By FPA member A. Christopher Engle, LUTCF, CFP®, ChFC®, AEP®
Last Updated: December 12, 2011
The excitement starts with an engagement ring. This starts months of planning for the big wedding day. Invitations, dresses, flowers, tuxedos, and cakes must be chosen and purchased to make your lifelong commitment special. Why do couples spend so much time and money on this one day, yet spend very little time preparing for the next 50 years?
Jenny and Thomas returned from their honeymoon full of anticipation about their lives together. They were going to be very busy over the next couple of months merging their lives into one. In addition to moving into their new apartment, Jenny would have to update all of her identification documents to reflect her new name. After they moved into the apartment, Jenny began updating addresses. Thomas had been giving Jenny his mail so that she could make a list. She began to notice that Thomas had accumulated quite a bit of debt over the years. In addition to his student loans, he had several credit cards with a total balance of more than $15,000. Also, she noticed that he had taken a large loan against his 401(k) at work. Jenny had never been comfortable with debt. She always paid her credit card balances each month.
Within a couple of months, Jenny had started to make extra payments on the credit cards. She felt satisfied that they could eliminate that debt within a year with a little discipline. Unfortunately, Thomas wasn’t on the same page. Jenny was checking her email when Thomas flew open the door and grabbed Jenny’s arm. “Come on, see what I got” he said as he led her downstairs. There it was. A brand new SUV, complete with leather heated seats sat in the driveway. “Isn’t it sweet?” he exclaimed. “Uh, yeah but where did you get the money?” Jenny responded. Jenny was not happy. All she could think about was how irresponsible this was. Also, shouldn’t he have consulted her on such a large purchase? Thomas instantly knew that Jenny was upset. The first fight of their marriage was about to begin.
Money and finances can be a major source of stress for married couples. In fact, according to some sources, it is a common cause for divorce. Jenny soon found out that Thomas has very different attitudes about money than she has. His goals could be very different from hers. Unless these differences are reconciled, it will continue to create friction in their marriage. In spite of the obvious need to discuss their finances and create goals, it is often difficult when you are living the “fairytale” of engagement and early marriage.
Financial issues could be even more complicated when it is not the first marriage for the bride, groom, or both. In addition to marrying the person, you could be marrying their debt and other financial obligations both now and in the future.
So, in addition to visiting the florist, baker, and dressmaker, engaged couples should schedule a time to visit a financial planner. A qualified financial professional will help you merge your financial life together. Here are some issues to discuss:
- What are your financial priorities and goals?
- Who will handle the checkbook and pay the bills?
- How much money is OK to spend without consulting the other spouse?
- How much debt do you have? How much is OK?
- Are there assets that will not be joint after the marriage?
- Should there be a pre-nuptial agreement?
- What are your credit scores?
- Should you update your will and trusts?
- Should you update your beneficiaries?
Your financial planner will lead a discussion with you about these issues. From there, you can develop written financial goals and a plan for achieving them. This plan will make sure that you are working together towards a common goal. You should anticipate reviewing and updating your plan at least once per year. The result is less stress and the ability to focus your energies on the other important issues in a marital relationship.
FPA member A. Christopher Engle, LUTCF, CFP®, ChFC®, AEP®, is a partner with Argus Financial Consultants in Grand Rapids, Mich. Securities offered through LPL Financial, Member FINRA/SIPC.
The opinions voiced in this material are for information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.