Financial advice for happy couples on St. Valentine’s Day
Valentine’s Day is that annual hearts-and-flowers fest that can be gushingly romantic, to say nothing of stressful. It’s also a time when many proposals of marriage are made – and accepted. Once that initial excitement subsides a bit, it’s time to get down to the brass tacks of planning the wedding. But it’s also a good idea to set aside some time to talk about your financial future together. Here are five tips I offer newly-engaged couples.
1. The “money talk”
It’s vitally important that couples planning marriage have a heart-to-heart about each other’s financial style. Determine how your partner handles spending and saving. Are they responsible about credit and debt? How do they feel about household budgeting? Who will handle the domestic bookkeeping – paying the mortgage and utility bills? It may seem like incredibly nitpicky stuff, but I’ve seen this sort of thing become a major issue between couples.
2. Assets and liabilities.
Set out what assets each of you brings to the marriage. It’s best to decide right from the outset what you’ll own jointly and what you’ll keep separate. This becomes crucial if this is not the first marriage and there are children from each previous marriages or if there is support or alimony involved. On a single sheet, list everything you want to keep separate and everything you want to comingle. Investment accounts or RRSP are pretty simple to deal with. But what about real property, including any real estate you own? And what about income from salary, investments, business, or professional practice? How much will be joint, how much will each of you keep separate?
Think hard about financial liabilities each of you brings to the union. Pre-existing mortgage payments, credit card debt, personal lines of credit, car loans and leases, other consumer loans, business loans (especially if secured by personal property), tax liabilities, alimony and support payments are all on the table. Any assets or accounts held jointly may, of course, be vulnerable to garnisheeing, attachment, or seizure by creditors, so it’s important to be up-front about who owes what – and who pays what (see point number 1 above). Often, a credit report from each of you is the best way to clear the air.
3. Joint or separate accounts
This is really an extension of point number 2 above. It’s perfectly natural for couples who marry to comingle their monies into joint accounts. It makes a lot of sense from a housekeeping point of view. But financial advisors would counsel some caution if this is a second marriage. Once you’ve laid out who brings what assets and liabilities to the marriage, you’ll have a pretty clear idea of how to set up your household finances. Remarried couples frequently keep separate bank and credit accounts but have a joint bank account for household payments. If you or your spouse-to-be have pre-existing credit problems, it’s better to keep those segregated and get them cleaned up separately first, before dumping it all into a joint credit or bank account.
Remember, too, that any investments, real property, or business interests that you hold jointly become the property of both parties equally in a marriage. This is an important consideration if your spouse-to-be has undisclosed creditors or if the marriage breaks up.
4. Consider a prenuptial agreement
If you each bring considerable assets (or liabilities) to the union, it may be worth considering a prenuptial agreement to get everything in writing. This type of legal documentation specifies everything you wish to do in points 1 through 3 above, and protects your legal interests should your marriage dissolve or should claims later be made against assets you’ve brought into the marriage. You’ll need a lawyer to draw up these types of agreements or other forms of documents specifying your respective interest in various types of assets.
5. Get advice
This is probably the biggest pitfall of all, as many couples simply don’t do it. Yes, I know, in the bloom of romance and a sparkling future, it seems perhaps unnecessarily “cold” or “objective” to talk about these issues. But doing so now can clear the air right away and save a lot of grief later, especially if children from previous marriages are involved. As for being “cold” and “objective,” luckily you don’t have to be. That’s what financial advisors are trained to do, and that’s what you pay them for.