If you and your fiancé are like many couples, you probably didn’t spend much time discussing money before you were engaged. And that’s understandable: While you’re on a date, saying, “Let’s not order wine; it’s too expensive,” doesn’t necessarily set the tone for romance.
Once you become engaged, though, you need to start laying the groundwork for healthy communication about finances. You are probably well aware that money talk can quickly become emotionally fraught—the two of you may have very different money styles (for example, you’re a saver; he’s a spender).
Experts say that habits like these usually begin in childhood when we learn our attitudes about spending and saving from our parents.
There may be other points where your attitudes about money diverge. Say you both want financial independence, but he strives to attain it by earning a large salary while you prefer to stash government bonds. Or perhaps you desire altogether different things: Maybe you crave the security of a home, and he wants to spend money on travel. Your priorities need to be discussed now because they could create conflict later on.
To make things easier for the two of you, we’ve put together a guide to good money talk. Here are six points to touch on in your discussions:
- Your financial facts and figures. Both of you should gather your papers and share information about what you’re bringing to the marriage. This includes annual income, assets, debts, and obligations. Discuss how much life insurance each of you has and who your beneficiaries are, where you bank, how much you’ve stashed away in retirement accounts and who your financial advisers are.
- Your home. Discuss whether you’re both ready to buy a home or feel the need to wait awhile. Some two-income couples decide that together they can afford to live in a more expensive rental than each partner does now. Others want to spend less for the time being and put the savings into a specially designated house fund for later. There’s no right or wrong way to do this; the important thing is that you’re both comfortable with your mutual decision.
- Your banking. You’ll probably want to establish a joint account to pay household bills. But will you also retain individual accounts? If you opt for this “his, hers, and ours” system (popular with many couples), will you each contribute a percentage or a specific amount of your income to the joint account? What will each of you pay for out of your personal account?
- Your insurance. If both of you work, it’s likely that one of you has significantly better health-care benefits than the other. Discuss the possibility of your both getting on the better plan and dropping the less-comprehensive coverage once you’re married. Also, take a look at your car insurance. The premium for two cars registered at one address is usually less than the premiums on two cars insured in different households.
- Your investments. “Finding out how your fiancé chooses his 401K investments speaks volumes about him,” says Michelle Smith, of Smith Financial Strategies Group in New York. “If he says he follows a pal’s advice, you know he’s casual about it. But if he pores over Morningstar data, you know this is important to him.” Whatever his—and your—actual level of interest may be, the two of you need to decide whether to merge your investments or maintain separate portfolios. Look over your statements together with the goal of creating a package. At the same time, discuss how you’ll make investment decisions. Will one of you be the investment guru and keep the other in the loop? Or will you decide matters jointly? Will you use a financial adviser or make decisions on your own?
- Your money chores. When you were single, you no doubt had your money-management system. Maybe you’ve always matched up your credit card bill with all your saved receipts and paid your bills electronically once a month. Perhaps he writes out checks twice a month and never reconciles a bank statement. Rather than get into a fight about who’s “right,” negotiate a plan. Perhaps one of you will handle the financial chores in exchange for the other doing the grocery shopping. Remember: As you learn to negotiate your differences, you’re building trust—and that’s something money can’t buy.