Say you’re going to be engaged/betrothed soon. You have a decent job, which has enabled you to afford housing, food, vehicle, etc. and lead a good life up until this point. You may or may not have accrued any debt thus far. But if you have, you have ensured it is sustainable. This seemingly utopic situation may, with marriage on the cards, run into a few changes. With the entry of a key stakeholder in your partner, your previous financial situation may shift from being “personal” to “joint”. At this pre-marital juncture, if you are someone who subscribes to the essentiality of talking finances, then your approach is consistent with what many studies suggest.
Turns out, money-related arguments/differences are the second leading cause of divorces. Yet, only 51% of couples have discussed finances before marriage. In fact, the same study(1) reveals that only 41% of couples disclosed their annual salaries. But both these statistics pale in comparison to ones that correlate debts and marriages. Ostensibly, only 36% of couples brought up debts before the marriage. This is a cause for concern considering nearly two in three marriages start with one of the parties in debt. Subsequently, as debts mount and couples find it increasingly hard to see eye-to-eye financially, problems can crop up. About half of couples with $50,000 in debt cite money as their primary reason to argue(2). In light of such findings, your intent to hold the “finance talk” with your fiancé and enter into the wedlock with the right expectations carries merit.
However, it is easier said than done. Oftentimes, finance is hard to address because it has strong “personal” connotations. In fact, even if you muster the resolve to bring it to the table, you can still get cold feet later. And the elephant in the room will continue to grow bigger and bigger while much is lost in translation. The reasoning behind this is that money values are often deeply entrenched, taken after parents, developed during formative years, and continually reinforced throughout adulthood. You could be a spender and your fiancé could be a saver or vice versa. You could have a risk-averse approach to finances while the fiancé could harbour a credit-heavy approach.
Therefore, it’s important to establish a dialogue at the earliest. Broadly, the “finance talk” can be classified into the pre-wedding, wedding, and post-wedding stages, to ensure you do not over-rush or slack. The idea is to start small and gradually touch upon long-term financial goals.
Pre-wedding
This is primarily the “getting-to-know” phase. If you are a recent couple, chances are that you are only becoming acquainted with each other. So, the scope for “finance talk” is slim to none. That shouldn’t deter you from striking conversations that have finance as a corollary. For instance, the topic of discussion can be house, vacation, or honeymoon — ones that require considerable capital. Important to understand that the discussion must not scratch beneath the surface. Delving deeper could run the risk of coming off as invasive. You wouldn’t want to start off on that wrong foot, especially when it comes to finance.
However, if the fiancé is a conversationist who is seemingly eager to delve deeper, you are well-positioned to discuss financial needs, long-term goals, etc. However, it’s important to retain the “getting-to-know” element, by touching upon the fiancé’s history: Student loans by way of academic credentials, mortgages by way of housing, assets and financial obligations by way of family history, etc. Most importantly, this conversation must be two-way — where you reciprocate by sharing your financial goals, long-term objectives, your investment ideologies, and the overall approach to money.
In doing so, you induce an obligation on the part of your fiancé, encouraging them to reciprocate. The ones who have engaged in the pre-marital financial discussion have been correlated to greater affluence, in a study(3). While only 43% of the general population talked about money before marriage, the number rose to 57% for affluent couples. The natural line of questioning here is what do “affluent” people know that others don’t? The simple answer: The importance of finance for happy marriages.
Wedding
Weddings are costly affairs across the socio-economic spectrum — regardless of your net worth, marriages, by design, tend to put a dent in your wallet. As a result, it is important beforehand to set the record straight as far as who is in charge of what wedding payment — from printing cards to honeymoon, and everything in between. This is perhaps the first real test of how both of you can set joint expectations, plan the finances, budget, and execute. The average couple spent $27,063 on their wedding in 2021(4) — which is quite a test to manage and spend effectively.
Any mismatch in expectations or inability to arrive at a common ground could set the precedent for post-wedding financial decisions. There is an alarming tendency to avoid financial discussions or act in contrast to one’s beliefs out of fear that any conflict could obstruct the wedding plans. It is important, however, to note that there is a lot on the line after the wedding. So, it’s better to be forthcoming and be safe than sorry.
Post-wedding
Once the honeymoon phase is over and the humdrum of life begins to dawn on you, it is time to have the real “finance talk”, this time with fewer inhibitions and greater resolve. This is perhaps where the chances of conflicts of interest are high. But this shouldn’t deter you from putting all your cards on the table; if anything, it should encourage you because the financial equation will only gather more variables — kids, house, cars — as time goes by. So, the sooner the better.
The first order of business is to share all pertinent finance details, including the ones you may have divulged before and ones you haven’t. This time, however, you talk numbers, time frames, the current status, details of any passive incomes, inheritance earnings, etc. The financial tell-all will give both parties the much-needed clarity to discuss the feasibility of individual and collective goals.
Establish clearly defined financial boundaries. This pertains to deciding whether or not you should open a joint account, and, if so, who contributes how much to it each month. Since the likelihood of combined expenses is high in marriages, the setting up of a joint account takes precedence. Even if one party chooses to not work and therefore makes no contribution, it is important to set up a joint account so that there is an equal agency in spending.
Establish mechanisms to go about purchasing a new asset, clearing liabilities, investing in securities and retirement schemes, making discretionary purchases, etc. The idea is to ensure there is transparency in spending, earning, and making critical financial decisions.
A couple of months into the marriage, you’ll have a decent picture of your expenses, earnings, etc. Using these, create a budget and set a spending threshold for activities such as eating out and other indulgences. Fortunately, there are many mobile-enabled applications available in the market for seamless household budgeting. Some offer real-time access to a unified portfolio for both parties.
Most importantly, never cease to communicate finances. In fact, it is advisable to dedicate a particular day/time of the week/month for financial discussion. It could be a “financial date night” or a conventional pen-and-paper activity on the couch. The objective is to have a household audit and provision for future eventualities.
Emphasize insurance. It’s your ticket to a happy marriage, devoid of unexpected medical and financial setbacks. In the event of an unfortunate situation with one party, insurances ensure that the other is safeguarded financially. At any stage — pre-wedding, wedding, or post-wedding — talk to a financial advisor to ensure that both you and your fiancé/partner are making the right decisions and achieving the best possible outcome for your circumstances. Reach out to our experts at the Continental Group today at clientservice@cfsgroup.com
References
- https://www.prnewswire.com/news-releases/get-engaged-over-the-holiday-its-time-to-set-a-dateto-talk-about-money-300773761.html
- https://www.ramseysolutions.com/company/newsroom/releases/money-ruining-marriages-in-america
- https://www.moneyhabitudes.com/financial-statistics/
- https://www.cnbc.com/2022/05/06/wedding-costs-surge-as-pent-up-demand-inflation-force-couples-to-cut.html
