As December gets underway our minds are on the holidays, but there\u2019s another season that is upon us: coupling. Christmas Day continues to be the most popular day for marriage proposals, and a large swath of engagements will take place starting the week before Christmas through New Year\u2019s Day. Popping the question (and saying yes!) means you\u2019ve found your perfect match, but too often couples swipe left when it comes to finding financial compatibility.<\/p>\n
That doesn\u2019t mean that the betrotheds need to make the same in terms of income or have had a similar upbringing relative to money. What\u2019s most important is that the Mr. and Mrs. to be — or Mr. and Mr., or Mrs. and Mrs. — have open and honest conversations about their individual financial situations as early as possible.<\/p>\n
However, that conversation isn\u2019t always easy. It usually begins with the daunting \u201cWe need to talk about money\u201d opener, followed by an often tense conversation. In fact, according to the American Psychological Association\u2019s (APA) 2014 Stress in America Survey<\/a>, almost a third of adults with partners reported that money is a major source of conflict in their relationship, whether you\u2019re married or just cohabitating. Further, according to research <\/a>by Experian<\/a>, 33% of newly married couples said their spouse\u2019s spending habits are different than what they expected.<\/p>\n But money doesn\u2019t<\/em> have to be the elephant in the room. In fact, getting more intimate with your finances is actually very healthy. So today we\u2019ll talk about the most important things to address relative to you and your partner\u2019s finances, which hopefully will eliminate a lot of stress and anxiety down the road.<\/p>\n Similar to Dickens\u2019 iconic character Ebenezer Scrooge, the way we view money is influenced by our experiences in childhood. There have been myriad studies focused on financial socialization and the role that families play. Researchers have found that both active parental coaching, as well as passive observations of parents saving and managing money influences your money habits in adulthood. For instance, if you grew up with a lot of material things and the belief that you need to show off that you\u2019re successful, chances are you might be focused on status and live outside your means as an adult. Conversely, if you grew up believing that saving for the future was the most important and that every penny counts, you could be inclined to be more honest about money and make decisions that support financial security. However, that doesn\u2019t mean you\u2019re \u201cstuck\u201d with that particular imprint. You can reshape your beliefs about money based on the values you develop as an adult, and often those values can be influenced by your partner.<\/p>\n Once he or she says \u201cyes\u201d, the wedding planning begins. The wedding ceremony is likely the first large expense a couple will have to face, and your upbringing can again play a role in how much you spend on the event. According to research by WeddingWire<\/a>, last year the average cost of a wedding was $37,000 when you factor in the ring, ceremony and honeymoon (and you can tack on an extra $15k if you live in a major metropolitan area like New York or San Francisco). Thus, couples who are footing the bill themselves should discuss what they can honestly afford before they get carried away planning the perfect day (or hiring a costly wedding planner, an expense that runs about $2,000 on average). The dream is to have a white wedding, so you don\u2019t want to start out in the red.<\/p>\n Wedding costs aside, another money issue from the past that often haunts couples is debt. According to a <\/a>study by Experian<\/a>, millennials\u2019 average credit score is 625 and their average debt (excluding mortgages) is $26,485. For Gen X-ers, those figures are 650 and $26,670, respectively. In <\/a>another study about newlyweds<\/a>, 33% entered marriage unaware of the amount of their spouse\u2019s student loan debt, while 40% didn\u2019t know their spouse\u2019s credit score. While having debt should by no means be a deal breaker, being forthcoming about your financial situation is really important. Like it or not, once you’re married your spouse’s liabilities can become your problem, so it\u2019s important to work together to pay down debt<\/a>\u00a0and building up an emergency fund<\/a> before you start investing for the future.<\/p>\n A common issue among married couples is secret spending. R<\/a>esearch by Experian<\/a> reveals men typically spend an average of $1,259 before mentioning it to their partner, while women spend an average of $383 prior to saying anything. Of those who admitted to maintaining a clandestine financial account, 61% were male and 39% were female. But practicing good financial hygiene as a couple doesn\u2019t mean that either has to be a killjoy. Understanding your complete financial picture will help you determine where you have wiggle room so you can ease the tension and decide on a monthly amount of \u201cfun money\u201d that each person can freely spend. Keep in mind some of that surplus might have to go towards attending the weddings of your friends who came to yours, which on average costs almost $900 per person!<\/a><\/p>\n According to research by TD Bank<\/a> almost 25% of couples keep all of their financial accounts separate. But that\u2019s not a good solution. Even with separate finances, your spouse’s credit score will affect your ability to get joint credit, which can impact a number of important life decisions. Further, 401(k)s, which almost all married couples manage separately, are considered marital assets. A healthy relationship depends on working jointly toward your financial goals. An important place for couples to start is understanding what investment risk they are willing to take as a unit. We previously wrote about this<\/a>, and offer advice based on your time horizon.<\/p>\n Conversations about money between couples often hover around the idea of values. And while that\u2019s an important place to start, it\u2019s in the specific situations that your values are put to the test. So talking about the different scenarios (like going to work for an early-stage startup, buying your first house, having kids), as well as your background relative to money helps get a better understanding of your financial compatibility.<\/p>\nThe Ghosts of Spending Past<\/strong><\/h3>\n
Wedding Bells<\/span> Bills<\/strong><\/h3>\n
Head Over Heels…in Debt?<\/strong><\/h3>\n
\u00a0What\u2019s Mine is Yours \ud83d\ude42<\/strong><\/h3>\n
Your Path Ahead<\/strong><\/h3>\n