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Those in love should have money talks

Updated: May 3, 2013 12:14PM

Originally published: February 13, 2003

Amidst all the hearts and flowers of Valentine’s Day, allow me to insert a dollar sign and a few words of advice to those who may be blinded by Cupid. Countless couples will get engaged over this romantic weekend. And very few of them will consider the financial implications.

There are basically two types of money personalities: savers and spenders. For better or worse, they tend to marry each other. And that’s often the start of big problems--both financial and emotional. There’s no way to change your basic money personality--but there are ways to organize your financial life to avoid conflicts.

Marriage does not actually require you to commingle your assets or finances. But even if you keep your credit, checking and investments separate, you’ll still be confronted with saving and spending issues that can cause disagreements. My best advice is to talk openly about money. The first step is to reveal your current financial situation.

Credit and marriage

It’s not terribly romantic to ask your intended for a look at his or her credit report--but it might be enlightening. There’s no such thing as a “joint” credit report, but one spouse’s bad credit history can easily undermine the other spouse’s future financial dealings, including a mortgage loan or even auto insurance rates.

It’s certainly possible to be married and maintain separate credit. Any existing accounts stay individual as long as they were established before the marriage. Your credit will stay separate if you don’t sign up for a joint credit card and don’t add your spouse as a user of the credit card that’s in your name.

Some marital purchases, such as a home or condo, will require joint ownership. In that case, you are responsible for your spouse’s debt. If you purchase a condo or home and title it jointly, you’ll each have to sign for the mortgage. Those mortgage payments should be reported on each of your individual credit reports.

If you do have joint debt and decide to divorce, you should know that no matter what is written into the divorce agreement, you’re still responsible for credit card and other debt if you are a signer on the account. The best thing to do in case of divorce is to insist that the account be closed. Otherwise you may be responsible for not only past but future charges made on that account. Again, not very romantic--but practical--considerations.

No discussion of premarital finances is complete without a look at the asset side as well as the debt picture. Are you unwilling to detail just how much money you have stashed away in mutual funds or CDs? If that’s the case, then do you really trust this person enough to be married and raise a family together? And if that question makes you squirm, maybe you should reconsider your plans.

Spending, saving and investments

Once you know all about your fiance’s past spending and investing habits, it’s time to start planning for the future. Here’s where marriage and money get tricky--especially for two-income couples. Consider this checklist of questions as a starting point for your conversation:

* How will you deal with pre-existing debts, such as credit cards and student loans?

**Will you keep separate checking accounts and each contribute to one account for household expenses?

**Will you contribute equally to the household account, or in proportion to earnings? Or will you each be responsible for separate specific expenses?

**Will you set up a joint savings account for mutual dreams, such as a down payment on a home or a winter vacation?

**Will each of you contribute to your retirement plans at work? And if one spouse is home raising children will he or she have money to contribute to an IRA?

This list is just a starter. Financial issues will only become more complex as you have children, acquire property, start investing and have to deal with the costs of insurance. But if you can’t discuss these issues now, how will you ever build a future together? It’s not romantic to discuss money before marriage. But it sure is practical. And that’s The Savage Truth.

Terry Savage is a registered investment adviser and is on the board of directors of McDonald’s Corp. She appears weekly on WMAQ-Channel 5’s 4:30 p.m. newscast.

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