First comes love, but before marriage, a financial heart-to-heart
TERRY SAVAGE email@example.com January 29, 2012 11:54PM
Updated: May 3, 2013 12:15PM
Valentine’s Day is just around the corner, and this column is meant to serve as a reminder. First, remember to buy a card for your valentine before they’re all sold out. And second, don’t get so caught up in the romantic season of hearts and flowers that you pop the question before you know you’re financially compatible!
Sure, a marriage proposal is supposed to be romantic. But don’t close your eyes to reality — especially when it comes to money. Your valentine may say “be mine.” Yet when you tie your lives together, you’ll also be joining a good part of your personal finances.
Don’t you think you should know what you’re getting into? If you can’t share your finances, how can you share a life together?
GET YOUR CREDIT REPORTS
So sit down with your true love and go online to read each other’s credit report. It’s easy at AnnualCreditReport.com, the one site that links you to each of the three major credit bureaus, where you can order your government-mandated free annual credit report.
You can see your report securely within a minute after answering a series of questions for which only you can provide the answers. That includes things like previous addresses and car purchases. (So no, you can’t pull a sneak and get your fiance’s credit report secretly!)
If you’re willing to take this challenge, you are well on the way to a marriage based on trust. And if one of you isn’t willing to share that information, it might mean you’re in for a surprise after you say “I do”!
A credit report will reveal all of your beloved’s credit-card balances. And did you know about those huge student loan balances still outstanding? Or a default on a car loan, or a previous bankruptcy?
The credit report won’t reveal your assets — but it will reveal your payment habits. Your lover’s bad credit might impact your ability to buy a home together. And it might make you think twice about how you’re going to handle money once you are married. Depending on state law, and whether you open joint accounts, you could become responsible for your spouse’s debts.
MAKE A MARRIAGE MONEY PLAN
Assuming you both have jobs, are you going to keep your money separate and each pay certain bills? Or put all your money in one account? Best idea: each contribute a certain amount, maybe 50/50 or an amount proportional to what you earn — to a joint household account. Use that account to pay shared bills, ranging from rent or mortgage to food and utilities. Then you’ll still have some spending money of your own in a separate account.
And there are other marriage/money issues to talk about well in advance of the big day:
† How will you pay off existing bills?
† Will previous obligations ranging from car payments and credit-card balances to child support be paid out of your joint account?
† Whose health insurance plan will you use, or will you maintain both? (Hint; whose job is more secure and who has better benefits?)
† Will you have joint savings for goals such as trips or a down payment? And will you each save money in your company retirement plan or IRA?
Just imagine what a hassle it will be to decide these things after you’re legally tied together — especially if one of you has nothing “left over” to contribute to the joint account.
GET A PRENUP
You don’t need to be a Kardashian to benefit from a prenuptial agreement. And no, it won’t spoil the romance to talk about it! But with half of all marriages ending in divorce (and a higher rate for second marriages), you’d be foolish not to consider this possibility.
To have a valid prenup, you must each have a separate attorney and fully disclose your assets. If you come into the marriage with existing assets, you may want to set up a simple trust to keep those assets separate. But there’s more to a prenup than what happens if you split up. It can all set the basis for how you will handle finances during the marriage and how you will handle your estate if one or the other of you dies.
Those are all financial issues that are a lot easier and far less expensive to decide together now, while you’re most in harmony, than to pay warring divorce attorneys to decide later! And that’s The Savage Truth!
Terry Savage is the Chicago Sun-Times’ nationally syndicated financial columnist and a registered investment adviser. Post personal finance questions on her blog at TerrySavage.com and blogs.suntimes.com/savage.