Okay so it’s not the most romantic of activities, but talking about money with your partner is important if you want to avoid problems down the line.
This is especially true if you plan to get married. Discussing money can help couples to plan for the longer term and make sure their financial goals are in harmony.
However, a recent survey from Starling Bank revealed that nearly a quarter (24 per cent) of married couples, and 30 per cent of people in a committed relationship, don’t disclose their finances to each other.
One in seven (14 per cent) of those in a committed relationship said they don’t know what their partner earns, including nine per cent of those who are married, while nearly a fifth (19 per cent) of couples manage their finances separately, including 12 per cent who are married.
As Talk Money Week begins, here are the best ways to cover the money conversation before you get married and nine key questions to ask your partner.
Planning your finances before you tie the knot
Once you know you want to spend your life with someone, don’t shy away from talking about money. According to counselling service Relate, money worries are the most common reason for relationship difficulties. “Tackling the topic early on avoids the potential for resentments to emerge later and lead to more destructive arguments,” says a Relate counsellor, Peter Saddington.
Marriage or civil partnership (which carries the same rights and responsibilities) is much more than an emotional commitment, it’s also a huge financial and legal one. You may be head over heels in love, but you need to understand the practical risks (and benefits) of legally binding yourself to another person.
It might not be the most fun date night you can think of, but the decisions you and your spouse-to-be make now about how to handle money will have major long-term repercussions for you both.
Key points to discuss
- You should both disclose your full financial situation. Don’t leave anything out! Include all assets (bank balances, pensions, savings, investments etc), debts (credit cards, loans, car payments etc), credit ratings, and monetary responsibilities for any children from previous relationships.
- Work out how being married or in civil partnership can benefit you financially, for example reduced living costs, savings on health insurance and lower car insurance premiums.
- Talk about how you will share any assets you both already have. Where will you live? Will one of you need to sell a property?
Do you need a pre-nuptial agreement?
If one partner has considerably more assets or income than the other, is likely to come into a large inheritance, or owns a business, you might want to sign a prenuptial agreement.
This is a contract that can protect premarital assets and provide for children from previous relationships. It can also set out responsibility for debts acquired before marriage and prearrange spousal support in case of divorce (or dissolution, in the case of civil partnership).
Make a plan for paying off debt
If either or both of you carry a lot of debt, draw up a plan for paying it off. One spouse’s premarital debt does not automatically become the other’s upon marriage, but that debt will affect your joint finances – and potentially your relationship.
Improve your credit ratings
While marriage itself has no impact on your credit score, once you tie the knot you might want to apply for joint mortgages, car loans, and/or bank accounts.
When you borrow jointly but one person has poor credit, a lender may charge higher interest and fees than the other person with a good credit score could have been eligible for on their own. So – if one of you has a poor credit score, get started on improving it.
Set joint financial goals
You may already be living together, but it’s important to set out (and agree on) your financial goals BEFORE you take your vows.
Here are nine key questions to cover:
1. What are your long-term career goals and prospects?
2. Will either of you need financial support for further education or retraining?
3. Will one of you stay at home full or part-time to care for children?
4. If either of you have children from a previous relationship, what are your financial responsibilities and how are these likely to change?
5. Are either of you likely to be called on to care for elderly relatives?
6. What are your money priorities? Eg. holidays abroad, a nice car, or big house?
7. At what age do you hope to retire, and what kind of retirement are you aiming for?
8. What are your attitudes towards saving and spending? How will you manage any differences?
9. How much financial independence do you want? Will you combine your finances completely or keep certain parts separate?
You probably won’t have all the answers, but you’ll get a good sense of where you both stand and any compromises you might need to make to achieve your financial goals.
Part of this content is from our new Good Guide to Financial Planning 2024. Download your free copy here.