I thought a good place to begin this newsletter is with the challenge of mixing love and money. Couples do not always align their financial values and expectations during their courtship or before moving in together.
When romance merges with finance, there is a lot to discuss. I suggest you align on these issues before they breed resentment or misunderstandings:
- Do you bring different assets and liabilities to the relationship? Does one of you have savings, but the other student loans?
- Do you have different incomes? Does one of you plan to be a stay-at-home parent, but you are wondering how that will affect your future earnings potential?
- Do you have different views on saving versus spending? Does one of you prefer to max out your Roth IRAs, but the other travel whenever possible?
- What is your risk tolerance? How aggressively should you invest your 401Ks, how much insurance should you have, and how secure should your job opportunities be?
- How much do you contribute to charity? Does one of you support the NRA but the other the Coalition to Stop Gun Violence? Should you donate to both or neither?
- How much of your kids’ education do you want to fund?
- And perhaps the most taboo topic, have you considered how you would divide assets, liabilities, and income if you were to divorce in the future?
On the more practical side, review this checklist:
- Do you need a will? If you have dependents, or assets that you want distributed in an atypical way (i.e., not all to your spouse), then you do. If you are entering the marriage with neither assets nor dependents, then a will is not urgent.
- How much life insurance do you need? If you have dependents or shared liabilities (such as a mortgage), you should have sufficient coverage; if not, this is not urgent. Simple term insurance is usually best.
- Have you updated your beneficiaries on your retirement accounts?
- Do you have a joint bank account? It is probably helpful to have one.
- Do you want a joint credit card? I usually recommend not to do so.
- Do you know whose health insurance to use? It won’t make sense to keep both of them.
- Are your taxes going to change? Depending on your incomes, they may go up or down when you file a joint return and you may want to adjust your withholding.
Mixing love and money is a journey, but your relationship will benefit from having a shared understanding. Sometimes, an independent third party can offer guidance on what’s sensible and customary when considering these issues.
My Mixing Love and Money financial coaching service may be the perfect wedding gift. Please get in touch to learn more.
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