Wedding season is upon us and while love is in the air, it’s important to make sure any wedding checklist has couples covered on more than just the big day. Before they tie the knot, couples need to address how compatible they are on longer-term and critical lifetime issues, including money and finance.
Money is often cited as one of the leading causes of stress in marriage so it pays, in more ways than one, to know the kind of financial marriage you may be getting into with your soon-to-be spouse.
- “MY” vs. “OUR” money: Will we have joint or separate accounts? Will we consolidate accounts with the same banking partner?
Ideally, all assets should be viewed as "ours" not just “mine.” That requires honest and open communication on the part of both parties. It is critical that P = I in discussions (Perception = Intention). The perception of the listener must be the same as the intention of the speaker. When P = I you have conformity, but when P does not equal I, you have conflict.
- Debt: How much debt am I bringing to the marriage, and how will WE manage it?
Debt is the great American issue that must be dealt with and eliminated. That requires adherence to a well-organized budget.
- Who’s in charge of budgeting and paying the bills? Is there a CFO of the house, or is it a partnership?
Who serves as the family CFO is based upon who has the desire and the skill set to manage the family finances, including bill payment. The other partner needs to be kept abreast of financial activities, but does not need to be the one managing the budget.
- Spending: Are our spending priorities in line? Is there mutual or individual approval for spending?
It is vital that the couple agree upon the difference between needs, wants and desires, especially when children are on the scene. Families are to provide needs, but not necessarily wants or desires.
Understanding the five principles of meaningful money management— earning, saving, giving, budgeting and spending— form the basis of a well-managed household.
- The Future: Are we prepared to plan for retirement together? (e.g. 401(k) plans, Roth IRA, etc.)
Proper planning prevents poor performance is the axiom that must guide the family financial forum. Information before hand is a reason, and information afterwards is an excuse. No one likes excuses, especially in family financial relationships. The degree to which a couple plans their finances and communicates the management of that plan to one another will play a major role in the solidarity of their relationship.
Bottom line: open and honest communication is the factor that will most determine success or failure in any relationship, but certainly is crucial when dealing in family finances.
Ray White Jr. is a senior vice president of PNC Wealth Management and leads those efforts for Central Florida. He can be reached at firstname.lastname@example.org