Good Day Everyone,
As some of you readers may already know, I’m in the middle of planning my wedding in September. As such, we’ve discussed many aspects of our future lives together, with finances being a significant part of that discussion. In my opinion, it is a must for all couples contemplating marriage to discuss how they will merge (or not merge) their finances as a married couple. Doing so can help you avoid unnecessary financial stress in the future. For today’s post, I’ll be talking specifics about the financial topics Future Mrs. Options2Riches and I have discussed along the way. I hope this can help you in your situation. (I’m breaking this down into two parts because the list is quite extensive)
How much do you make?
If you were uncomfortable discussing salary with your dating partner, now is the time to be upfront. This isn’t to make one person feel superior/inferior to the other (if you feel this way then… I’d say there is a decent chance that the relationship will fail some time in the future.) Salary is important to know so you can establish a financial system/budget for your newly established family. Can’t do that without knowing how much money is coming in right?
Our Answer – When we first met, the salary ratio between myself and Future Mrs. Options2Riches was about 60/40, but she recently started a new job which brings it closer to 50/50. This was never an issue in our relationship, but we know how much we have coming in as a married couple.
How much savings/debt do you have?
I feel like this is something that must be discussed, and the earlier the better. It SHOULD be easy to answer and it kind of establishes how each of you have managed your own money up until that point and where you will begin as a married couple. This isn’t meant to allow one person to exert power over the other and if you see it that way, maybe you should re-evaluate if that’s the right person for you.
Our Answer – I’m a couple years older, and have been saving aggressively for longer. She also took a year off to go back to school so not surprisingly I’ve managed to save more than she has. Without getting into exact dollars, I’d say my assets are around 8x more than hers. To many couples this could be seen as “unfair” or “unbalanced” but our relationship has never been about money or wealth. I’ve never judged or looked down on her, and she’s never felt self conscious or a lesser partner because of this gap. As the person that will be running the finances, I just needed to know what our starting point will be as a married couple so I can determine how we will distribute our savings across our different accounts and how we can reach our financial goals.
What’s the wedding budget?
I put this third question because the answer of the first two will go along way to answering this. One of the worst life choices you can make as a couple is to overextend yourselves over one day. Wedding inflation is through the roof, and coming up with a reasonable budget is becoming increasingly difficult. Several of my friends have opted to do city hall ceremonies because of this fact even if they could afford a big wedding (which I greatly respect).
Our Answer: We first listed out everything we (she) included as “must haves” in the wedding and an approximate guest count. Once I itemized everything, I gave her a “do not pass this number” budget and so far she’s managed to do just that. Many times, your expectations are greater than what they can afford. You can either delay the wedding and save for what you want, re-evaluate your priorities, or power through and live with the consequences later. The truth is, she’s been clear about what she wanted out of her wedding years ago and those expectations definitely delayed my proposal. Being the responsible couple we are though, we wouldn’t have had it any other way.
How should we do our finances?
It’s important to understand that there’s no right answer here. As long as both people agree to how it should be done, then there shouldn’t be problems. People come from different backgrounds which play a big role in shaping a person’s view on this topic. Communication and understanding plays a big role here as I imagine most of the time couples don’t agree with their first answer. I’ll go over some of the most common ways I’ve heard of how couples do their finances before I get into our answer.
- Pool all income together and save/spend it as one big family account – old school way, but that’s how both our parents did it and it’s worked for them with no problems.
- Pool income together in one family account, pay the family expenses, save as a couple and divvy up the disposable income to each person based on some agreed upon amount/percentage – new school way and is what I hear most of the time
- Each person is responsible for 50% of all family bills, and each person manages their own finances – ultra independent method, not really my favourite way for a couple, but if both people are well inclined to do their own saving and investing it can definitely work.
Our Answer: We went with option 2. We’ll be pooling our incomes together, paying the bills and saving as a couple. The remainder will be split 50/50 to be spent however we see fit. Regardless of income split, we feel that this way best fits our family and money values. Many people around us have disagreed with our way of doing things (which we respect) and again, there is no wrong answer here, just what works for you as a couple.
Who will run the day to day finances?
You may have established how the finances will be split, but someone still has to run the day to day of it (make sure the bills are paid, and savings are put in the right accounts). The answer here really depends on who in the relationship has the experience/inclination to do it.
Our Answer: I will definitely be running the finances which includes everything from paying bills to investing decisions. However, I will be keeping Future Mrs. Options2riches in the loop on everything just in case I drop dead suddenly. The decision was made easy because she has absolutely zero interest with managing our finances.
Bottom Line: This part one of “The money talk” covers only the most basic topics. Next week I will be talking about some more specific issues about family finances that should be discussed. I hope you enjoyed today’s post, and I’d love to know if any couples reading this had these discussions before their weddings. If anyone has valuable wisdom to share, I’d love to hear it so please feel free to comment or contact me in any of the ways below. As a side note, I will be posting a special edition of the Stock of the Month series in the coming days, so look out for that.
Have a Great Day
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