Have the Talk Before You Take the Walk

If your significant other pops the question today, keep this in mind: talking about money before you tie the knot is far more important than the type of wedding flowers you select or the color of the reception tablecloths.

by Sue Tomchin

It’s Valentine’s Day, and an estimated six million couples will become engaged, an American Express survey tells us. You know what that unleashes—a  whirlwind of wedding planning, caterers to interview, future in-laws to meet and dresses to consider. Why would anyone choose to taint the glorious months of their engagement by talking about something as difficult as money? 

Because it’s essential.  

When we don’t have the “money talk” with our prospective partner and plan our financial future together we can set ourselves up for later marital discord and economic vulnerability. 

“Sharing your thoughts with your partner, especially your thoughts about money, is the brave thing to do,” counsels Pam Friedman in her book I Now Pronounce You Financially Fit: How to Protect Your Money in Marriage and Divorce. A must-read for those who are getting married, the book approaches financial planning “through the lens of relationships” offering tools and strategies for premarital and marital financial planning, as well as guidance in making financial choices should you decide to divorce.  

JW had a heart-to-heart with Friedman, a certified financial planner and certified divorce financial analyst. Here is an edited version of the conversation: 

Many women can get so caught up in the romance of their engagement that they don’t discuss financial issues before they walk down the aisle. Why is having a premarital money talk good for a relationship?

During your engagement, it’s all about the celebration—choosing a venue, picking out flowers, even budgeting for the wedding. It seems unnecessary to “rock the boat” by bringing up money. But the more you and your partner can talk about money and where you are going—isn’t that what marriage is about? And if you can plan together and get to know more about your partner, about their views and how those views were formed, isn’t that intimate? 

How can you start the conversation?

One way to start the conversation is to talk about your parents and their attitudes about money. Who made the money? Who paid the bills? Did they pay for your college education? How did they save for their first home or retirement? Slowly transition to you and what your attitudes are about money and why you think they are the way they are. Then you have to start the hard work: Gathering documents; sharing information; and being open about your attitudes. If you’ve made mistakes or had setbacks, admit to them: If you got yourself in too much credit card debt; if you lost a job; or had a health scare. These conversations can be the opposite of threatening. They can be relationship building.

If a prospective spouse can’t handle it, is that a red flag?

Often if someone is resistant to the conversation there is a reason and you have to find that reason. Having a third party there helps, so maybe it’s a good idea to go see a financial planner. I do this in my office. I ask a lot of why questions. Certainly, if a person won’t take that step it’s a red flag. You get the feeling that they are trying to hide something and you have to ask yourself if this is a relationship you want to get into.

What are the essentials of any money conversation?

The key to the whole process is to be open and transparent. Sharing documents is essential. You and your partner deserve to know where your money is and how it is used. In my book I have a list of 21 of most important documents to share, review and discuss, such documents as the W-2 annual income statement, mortgage statements, and student, personal and business loans.

What are your joint bills? They might be rent and the dog and food and electricity and renters’ insurance. You may also have some expenses that are not necessarily joint. For my husband and me, it’s lunch. (I eat out more often than he does.) It might be haircuts. It might be fishing trips. List those expenses—what is ours and what is yours. 

A good way to start a marriage is to have a joint account that each contributes to for joint expenses and for each to maintain an account for expenses that are individual. Why start out in a place where you don’t have an understanding of what’s going on? When you get married, you haven’t known that person all that long. It doesn’t mean you’re going to have a joint account and separate accounts forever. It takes a long time to really understand what’s important to one other and to merge your financial lives.

Then dig down deeper. If one spouse makes more money than the other, should that person pay more of the joint bills? The joint account can be contributed to unequally. If one person makes twice as much as the other, one can contribute two-thirds and the other one-third. Making decisions about these things are so much more important than picking out flowers for your wedding. 

Young people starting out may have debt-car loans, education loans, credit card loans. Should that be a deal breaker for a fiancé? 

No, it just needs to be discussed. If you talk about it you can come up with a plan to resolve it. This is where a third party professional can really help and probably is needed. 

Do you recommend that even people getting married in their twenties get a pre-nuptial agreement?

Not necessarily, but I do recommend that they get a little knowledge about family law and the laws that govern marriage and your financial lives in your state. With a little knowledge of each, you may be able to plan within those parameters. For example, in the state of Texas, my separate property before marriage is my separate property. So if I have a 401(k) or an IRA before marriage that’s going to be mine. But the way the law is written, the growth of that IRA, the interest and dividends, are marital, even though I saved the money. So, we can decide to keep that IRA separate and agree that its growth is mine. And you keep yours separate too. By having some knowledge of laws, you can make your own plan, instead of letting state laws dictate the financial terms of your marriage. 

Some people need a little guidance to do this and some can do it on their own. What people want from a financial planner like me is they want to know their options. They don’t know where to start. We help them get organized and think about it more strategically. About what their goals are and how much risk they want to take, all the traditional financial planning things. It’s just financial planning, but it’s for two, which is different from financial planning for one. 

Why is it so important to get past our reluctance to talk about money with our future spouse? 

Many of us have this feeling that if you bring up the topic of money, you’ll be labeled either a “gold digger” or “stingy.” You are neither. You are just trying to make a plan and work together toward some goals. Money is the grease that keeps the cogs of life’s machinery moving smoothly and helps you reach those goals. Everything costs money. You have a goal to buy a home. You have a goal to put kids through college. You have goal to retire. Don’t you want to set those goals together? Part and parcel of setting those goals as a couple is the money that enables you to reach them. That’s why knowledge about that money is so important. 

I have many divorcing clients who come in and tell me that they never paid attention to money. Their husband took care of it and they took care of the kids. They say now, “I wish I knew about the money. I wish I was more educated. I wish I had asked more questions, but I just let it go.”

Not paying attention to money is one of those things we do that are bad for our self- interest, like eating too much and not exercising.