This month’s personal finance column gets to the heart of relationships, navigating the rocky waters of love and money.
Q: My boyfriend just proposed and I said yes. But now, after the buzz has worn off, I’m afraid to bring up the subject of money. He’s got an awful credit score even though he makes a decent salary. We come from very different backgrounds. My parents are dedicated savers and his still fight over money even though they’ve been divorced for years. How can we talk about money without it getting ugly?
Signed, Cold Feet in Colorado.
A: Dear Cold Feet: Bravo for addressing this subject before saying “I do.” We’ve all heard that money problems are one of the leading causes of divorce, so getting a handle on potential problems before the wedding is a smart way to keep your marriage healthy. The truth is, even romance has a business side. Before you make your wedding plans, make a date with your husband-to-be to map out a money plan. Ask him if he’s willing to work with you to address your concerns, make a plan and stick to it.
Be honest. The most important thing in a marriage is communication. And you have to be honest with your fiancée about your misgivings. Tell him what stresses you out about his money situation and listen as he relates the history of his finances. Ask questions. Encourage him to open up and share and let him know you are his partner, not his judge. This isn’t the time for secrets. By creating an environment of trust right from the beginning, you’ll avoid the pitfalls so many couples fall into when it comes to sharing the finances.
Take the lead. Model good money management and lead by example. Perhaps the love of your life was never taught good habits when it comes to money. We often take on those of our parents, for good or for bad. Don’t be afraid to discuss how you will teach your children when the time comes.
Credit for two. His credit score will affect both of your futures. Buying a car, a house, or even getting a credit card hinges on how you’ve handled credit in the past. With a little discipline and a willing partner, anyone can correct past mistakes. It just takes time and commitment.
Live on one salary, save the other. Once you move in together, you’ll be saving money on rent. Share the load with cooking and food shopping. Eating at home saves big bucks over time, and you can create romantic adventures cooking together. Trying new recipes can make dinnertime an adventure. Put your heads together to find more ways to cut expenses.
Build the foundation. You’ve probably already thought about the home you will make together. How will you structure your financial life? Will you have joint bank accounts or keep them separate? Who will pay the bills–one person, or will you share the load and do it together? Whatever you decide, try to make it fun.
Tax cuts. After the wedding, the withholding allowances you claim on your W-4 form will change. Allowances help your employer calculate the amount of income tax to withhold from your paycheck based on income, deductions, and marital status. The more withholding allowance you have, the less is taken out of your pay. For instance, if your spouse doesn’t work, you can add an allowance. If you’re both working, divide the total between you and your spouse. Filing jointly can help reduce your tax burden by avoiding “marriage penalties” if your salaries are substantially different. The spouse with the lower salary can pull the spouse with the higher salary down to a lower tax bracket, lowering your combined overall taxes. Visit the IRS web site to determine your new withholdings to make sure you are not over- or under-withholding.
Talk about the future. Make sure you both have life insurance and even though it sounds morbid, write a will. While it may seem far away, talk about your retirement goals. The two of you should be putting money away from Day One to ensure a sensible retirement when the time comes.
If you have a money question that’s gnawing at you, please send it to [email protected]