With each New Year, plans for spring and summer marriages start getting underway across Canada. On that note comes the thought that, for better or worse, everybody marries into money. Maybe it’s a lot of money or a little money, but it’s nonetheless money reflected through whatever accounts, assets (what you own), and financial dealings both parties are bringing to a marriage. Call it the business of love – a very important thing. Money matters need close attention and review before couples make their vows.
When couples make vows based on a life-long commitment, they ought to know what they’re getting themselves into.
To some, a financial review may seem like a cold thing for two people who are in love. On the other hand, love by definition involves openness, honesty, and understanding. When couples make vows based on a life-long commitment, they ought to know what they’re getting themselves into.
Loving partners start out by dealing with financial matters in an honest way. Any money or debt problems that may come up are sorted out with understanding and proposed solutions. In this way, according to the experts, couples vastly increase their chances for a happy, long-term relationship.
Where current household budget or debt problems present themselves, explore options and agree to a plan of action.
Here are some helpful financial guidelines to help strengthen relationships.
• Look at the full picture. Know where you stand financially as a couple. Gather all current financial statements relating to your banking, investment, credit cards, loans, insurance and other documents. List all your assets and all your debts. Review copies of your credit reports as well.
• Update everything and address any problems. Determine what changes you need to make for the financial life you will soon be sharing. Look into things such as wills and estate plans, asset ownership, as well as work-related medical and dental plans and insurance policies that might also involve children from a previous relationship. Where current household budget or debt problems present themselves, explore options and agree to a plan of action. In serious cases of debt overload, consider solutions through the non-profit credit counselling and debt consolidation programs we offer at Credit Canada.
Put short, medium, and long-term goals in writing. At the same time, put needs before wants and track your spending.
• Set a plan for managing household finances. As a couple, know how you wish to manage your money day to day. This may involve keeping joint or separate bank accounts, setting responsibilities for bill payments, etc. Such matters are open for discussion. Some experts say separate accounts raise issues of trust that can divide couples. But other experts say that separate accounts promote self-empowerment provided couples are open about how the accounts are being handled. Joint and separate accounts can be an option.
• Set goals, track spending, and create a written household budget. Goal setting helps motivate couples to spend and save wisely. Put short-term, medium term, and long-term goals in writing. Put needs before wants. At the same time, track your spending so you know exactly what you’re doing with your money. End bad spending habits and encourage the good ones. Then you’re in a strong position to create a written, monthly budget that helps you smartly manage income and expenses, plus work toward achieving your goals.
Pay off all non-essential debts as soon as possible. Practice frugality – stop spending on stuff you don’t really need.
• Make savings a priority. Crunch your numbers to determine how much money you can save (and/or put into smart investments) each month, then stick to the plan. First and foremost, save for an emergency fund that will help you deal with unexpected financial storms. Experts recommend that couples adjust their spending for savings equivalent to at least 10 per cent of household income. Meanwhile, explore longer-term plans for a retirement fund (the sooner you start, the better) and perhaps education funds devoted to children.
• Manage debt wisely. Keep all debt payments up to date and keep your credit score in good standing. Avoid going into debt over small matters. Look at life’s big picture in relation to important wants, such as purchasing a home, and perhaps important needs, such as buying a vehicle. Make an effort to pay off all non-essential debts as soon as possible. Practice frugality – stop spending on stuff you don’t really need.