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With these assets, I thee wed
By Chuck Nowlen
Sure, you’re on Cloud Nine – and you should be: You’re marrying your soul mate, and every dream for the future seems blissfully within your reach.
But have you really thought about the nuts and bolts of putting your financial lives together? If not, Cloud Nine could turn into a nasty thunderstorm – and sooner than you think.
“There are so many things people seem to talk about before they get married – they talk about kids, they talk about their relationship, they talk about what they want to do with their lives. But, for some reason, money doesn’t come up as much as it should,” notes Carin Thomas, a midwest Merrill Lynch wealth management advisor based in Bloomington, Minnesota.
“And that’s really a huge mistake – especially when you think about the fact that one of the major reasons couple break up is money.”
Pre-wedding financial planning is especially important in Wisconsin, adds Elaine Rich, managing member of the Madison-based financial planning firm, Rich Mikkelson and Rich. That’s because as the nation’s only “marital property” state, Wisconsin treats a bride and groom’s assets differently depending on whether they were accumulated before or after the wedding. The same holds true for a couple’s debts.
“Essentially, it boils down to this: Whatever you bring into the marriage can be separate under the law; otherwise it’s considered joint property,” Rich explains. “That alone should convince people that they really need to think about what they should do to stay in front of the eight ball.”
A visit with a financial planner can help, but some couples can sort it all out on their own. According to the experts, here are the essentials:
Different folks, different strokes. First, take an honest, objective look at your respective money orientations, and, above all, talk about your similarities and differences. Is one of you a “saver” and the other a “spender”? Is one of you more geared to the short term than the long run? And, most importantly, can you set realistic financial goals together that make the most out of your strengths and weaknesses?
“The biggest successes happen when couples are on the same page – both about who they are as individuals and where they want to go,” says Rich. “If there’s open communication and trust, people with very different approaches to money can still lay out a successful roadmap together.”
Adds Herb Hanson, senior advisor at Madison’s Financial Planning Services: “Maybe you should take notes on what you decide, and then maybe even sign it. It wouldn’t be a formal legal document, but just having it could help. That way, you’ve got something concrete you can refer to, just to keep yourselves on track.”
Match your budget to your goals. Once your goals are set, it’s time to develop a budget, ideally, a short-term one, a medium-term one and a long-term one. Revisit them regularly -- Thomas recommends at least once every three months -- and make mid-course corrections when necessary. According to Rich, the biggest mistake here is failing to consider how budget strategies will play out in day-to-day life.
“The golden questions you need to keep in mind are: What kind of asset base to you need to accumulate to accomplish your goals, what kind of income stream can you expect to do that, and what kind of lifestyle can you expect when you actually live out your budgets,” she says. “You’d be surprised how many people don’t have a clue when it comes to day-to-day expectations.”
One rock-solid habit you both should establish, especially younger couples: regular savings, ideally 10 – 15 percent of each paycheck.
“I know, there are a lot of bills and expenses, especially when you’re first starting out, but that’s not the time to scrimp on savings – and it should always be the very first thing you do,” Thomas says. “Putting anything away on a regular basis will really help you in the long run – but, above all, make it a habit. Eventually, you’ll get to the point where you barely even miss it.”
One manager or two? Some couples share the bill-paying, checkbook-balancing, expense-monitoring chores equally, but according to the experts, it’s probably best to designate one primary manager, mainly to simplify things. At the same time, experts unanimously – and strenuously -- warn that neither spouse should assume total control.
“Both parties should definitely be involved, and both should be completely aware of the household system,” Thomas says. “I have dealt with a lot of suddenly single people who have a very, very difficult time handling things on their own because, at the beginning, the other spouse was given not only total control but total knowledge.”
Yours, mine and ours. Here, we’re talking about what is known as “titling assets” – or deciding before you get married whether one or both spouses should be listed as owners, signatories or beneficiaries of certain assets. Key items to consider: bank accounts and real estate, health and life insurance policies, retirement plans and inheritances.
“A husband might have an Individual Retirement Account, but he forgets to change the names on it when he gets married – and it never comes up until it’s too late,” says Rich, for example. “This all should be a part of those very important discussions at the beginning about what should continue to be separate and what both parties are OK with joining together.”
Rich adds: “You can’t have any secrets, either – no secret credit cards or anything like that. You have to keep in mind that when you get married, you assume each other’s debt, too. So you both really have to be aware of everything each of you has.”
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