Getting Engaged on Valentine’s Day?

Let Your Money Skeletons Out Of the Closet

Maybe you’ve seen the commercial for CreditReport.com where the young guy sings, from the basement apartment of his in-law’s home, that he wished he’d known about his new wife’s credit problems before getting engaged. It’s not romantic, but each of you should prepare a detailed financial statement listing assets and liabilities, annual gross income, interests in family trusts, even potential inheritances. The more you share information, the better prepared you will be to make joint financial decisions.

Consider A Prenuptial Agreement

Today more couples from any level of wealth, (particularly those who were married before or who have a blended family) include a prenuptial agreement in their wedding plans. A prenuptial is a written contract created before you say “I do” that addresses a range of legal and financial objectives. For example, you might use a prenuptial agreement to separate pre-marriage assets, protect a family business, define community property, specify what happens to assets in the event of divorce, or address potential family inheritances. While you can draft the document yourselves and have it signed and witnessed by a local notary, you each might consider hiring a lawyer to review the agreement to ensure your individual interests are protected and that the agreement follows state law. Note that prenuptial agreements have been struck down in court when the agreement wasn't reviewed by a qualified attorney.

Build Your Money Dreams Together

Ask yourselves: What’s important about money to you?  Exploring this question may lead you back to your childhood to think about how your family managed money. You might also ask: If money was not an issue, what would I do with my life? Having a little perspective on where the other person comes from can provide a high level of understanding and empathy.  Get help from a Certified Money Coach to help facilitate the "talk money with your honey" conversation.

Create A Plan For Your Top 5 Goals

What do you want?  Are you planning to buy a home, or pay off debt?  A goal is a dream with a deadline.  Your short and long-term goals will help you determine how to manage your money. Clarity is essential when it comes to goal setting.  Prioritize your goals and be specific.  Give each goal a timeline and price tag.  Ask yourself "how much by when" for each goal.  

Joint And Separate Bank Accounts

Many couples use a joint account, perhaps funded in proportion to each person’s income, to pay for mutual expenses such as food, rent/mortgage, and common goals. In addition, separate accounts, funded after the necessary joint account, grant each spouse the freedom to make relatively minor purchases without consulting the other.  You might find it helpful to determine a dollar amount, either per purchase or monthly before a conversation is necessary.

Create Your Cash Flow Plan Together

It’s easy to budget for essentials like car payments, but an accurate budget requires that you track all your expenditures. To accurately estimate what you spend on variables such as entertainment, keep all your receipts in a file for 90 days. When you finally tally the results, you may be surprised how much you spend on lattes. Once your budget is drafted, sit down weekly for ten minutes to discuss short-term mutual financial decisions, and meet periodically, say once a quarter, to review your overall finances. Although one person may do much of the actual bill-paying, the other spouse should be involved because managing money together reduces conflict.

Ask a Professional For Help

Are these exercises keeping you up at night?  They're not intended to burst the getting engaged balloon.  Help is available.  A financial advisor helps you recognize your money attitudes, clarify your goals, organize your finances, and establish an investment plan. Working with a professional can help you build your money management muscles by teaching you good habits before you have the time to form bad ones.