Make the money talk a 'to do,' before the 'I dos'
If you're planning a life together, discussing your financial picture should be a top priority. 'Today' financial editor Jean Chatzky offers pointers
There's little that rivals the excitement of an engagement.
From the proposal through the planning, the months counting down to a wedding are typically a happy, optimistic time. So it makes sense that a lot of couples shy away from topics that, if mishandled, could quickly degenerate to blows: In-laws, religion, sex and — yes — money. Unfortunately, that sort of ignore-it-and-it-will-go-away mentality is precisely the opposite of what you need as you start a life together. Particularly where your money is concerned.
So whether you're engaged today, thinking you might be (hint, hint) engaged tomorrow, or are already married (but not exactly sailing in smooth financial waters), here's an exercise I'd like you to try:
Know your financial self. Before you discuss your finances with your beloved, it helps to know as much about those finances as you can. So do a little reckoning. Pull out bank statements, student loan records, credit card bills, documentation of any big assets and pull your credit report (you can get this for free at www.annualcreditreport.com).
Then, suggests John Bodnar, owner of New Jersey-based Bodnar Financial Advisors and volunteer premarital financial counseor at his local church, make a chart based on these documents. List your assets, including bank and retirement accounts, stocks, and any major possessions like a car and a house, on one half of a page, and your liabilities, like credit card and loan balances, on the other. Then share your list with your partner — that way, you know exactly where the other person stands financially.
Fill in the blank: When I pull $100 out of the ATM I______________.
Here's the deal, your soon-to-be spouse needs to know: When you visit the ATM, does that money burn a hole in your pocket until you buy a new pair of shoes? Or do you only withdraw a set amount of cash each week so you have some left to bulk up your savings? If you're not sure (and many people aren't), document all of your expenditures for just one month during your engagement, then share your findings. You might be surprised to see where that money is going, and what you could learn from each other.
Dream a little dream. Do you know what your fiance wants in life and how soon he or she wants it? A house? A baby (or four)? Seed capital for a dream business? To kick back in Bora Bora? Early in your courtship you likely allowed yourself to get caught up in some lifestyle fantasies, but now that wedding planning has set in they may have taken a back seat. Give yourself some time together to dream in a more realistic way.
Figure out what both of you want, then attach some tentative numbers to those goals and think about how soon you'll be able to achieve them. If you're both on the same page, says Alexander D. Nirenstein, managing member of NRG Family Law in Arizona, it'll be easier to motivate yourselves to work toward those things you really want.
Think tactically. Each couple should come up with an accounting system that works for them. A lot of people are utilizing what Nihara Choudhri, attorney and author of "What to Do Before 'I Do': The Modern Couple's Guide to Marriage, Money and Prenups," (Sphinx Publishing, 2004) calls the "three pot system." In this, each spouse has his or her own checking and savings accounts. Together, they have a house account, and each contributes a fair portion (often the same percentage) of their paycheck to be used for shared expenses. This is a way to eliminate feelings of guilt brought on by the purchase of season tickets or a new outfit. Finally, if your soon-to-be-spouse is hesitant to talk, making him air all of his financial mishaps, or her regale all of her spending sprees, likely won't help. So go ahead and unveil your history first, says Choudhri. "I think the easiest way to approach it is by sitting down, or maybe going out to dinner, and saying, 'I just wanted to tell you about my financial situation.' Put your issues on the table, and then say, 'That's my story — now can we talk a little about what's going on at your end?' " Once your spouse knows that you've made mistakes too, he — or she — will be more willing to disclose.
Additional reporting: Arielle McGowen
Jean Chatzky is an editor-at-large at Money magazine and serves as AOL's official Money Coach. She is the personal finance editor for NBC's "Today Show" and is also a columnist for Life magazine. She is the author of four books, including "Pay It Down! From Debt to Wealth on $10 a Day" (Portfolio, 2004). To find out more, visit her Web site, www.jeanchatzky.com.
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