TO see the winners of this week’s questions I answered on ABC News just click on the link. The following bloggers will receive a free copy of The Little Book of Big Savings (Waterbrook, 2009) from our offices: Lauren from Tucson, Trish from Ft. Lauderdale, Misti from Chicago, and J Brooks from Hawaii,
Here is a review of my Q&As for the show:
1.) There’s already so many things going on, Ellie, tell us where you can start when it comes to dealing with money before the big day.
Answer: The most important financial merger of your life requires hard work—but it’s worth it. COMMUNICATION is the key to dealing with money in marriage. According to a 2008 study conducted by California State University, 21% of couples fight over money daily or weekly. 10% fight monthly and 46% put on the gloves every few months.
2.) But successfully merging your money when you marry isn’t as easy as slipping rings on each others’ finger’s. How much time and effort should couples put into this financial merger?
Answer: I think it’s critical for couples to get premarital counseling that specifically deals with money matters. Each partner comes to a marriage with different money management styles. For example, I was a born saver (big surprise) and my husband, who had a good work ethic from the time he was a child was a born spender. In fact, his money never say the inside of his pocket! Consequently, I recommend date nights should be set aside monthly (if not weekly) to regularly talk about your financial progress with your mate. Spouses-to-be who discuss their views of money and work together on how to use their financial resources may discover that they actually like the process.
3.) Also, some experts recommend doing credit checks on their spouse-to-be. Do think this is a good idea? After all ‘till death do us apart is the saying, and that means accepting everything about the other person, including any bad debt.
Answer: I like to say that my love is unconditional, but my money is conditional. Part of accepting my spouse means that I know what I’m accepting—good bad, and indifferent. I need to know the debt, the problem areas and what kind of future the mingling of money will have as an impact on my own credit score. When you merge all financial resources, it means that in many cases—for mortgages, home improvement debt, car loans and joint accounts—his credit becomes my credit.
4 ) When one has better track record than the other, does the credit score get better or worse for the couple?
Answer: Usually, the bad score will more quickly impact the good score when joint credit is secured. However, it depends on how previous debt and accounts are handled. I do not recommend putting the person with good credit onto the debt history of the partner with bad credit—this deteriorates the good payer’s FICO. So if Mr. Debt has a credit card that he wants to add MS. GOOD to, then she just says no. But when it comes to future loans, there is a measure of unavoidable mingling. As a personal example, when my husband and I moved to CA and had to hook up electricity, his FICO score required a $500 deposit and mine allowed us to get it with no deposit—obviously we put the bill in my name and in this case, it didn’t deteriorate my FICO but it saved us $500!
5.) So, what are some of the most crucial topic couples should cover as they talk about financial matters?
• Long Term Financial Goals (buy a home, have kids, dream travel destinations)
• Spending Plan
• Saving Plan
• Debt Management
• Short Term Financial Goals (new furniture, honeymoon trip)
5.) And when it comes to financial goals, it’s obviously important to make them and reach them , but it is that something that can wait after you’re married?
Answer: Some goals, such as dream vacation destinations, can be ironed out after marriage. But other goals, such as having kids (and how many) is something that should be agreed upon before you marry. Other critical goals that should be discussed pre-nuptials is home ownership—when and how? One partner may be content to spend money to have a “good life” and doesn’t really care about paying down consumer debt in order to buy a home. While the other partner may think that home ownership is a primary goal and spending should be put on hold in order to achieve that goal. These are the kinds of discussions that are necessary before rather than after the big day.
6.) And of course saving money is at the top of the list for many people, tell us, should we go the route with joint or individual accounts? And why is this important?
Answer: Any home based business accounts should be kept separate at all times from a couples joint account. As to other checking accounts, there is no right or wrong answer on this one—it all depends upon what the couple mutually agrees to and what works for them. If there are separate accounts, there needs to be full disclosure and accountability for those accounts. I’ve had the unfortunate experience of counseling many couples where one spouse racked up thousands of dollars in consumer debt and the other partner knew nothing about it until it was too late. On the other hand, I’m a firm believer in keeping mad money and surprise money separate. After all, if Bob wants to give me a surprise trip to Paris for our anniversary—whom am I to rob him of that pleasure?
7.) And finally tell us how newlyweds can prep for the future. Say, purchasing a home or having new additions to the family like babies. This is something that obviously needs to be discussed before walking down the aisle?
Answer: In the picture above, you’ll see the newlyweds in our family, our 22 year old son just married his bride. I’ll give our viewers the advice I gave them: plan for what you can, try to prepare for the unexpected and roll together when life throws you a curveball. Our newlyweds have no consumer debt, student loan debt or automobile debt. One partner is still in college and they both have modest jobs. So they are living within their means, spending less than what they make, and saving for future kids (my grandbabies, mind you!) and a future home of their own. They are on their way to a wonderful life!
Thanks for your questions and be sure to tune in next time to see how you can win a copy of one of my books!
America’s Family Financial Expert (R)