Have This Talk BEFORE You Tie the Knot

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We hear all the time that one of the main causes of divorce is money. One way you can reduce the chance (it never goes away) of money fights with your spouse is to discuss finances beforehand. But how can you tell if you are on the same financial page? Here are four things to discuss before you marry:

1. Assets and Liabilities

First of all, couples need to get it all out in the open. It is vital to share your assets and your liabilities. “Complete honesty is necessary here,” says Kelly Campbell, the founder and principal of Campbell Wealth Management in Fairfax, Va. “You don’t want any surprises. It might be embarrassing in some cases to admit how much debt you have, but it needs to be on the table from the beginning.”

Having a starting point for creating a financial plan going forward is important. And it is a good idea to know the exact situation before the marriage; that way, you both are aware of where you stand with regard to money. Debt, insurance, pensions, investment accounts, cash flow, income and property are all items that should be covered. As part of the discussion about assets and liabilities, Campbell recommends that couples also discuss their spending and saving habits.

2. Credit History

Another important financial issue to discuss is credit. One partner’s poor credit can reduce the chances of approval for car loans and mortgages. Even if you do get approval, you might not get the best deal on an interest rate. Some states will allow you to use only the better credit score. However, common property states won’t allow this, and your partner’s bad credit could lower your credit score. By disclosing your credit issues, you can face the problem together, and work on a plan to improve a credit score that needs some help.

3. Handling the Finances

Figuring out how to handle the finances in your marriage is an important discussion to have. “You need to understand how you will combine [your money] if you decide to do that, and how you will divide up expenses if you decide to keep some aspects of your financial lives separate,” Campbell points out. He says that potential spouses should discuss different systems and options for handling individual and shared bills ahead of time.

“You also need to talk about your situation with kids. Will one of you stay home? Realize that if one of you stays home full- or part-time, a contribution is being made. You would have to pay for those services if the stay-at-home parent were working full-time. Have a plan for making sure that the stay-at-home spouse participates in money decisions.”

4. Long-Term Financial Goals

Look at what you want to accomplish. Do you have similar aims for your money? Being on the same page with regard to the big picture can save heartache down the road. This is also a good time to chart a course based on your goals, and on the issues you have discussed previously.

“If one of you has a lot of income right now, but the other has greater retirement assets, you can see how to meld that situation so that you meet your long-term goals,” Campbell says.

When having the financial talk, Campbell recommends that couples try to keep emotion out of the discussion and instead focus on the facts and numbers. “Having a third party, a financial planner perhaps, can help keep emotions in check.”

And if you're concerned about broaching the subject? “The best way to start that conversation is to say, ‘let’s have a budget,’” says Campbell. “As you start to look at what’s coming in and what’s going out, it naturally leads into the money talk.”

—For more ways to save, spend, invest and borrow, visit MainStreet.com.

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