Questions To Ask Before You Say I Do
There are only three days until Christmas! I had the misfortune of needing to go to the mall last Saturday night to pick up a gift for my father. I wanted to buy him a protective case for his Apple iPad. That trip was brutal to say the least. There was no parking. I circled the lot for a good five minutes, stalking other shoppers as they came out of the mall and headed towards their cars. Then when I got to the Apple store the lines were 15 people deep. I stood in line for at least 25 minutes and when I got to the counter a pimply faced kid who looked no older than 17 kept calling me ma’am as he processed my order. I never thought I’d miss the days when customer service representatives addressed me as “Miss”.
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Figuring out what to get everybody on your list is the hardest part in the gift giving process. Once you have that nailed down then you can turn your focus to finding the best deal on those items. While researching popular gifts for 2010 I found out that one of the most popular gifts for the holidays is engagement rings. December is the most popular month to purchase engagement rings, according to data from National Jeweler Magazine, with 12.3 percent of rings being sold in the that month. And 19 percent of all engagements take place in December according to data from the Fairchild Bridal Group.
With so many couples taking the next step in their lives this month I thought it would be appropriate to talk about how money affects these budding relationships. Newly engaged couples probably feel like they know everything there is to know about their partner. They know what side of the bed they prefer, what their favorite dish is at any given restaurant, even the name of their partners first girlfriend/boyfriend. One subject that couples don’t always discuss freely and openly with their partners is money. Sure at this point you probably know how much money your partner is making and what bank they hold their accounts in, but the topic of money runs much deeper. There are six questions it is imperative that you know the answer to before you link not only your names but your finances together too. Even if you’re not newly engaged read through the list of questions and ask yourself if you know the answer. We all should.
1. What’s your partner’s credit score?
Undoubtedly this is a romance buzz kill, but nonetheless an important topic. Your scores affect your future. Long time readers know that credit scores affect your ability to buy a house together and what rate you’ll get to finance that purchase. If one of you has a great credit score and the other has one that is less than desirable you may find it hard to get a loan at all. Banks and creditors do not take an average of the two scores; they generally base their rates on the lower of the two credit scores. If one of you has a score below 640 you may find you it impossible to get a home loan altogether. Ask yourself if you can wait three, four or five years in order for your partner to clean up his credit enough so you two can buy a house together.
2. What experiences has your partner had with money?
A credit report is a great place to start the discussion on money. In part because a credit history is like a historical record of past mistakes and overall financial habits —missed payments or excessive credit card use. That in itself is a good starting point for a discussion about what you’ve learned about handling money.
Were finances discussed openly while your partner was growing up? How did his/her parents make decisions about finances? Money habits are learned, you are not born knowing how to balance a checkbook. It’s important to discuss the past as it is a window to your financial future.
3. What debts does your partner have?
When you marry, your partner’s debts become your debts. You need to know how much you’ll be on the hook for after you walk down the aisle. School loans, child support payments, credit card balances, all of which you could be forced to pay off for your partner. Ask yourself how much is too much debt. You may find that it makes sense to defer marriage or prolong your engagement until one or both of you are more financially stable.
4. What investments does your partner have?
Just as you want to know what debts your partner has incurred in the past you want to know what investments they are in. Sharing this information can help reveal financial attitudes. One of you may be heavily invested in micro cap stocks, a riskier investment. While the other might be totally invested in bonds and money market funds, very safe investments. Discuss your combined risk load and adjust your portfolios so that no one area is too heavily invested in.
This conversation will also reveal any overlapping investments. You don’t want to put all your eggs in one basket. If the market tanks or an investment plummets in value you would both lose your shirts instead of only one of you. You don’t want both of your investment portfolios to be invested with the same funds. Remember all those people who lost their entire retirement nest eggs with Bernie Madoff? Learn from their mistakes.
5. What are your future financial goals?
Even if you know how much money your partner makes per year you need to discuss what they think they’ll make in the next three, five, ten and 20 years from now. To make more money does you or your partner need to go back to school for more education? Are you prepared to support the family and pay for their schooling while they attain a degree? Consider what sacrifices you might have to make to make those plans a reality.
Ideally you should sit down with your partner and make a list of short term and long term financial goals. Do this individually the first time and compare similarities and differences. Once you’ve gone over both your lists come up with a shared list of future financial goals and actions you need to take to accomplish those goals.
6. Who will be handling the bills?
You need to figure out who will be writing the monthly checks and from what accounts those bills will be paid from. Yours? Theirs? Both?
If one person volunteers to balance the checkbook then there usually isn’t a big problem. Problems arise when both spouses want to control the checkbook. Now-a-days couples are marrying for the first time later in life. The median age at first marriage increased to 28.2 for men and 26.1 for women in 2010, an increase from 26.8 and 25.1 in 2000, according to the U.S. Census Bureau. When two people have both been on their own, financially speaking, for quite a few years it’s harder to give up that control. It’s important that no matter who you decide to handle paying the bills each month that you both know what is going on with your money.
When one person makes most or significantly more than the other that can cause problems too. Couples must decide if the person paying all or most of the bills gets to make most or all of the financial decisions for the family. If one of you wants a six passenger SUV and the other wants a two door roadster who gets to make that decision? How will you split costs when kids come along? Is it implied that the woman will quit working and you will become a one income household? These types of questions don’t always come up when your dating as these topics seem to encompass things that may be years away from happening. But it’s important to discuss instead of assuming you know the answers. The answers will allow you to begin making financial preparations for the rest of your lives together.
Men and women tend to view money differently. Women view money as a means of security while men see it as a status symbol. Whatever your money talk reveals, be sure your fiscal personalities and habits mesh.
Happy Holidays everyone.
Is This Cheating?
People are convinced my friend Marc Charles is doing something illegal. Here are just a few examples of why they think that:
While you and I go around paying for dinners, cruises, and hotel stays… He gets them for free!
Or when we want money we either have to earn it or apply for a loan… While he shows others how to get free money that they never have to pay back!
Some might call this cheating. Marc calls it, “Ethically Gaming the System”.
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Keeping Money In Your Pocket,