First-time Newlyweds: When and how should we start budgeting and combining finances?
Discussion about finances is a process best started when you commit to marry and should continue indefinitely. A good way to start is by sharing each of your specific short-, mid- and long-term goals. Then, together, prioritize the goals, giving relevant details like cost and time frames. Next, determine the strategy for achieving these goals; to do this you’ll need to create a detailed budget. Budgets are easy to create but often hard to follow; you’ll be more successful meeting your goals if you have a detailed spending plan. Finances are a leading cause of marital stress, and it’s important that both parties agree and take responsibility for knowing and understanding the plan. Review your plan periodically to stay on track.
Start by listing all of your expenses; include amount, frequency and due date. Be sure to include all expenses, no matter how big or small – include rent or mortgage, debt payments, groceries, medical, repairs and gifts, and be sure to include “fun” money, as this will help you stay on track and not feel deprived. Then add a section for savings. This includes emergency reserves and funding your goals. Next, categorize each item by due date and allocate your income for the same period. This is a good time to discuss and devise a plan to eliminate debt.
Second-time Newlyweds: I’m remarrying; how and when should we talk about our finances?
Start the discussion once you’ve decided to remarry. Most likely, you both have established goals, and sharing these is a good place to start. Include goals that you see accomplishing together and separately. Discuss retirement plans or, if already retired, review the existing plan and whether it is sufficient to accomplish new retirement goals. Decide where you’ll live, and agree on whether you’ll manage expenses together or separately and how much each is expected to contribute. Even if you decide to manage expenses separately, it’s good to discuss any debt and whether debt is still being created. Keeping this a secret often leads to mistrust and marital issues down the line.
Last, it’s important to understand how much money the surviving spouse will need and can expect to receive in the event of death. It may make sense to have a financial planner help, as this can be difficult to determine and is especially important if children from a prior marriage are involved.
Should we involve our adult children in the conversation? How?
Yes. Once you agree on how the estate will be divided upon either spouse’s death, schedule a family meeting and explain the plan in specific detail so that everyone knows what to expect when the time comes. Make sure you tell the family who the executors are, who has power of attorney and who can make medical decisions. Be sure they know that things could change and if they do, you’ll let them know. It’s OK if the kids get upset about your decisions; just be confident that you have made the right decision. Know that having these important conversations teaches your kids that it’s OK to talk about money and will help minimize resentments when a parent dies.
Gretchen Stangier, CFP and founder of Stangier Wealth Management, has worked in the financial services industry since 1998. She is a recipient of the 2011 and 2012 Five Star Wealth Manager Award in Portland Monthly Magazine and is ranked as a top wealth producer at LPL Financial, the largest independent broker in the nation. Recently, she was selected by LPL Financial to attend the prestigious 2012 Seventh Annual Barron’s Top Women Advisors Summit. www.StangierWealthManagement.com; 1-877-257-0057.