Thursday, June 12, 2014

Before the Cake and Wedding Dress: Couples Should Discuss Finances Before Saying "I Do"

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Benjamin Franklin in Poor Richard's Almanac said, "Keep your eyes wide open before marriage, half shut afterwards." Wise advice then. Wiser advice now. With the wedding season kicking into high gear, there's one discussion that too often doesn't occur between couples – finances. It should—or it could have perilous consequences later.

Unfortunately, couples would rather talk about anything but money. But according to several studies, not discussing finances prior to saying "I do," is the biggest mistake a couple can make.

At minimum, couples should have a frank discussion about their approaches to budgeting, planning and saving. Indeed, the importance of a frank discussion on finances before you take the plunge cannot be overemphasized. Many marital family attorneys agree that money is often at the root of many divorces

So before tying the knot, here are some issues about money that may help improve your chances for a long and happy marriage.

Have a frank discussion about finances.
To start things off, both you and your spouse-to-be should establish your financial priorities. At this point, it is important to understand your spouse's attitude toward money.
"If one spouse is a saver and the other a spender, there is likely to be conflict," says Anthony A. Saccaro, president of Providence Financial & Insurance Services Inc. in Woodland Hills, Calif. "Once this is identified, both can have a meaningful conversation about how to handle it."
"Just having a conversation about money before they get married can improve communications about money," counsels Larry Luxenberg, a financial advisor in New City, N.Y. "It's hard to get that conversation started, but hard to stop it once it gets going."
 2. Financial Priorities
A good first step, says Susan Carlisle, an independent CPA in Los Angeles. "Establish how much to save, how much to spend, and just as importantly, who contributes what amount or percentage of their income to the budget," she says.
 Other priorities:
  • Who is going to pay the bills?
  • How much to allocate to a yearly family vacation?
  • How often to buy new cars?
  • When to purchase a bigger house or live in a different neighborhood?
--Agree to stay out of bad debt.
Make a conscious effort to understand debt. The key, say advisors, is using debt to advance your goals.
"Treat the financial aspect of your marriage like a business," advises John Gajkowski, CFP, principal of Money Managers Financial Group in Oak Brook, Ill. "You're trying to utilize money more efficiently."
One client had accumulated a balance of approximately $15,000 on half a dozen credit cards. "By prioritizing his debts, we were able to pay them off in about 13 months," said Gajkowski.
--Establish whether you're a spender or saver.
 Determine if you're comfortable carrying credit card debt, whether one of you plans to stop working with new children, and how much to save for retirement, according to Magnolia D. Levy, a partner in the matrimonial department at McLaughlin & Stern LLP in New York.
"You want to ensure that you and your intended have the same financial priorities," she says.
 3. Insurance
There are good reasons to include insurance in the discussion, according to Mark Brownstein, president of Brownstone Financial Group in Nyack, N.Y.
Couples need to protect their insurability now as their health can change at any time, he says. They also need it to cover any existing debt or a home to be purchased together. Regarding costs, the difference in premiums for a 20-25 year old or 25-30 year old are substantial on a 30-year term policy, points out Brownstein. Finally, he recommends all "to be wed" couples review the beneficiaries of any existing insurance coverage they have.
 see more at mainstreet

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