Getting married is one the most important decisions you may ever take in your life. However, it may turn into a financial nightmare if you don’t discuss in advance your financial goals and financial decisions with your spouse. You need to go into details about your financial future in order to decide how you will effectively handle money as a married couple.
The following are five important money questions to ask before getting married.
1. “How is your credit report?”
The credit report is a very important document that portrays how effectively (or not) a person manages money. If your spouse’s credit report is a lot different than yours, you should consider financial compatibility issues, but the good news is that marrying a person with bad credit doesn’t plunge your credit score. If you apply for a car loan individually, your spouse’s credit score cannot affect your application.
However, if you apply for joint financing for buying a house together, the lenders will consider both credit reports. If your spouse’s credit score is low, it probably means that he/she won’t be eligible for a mortgage and your application may incur higher interests or even be turned down. Therefore, you should know how the credit report of your spouse looks like before living together.
2. “How much debt do you currently carry?”
Living together means sharing everything, including debt and bills. So, before going into the marriage you should discuss debt issues. How much debt each of you has and who is going to be responsible for that debt? How are you planning to deal with existing debt? Are you going to merge existing individual loans with your spouse’s? Sometimes merging loans after marriage works, sometimes it doesn’t, especially if you get a divorce and one person defaults on their debt. Sit down with your spouse and make a debt plan in order to avoid financial troubles, including bankruptcy, in the future.
3. “Do you pay your bills on due time?”
Paying your bills on time can save you from several financial troubles. If you are a person who pays their bills on due time, but your spouse pays his/her bills at the last minute, once again you have to consider financial compatibility issues. But you should know how your spouse pays his/her bills because this will give you an idea of how he/she generally handles financial issues.
Paying bills on time shows a well-organized person. If this person is you, then you should probably be responsible for the bills in your household, including writing checks, making online payments, rebalancing portfolios and doing the taxes. In any case, your spouse should know where your keep all financial information, including usernames and passwords for online payments in order to undertake the responsibility, if required.
4. “Shall we have joint accounts?”
If you earn approximately the same amount with your spouse, it probably means that you can both contribute roughly the same dollar amount to the joint account. If one person earns more, it makes more sense to allocate the contribution on a percentage basis.
For instance, if you earn $40,000 per year and your spouse earns $60,000 per year, your total joint income is $100,000. To calculate contributions to the joint account divide your salary (lower) by the total joint income to get the percentage contribution = $40,000 / $100,000 = 40%. Assuming that the dollar amount you need in the joint account monthly to meet your financial obligations is $3,500, the lowest monthly contribution is 40% x $3,500 = $1,400. The highest monthly contribution is $3,500 – $1,400 = $2,100.
After setting up a budget with your spouse, decide how much each one will contribute to the joint account to meet shared financial goals, including buying a home, funding your kid’s education, saving for retirement and so on.
5. What are our health insurance options?”
Health insurance is extremely important because without coverage, you won’t be able to cover potentially colossal medical expenses incurred from an accident or an illness. This can lead you even to bankruptcy. If you already have health insurance, consider adding your spouse in your health care plan. This can significantly lower the insurance premium, while you will both enjoy several benefits, including lower medical costs, lower costs to specialized doctors, easy access to routine medical checkups and health care and coverage of hospitalization and treatment.
Discuss your health insurance options with your spouse, assess the costs and benefits of your individual plans and device what is the best option for your household.
All in all, marriage is a very important decision. When two people decide to join their lives, there are many things to consider and one of them is money. Research shows that one of the most common causes of divorce is financial issues that can often lead to conflicts and disputes. So, don’t be afraid to ask important money questions before getting married. How many credit cards do you have and what are the interest rates and balances on those cards? Is there any black mark on your credit history that may affect our ability to meet our financial goals? Do you have any debt from a previous marriage? How are we going to support our children? Dealing with financial issues during marriage can be extremely hard if you don’t’ ask these questions before living together.
Sources:
http://www.creditcards.com/credit-card-news/12-debt-questions-to-ask-your-betrothed-1267.php
http://www.kiplinger.com/columns/starting/archive/2005/st0607.htm
http://www.allbestarticles.com/family/legal/common-causes-of-divorce.html