It’s peak wedding season, and many weddings these days are over-the-top when it comes to how much is spent.
Couples take months to plan their big day, and determine how much they will dish out on everything from the caterer and the disc jockey or band to the wedding cake and groom’s cake, to say nothing of extras such as chocolate fountains and photo booths. The average U.S. wedding costs around $25,000, not including the honeymoon.
Despite all the hours spent discussing details about the flowers and the favors, the topic of how the couple will manage a lifetime of spending, saving and surviving financially is rarely discussed. It seems as though money is one of the few taboo topics left in our society where all sorts of touchy subjects are blasted all over the Internet.
A recent poll found that 68 percent of engaged couples had a negative attitude about discussing money with each other, with 5 percent indicating the discussion would cause them to call off the wedding, according to the National Foundation for Credit Counseling.
What is it they fear revealing? Large student loans or a bad credit score? That could be.
The truth needs to come out before tying the knot, because afterward the maxed-out credit cards or the addictive shopping habit will probably no longer be a secret. A spender married to a saver could be a doomed combination.
In fact, with money one of the major issues couples fight about and one of the main reasons for divorce, it’s crucial that couples delve into the subject to avoid a disaster later.
Shelley Cabangon, vice president and senior wealth planner at PNC Wealth Management in Palm Beach, Fla., advises wealthy people about complex estate and other planning issues. No matter what their income, everyone entering a marriage should have a talk well before the wedding day about how they will handle finances, she said.
Cabangon boils it down to these five issues:
1. “My” vs. “our” money: Will we have joint or separate accounts? Will we consolidate accounts with the same banking partner?
2. Debt: How much debt am I bringing to the marriage, and how will we manage it?
3. Who’s in charge of budgeting and paying the bills? Is there a CFO of the house, or is it a partnership?
4. Spending: Are our spending priorities in line? Is there mutual or individual approval for spending?
5. The future: Are we prepared to plan for retirement together? (e.g. 401(k) plans, Roth IRAs, etc.)
“It is not necessarily an easy conversation to have right off the bat,” Cabangon said. “You can’t be having it shortly before the wedding.
“Knowing what the divorce rate is, just do it.”
Cabangon suggests incorporating financial planning into the wedding planning. Some churches even require premarital counseling that includes a financial component.
One way to solve the My vs. Our money issue is to have a joint account for shared expenses such as the mortgage or rent, electric bill, car payments and food. Individuals could also have separate accounts as well to retain some autonomy.
Don’t automatically assume your future spouse feels the same way you do. One party might consider a fancy car a necessity, while the other is content with basic transportation.
Assets and liabilities need to be discussed. How much does each person have in savings?
If children from a previous marriage are involved, questions about who will pay their expenses need to be ironed out.
Attitudes matter, too, especially about retirement. Does one person plan to never retire, while the other dreams of retiring at 65 and traveling the world?
“Those are two different goals. It really has an impact on how you are going to save for retirement,” Carbangon said.
What about saving for children’s college costs, or vacations?
One person might have been brought up thinking parents should pay for college, while the other might feel that the child should fund it with jobs and loans.
“The main thing is really communicating properly openly, honestly and all throughout the marriage. You don’t talk about it once and never bring it up again,” Carbangon said. “It is a regular thing you bring up, and you get into the habit of that.”