Understanding your finances is key to avoiding nickel and diming one another.
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Getting married? Congrats! Marriage represents an intimate union and equal partnership between two people. It is very much based on shared interests and values that shape all aspects of your future—and that certainly includes finances.
Prior to tying the knot, you and your soon-to-be husband or wife may choose to combine your finances. By no means is this necessary, and if neither one of you cares all that much about your credit and wants to live in the here and now, that’s fine. But if one person is obsessing over his or her finances while the other just wants to buy a brand new convertible, then you’re going to have trouble.
Discussing finances can challenge even the happiest couples, but it’s important to get on the same page with your prospective spouse if you can. Here are six financial issues that you should consider before walking down the aisle.
Credit Score
Consider Rob and Tyra, a recently engaged pair of Millennials that wants to buy their first home. They’re young and in love, but are they in a financial position to acquire their dream home? It may depend on each person’s credit score.
Your credit score influences the credit that’s available to you and the terms that lenders may offer. However, you can track your score by checking your credit report annually. A credit report contains the data used to calculate your credit score, and you can get one free credit report from each of the three major credit bureaus (TransUnion, Equifax and Experian) once every 12 months from annualcreditreport.com.
Checking a credit report for errors is essential, too. Make sure that there are no late payments incorrectly listed for any accounts and that the amounts owed for each open account are correct. And if you find any errors, you can dispute them with the credit bureau that provided the report.
Debt
Debt is another key factor that can impact a couple. To better understand how debt can affect a future husband or wife, let’s take a closer look at Austin, a 22-year-old who is getting ready for his wedding ceremony.
Austin wants to take out a loan to help finance his upcoming wedding. But unfortunately, his student loan debt prevents him from getting the loan he needs to give his fiancée Norma the wedding of her dreams.
For Austin, reducing debt is essential, and devoting the necessary time and resources to manage debt now can deliver long-lasting benefits.
Credit.com offers a five-step process to lower debt:
- Evaluate your debt
- Look at your budget
- Make a plan
- Start debt management negotiations
- Follow-through with your debt reduction strategy
Debt counselors and consolidation agencies are also available to help you explore ways to reduce your debt.
Savings
Examing your savings is yet another important consideration before getting married—just ask Eric the electrician. He has been working at an electric company for 11 years. He enjoys a steady income but lives week to week. However, the electric company has decided to lay off some of its employees, and Eric now finds himself without a weekly income and no savings. And with his wedding coming up soon, Eric has no idea how he’ll be able to pay for the ceremony.
Let’s face it—saving money can be difficult, and in many cases, the toughest step is just getting started. But it is important to set financial goals. That way, you’ll be better prepared financially if any emergencies arise.
Bank of America offers several helpful tips for those who want to save money, including
- Track your expenses
- Make a budget
- Set savings goals
Earnings
Remember, how much you save is relative to your income, and examining your earnings regularly can help you determine the best way to reach your immediate and long-term financial goals.
To illustrate this point, let’s take a closer look at Samantha, who just earned her undergraduate degree in biology. She lived on campus during her collegiate career and wants to move in with her soon-to-be husband Herman, who currently is unemployed and lives at home with his parents. Samantha and Herman want to rent an apartment together but neither has a full-time job or steady income.
For Samantha and Herman, earning a consistent weekly income is key. Conducting an effective job search offers a great first step toward achieving this goal, and Entrepreneur notes that understanding your job criteria and customizing your resume and cover letter accordingly is crucial. And for those who want to earn additional income to supplement their current salary, LedgerLink points out that becoming an indispensable expert within your organization can help you rise up the corporate ladder.
Financial Goals
So now the question becomes: What are your financial goals? Financial security is key, and those who set up financial goals can determine the best ways to protect their assets.
For example, consider Andrea, a bride-to-be who has accepted her first job out of college, an entry-level position at a law firm. She receives a full benefits package as part of her compensation, including the option to enroll in a 401(k) where her employer matches worker contributions up to 6 percent. Andrea declines the 401(k), and instead, plans to save any extra money from her paycheck to buy a jet ski.
Andrea is focused on the here and now, which is certainly a viable option. But let’s not forget the value of setting financial goals, either.
Kiplinger points out that establishing goals that allow you to get ahead financially each year can provide you with crucial financial reserves. Each financial goal you set should get you excited, and you should be able to determine a path to achieve this goal as well.
Retirement
Lastly, retirement often is an important goal for prospective spouses. Someone like Alex, who plans to get married in the near future, just started looking at his retirement savings. And at this point, he doesn’t like what he sees.
Alex is looking to retire in 10 years. But when he examines his finances, he realizes he hasn’t saved any money, despite the fact that his employer has offered a 401(k) since he started with the company over 20 years ago.
It is never too early, or in Alex’s case, too late, to start thinking about retirement, and numerous retirement tools are available to help streamline the planning process. The U.S. Department of Labor recommends understanding your retirement needs and learning about your Social Security benefits. In addition, putting money into an individual retirement account (IRA), 401(k) or 403(b) can help you save money for retirement consistently.
Keep in mind, even if you decide to wait to delve into your finances until after the wedding, it’s a topic of discussion that will come up at some point in the future. And ultimately, you and your prospective spouse will be better prepared for any financial challenges you encounter if you’re on the same page from the very beginning.
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The post One Spends, The Other Saves: 6 Solutions to the Fight About Money appeared first on The Good Men Project.