Getting married or know someone who is? Smart couples master these money moves before marriage! In today's conversation, we discuss important financial steps to take after getting engaged. Some of our suggestions:
1. Start Saving Together: It’s essential for couples to begin saving together, even before the wedding. Opening a joint savings account and contributing a set amount monthly can help establish a healthy financial foundation.
2. Share Your Financial Situation: Open communication about each person’s financial situation—like debt, credit scores, and retirement savings—is crucial. Full transparency helps prevent future misunderstandings.
3. Plan the Wedding Budget: Be intentional about your wedding planning. Instead of blindly following societal trends, discuss with your partner what is important to you both and what you want your wedding experience to feel like. Prioritize what matters most to avoid overspending.
4. Cash Flow Management: Couples should talk about how they will manage their finances together, including how to split living expenses and manage credit. Clear communication about how money flows in and out of your shared life is essential.
5. Consider a Prenup: While it might seem uncomfortable, couples should think about a prenuptial agreement, especially if they have significant assets or debts. A prenup can clarify how property and debts are handled if the marriage ends, ensuring both parties are protected.
Be intentional, have open conversations about finances, and make informed decisions about financial matters as you prepare for a life together!
Resources:
- Alliance of Comprehensive Planners: https://www.acplanners.org
- John's firm website: https://www.trinfin.com
-Find us on Facebook: www.facebook.com/friendstalkfinancialplanning
TRANSCRIPT:
Bridget: Hey, John, when you get engaged, congratulations! But there's stuff you should do financially, and we're going to talk about that. We've created a checklist for everything to do when you get engaged. And this is going to be great information if you just got engaged or if one of your kids just got engaged. Hi, I'm Bridget Sullivan Mermel. I've got a fee-only financial planning practice in Chicago, Illinois.
John: And I'm John Scherer. I've got a fee-only financial planning practice in Middleton, Wisconsin. Before we jump into our checklist for financial things to do when you get engaged, let me just remind everybody to hit that subscribe button to help other people find this information on YouTube. And with that, I'm looking forward to getting into this, Bridget. And as you were describing things to do when you get engaged, my mind just jumped to, holy mackerel, that's was a long time ago. I had hair way back then. Holy cow!
And I love that you said too that it's not just about me. I'm thinking about my kids. My kids are younger, but my friend's kids are in that position. One just got engaged, so they need to think about these things. It's helpful. I know a lot of our viewers are similar in age to you and me, but this is a family thing. And what are the things to do when you do get engaged? I know you deal with this a lot more than I do. I'm looking forward to hearing from you. What's on your checklist?
Bridget: Yeah, I got a lot of young people in my life, which is awesome. So here’s the first thing I would say, and this is from personal experience because I have not been married for as long as you have, but at least I remember it more 😊. The first thing is to start saving together, if you haven't already. When we were dating, we actually started saving together because we wanted to do some stuff together.
And I got to admit, I was a little bit anxious about how this was going to work financially with my husband. And he suggested, “Well, why don't we open a savings account? We'll both put in money.” We started small, like $200 a month each. And the thing is that you start getting acclimated to the power of getting married and the power of saving with somebody else. You don't have to do it all. It's twice as much as you put it. It's a nice feeling. So I would say that it's a foundational skill for a relationship, and so it's a good time to start.
John: And you're talking about setting up a joint checking account, savings account, whatever, and then putting some money into it each month.
Bridget: Exactly. So we had a savings account at online bank that was high interest. We put both of our names on it, and then we just put in a couple hundred bucks a month and it started earning interest. And, then we were off and running.
John: That's great. I love that personal experience. You've been through that more recently. I was much younger, and we didn't have any money to put together, so it didn't make any difference for us at that stage. But one of the things that made me think on my checklist is just sharing your financial situation with your spouse.
Bridget: Yes, that’s really important.
John: So one's saving. I love that idea. Let's start working on stuff together. But the other thing is saying, “Hey, how is this whole financial thing going to work?” And for the folks we work with, we ask things like, “Does that person have credit card debt? Do you think alike when it comes to saving for retirement or other things?” And so, we talk about people about actually sharing of financial information. Hey, here's my balance sheet, here's my tax return.
And just be open. Our society tends to be so closed and put a stigma on money. And we can talk about that whole thing separately. Maybe we shouldn't do that in general but when you're getting married to somebody, that's a place where you have to have open communication. So just sharing your actual financials, I think, is one of the checklist items.
Bridget: Yeah. And you want to be able to talk to your spouse about it. A lot of times at this point, people have student loan debt, and so it's just a matter of being open about it. This is how much it is. This is what I'm doing. This is my payment. We talk a decent amount on this channel about credit cards. And you want to see how this person approaches credit cards. Is it responsible, adult behavior? That's what I'm going to say. Or maybe they're spending too much, and they haven't figured out credit cards yet. So I think those are important things to think about at this stage.
John: Yeah. Well, what’s next on your checklist?
Bridget: I think the next thing is start thinking about your wedding. And I think there're two ways to plan a wedding. There's one, intentionally, and then there's the other. I'm going to just wait out and look at the wedding planning sites and see what my friends were doing and do what everybody else seems to be doing because that's socially okay. Then nobody will criticize me, and it will cost a hundred thousand dollars.
John: Whatever it costs.
Bridget: It costs a lot of money. And so, I think what you want to do is outline how much you want to spend on this and what's included. Before you even start planning the wedding, a lot of people these days take photos of their engagement. They want to memorialize that. Okay, we got an expense already that somebody paid for. It seems to me like that should be a joint expense, not just borne by whoever pops the question. That is what I would say. And the things that I like to talk through with people are how much you want to spend? If you were going to say, how much do I think this should cost? And then number two is what are your values? And what do you want people to feel like at your wedding and after your wedding?
John: Yeah.
Bridget: Now this was interesting. I had a client who I worked with who said that they wanted people to have an elevated aesthetic experience. One of them was a graphic designer and the other person was another creative person. And so, they ended up having their wedding at an art gallery. And they had two different musicians, one on one side, one on the other side. And they kind of alternated and they really felt like they got that aesthetic experience. Now not everybody's going to want that. I know at my wedding I just wanted people to have fun.
John: Yeah.
Bridget: So the first thing we did was hire a band. We spent a lot of money on that, and then kind of worked around everything else for the budget. Afterwards I wasn’t sure if I should have done it that way, but that's what we did.
John: And I love that idea of being intentional. And my reaction when you first said, “What do you want to spend?” was, golly, that’s like asking me how much I want to spend on a SpaceX trip to Mars or something. I've got no idea. I want to spend $500. So I really like that idea of saying what's actually important to you. And I love the graphic designer example. For them, that experience was really meaningful, as opposed to an add on some website or the thing that you see on social media or the wedding magazines that tell what you should be doing.
Bridget: Right.
John: How do I feel about that? What are the things that I want? And then start to work with the how. We talk a lot in our office about the fact that clients need to come up with the ‘what’; here’s what I want. And then our job is to come up with the ‘how’. And when planning a wedding, don't figure out the ‘how’, and then go back into the ‘what’. First consider, “What is it that you want?” And then great! There's a lot of different ways to approach it. I really love the idea of being intentional about it, because those numbers get pretty big if you just let the cart get out in front of the horse.
Bridget: Yeah. It's a whole industry. And you know, I got a whole list of complaints about the industry as far as their service to people, but we have to move on. I'm sure the people that are getting married can sympathize. Next is cash flow. How do you handle money coming in and money going out? So a lot of times once you're married, you start joining your finances. But getting an idea of that is critical. Tell me more about what your thoughts are on cash flow.
John: Yeah. I think a lot of people these days, certainly more than when we were in that age, are living together. And so maybe they've got some sort of cash flow thing figured out, or maybe they're just kind of living together as roommates and haven't really shared some of those things. And still for a fair number of people, their first living together experience is getting married and then living together. And so, it's that idea of who's gonna pay for things? How do we look at these things? I've got one client couple where one person pays the mortgage, while the other person pays utilities.
I personally prefer the joint side of things. Everybody puts money in, and then we pay our joint expenses from a joint account as you described. But there're different ways to do it. The problems that I see come in are when people haven't had that conversation. When a spouse is surprised to find out that her husband's got all kinds of credit card debt or whatever it is, that’s when the problems begin. For me, anyway, having that initial conversation is key.
Here's all my stuff. But then, how is this going to look when we start intermingling our lives together? And just the communication is such a big part that often gets overlooked because it's exciting to plan the wedding and the bachelor and bridal parties and the honeymoon. That's all awesome. And then some of these realities get overlooked. So for me, it's not necessarily this big hammer of all these things you have to do. But you shouldn’t forget the stuff; you shouldn’t forget to talk about how you want to work cash flow together.
Bridget: Yeah. And then finally we want to talk about whether you are going to have a prenup. I think it was a Seinfeld episode where George wanted to break up with somebody or he wanted to call off the wedding, but he asked for a prenup anyway.
John: Yeah.
Bridget: So when do you recommend a prenup, John?
John: Well, I think that people need to think about it. We're talking about debt and some other things that might crop up as you start to merge your lives together. And in certain states (for example, Wisconsin is a community property state) everything is mixed together, whether it's in my name or my wife's name. Marital property does apply in some other states, like Illinois, but it's in our law in Wisconsin.
And just to know, okay, what am I getting into here? And to know what my rights and rules are with things. So we recommend that people think about it. How do you want to have this? And it kind of sucks to think about when you're excited to get married, but the reality is a lot of people end up not being married and going their separate ways. And just to give some thought to how do you feel about those things? Let's just split it all up 50/50. Great. Let's put it in writing.
Or wait, whatever we each came into to the marriage with, we leave with. Let's memorialize that. So I encourage people to think about those things. And I rarely see problems when it's in writing, or there're fewer problems. When things aren't documented and they haven't had conversations about it, that's when I see problems come up. What do you do as far as recommending prenups or marital settlement agreements?
Bridget: Well, I actually like your advice of making an agreement of something like whatever we came into we go out with. That makes sense. And if you're going to get a prenup, both people have lawyers, so it can get complicated, but I really look at the dollars involved. I've seen people who have inherited a bunch of money. And so, it just depends on how much money you've got. What are the dollars involved? Generally, the concept is that money that's earned while you're married is joint; it's 50/50.
It doesn't matter if one person's bringing it all in and the other person is not. That's the basic concept, and it's going to vary state by state, but it's not like if you're staying at home raising the kids, you get zero and the other person is getting all of it. So what are you coming in with? And another basic concept is you don't get some of the stuff that the other person came in with. That's not just automatic unless it's part of what you guys decide to do together. And another concept is that when you inherit money, it goes to you.
John: Yeah.
Bridget: It's not marital property. So if you inherit money either before you're married or while you're married, it generally goes to you, not to your marital property. So I like people to get familiar with the rules. And again, it depends on how much money we are talking about.
John: I like that.
Bridget: What's the family situation? It can vary so much.
John: And like so many other things we talk about, it's about being intentional. Should you do one or not? There's no answer to that but be intentional and know the rules. I love that side of it. And that's probably a great place to wrap up this episode. Again, I'm John Scherer, and I run a fee-only financial planning practice in Middleton, Wisconsin.
Bridget: I'm Bridget Sullivan Mermel. I've got a fee-only financial planning practice in Chicago, Illinois. Both John and I are members of the ACP or the Alliance of Comprehensive Planners where you can find a planner who thinks like we do all over the country. Although feel free to call John or me as well. Also, I can't leave without saying please subscribe.
John: That's right.
At Sullivan Mermel, Inc., we are fee-only financial planners located in Chicago, Illinois serving clients in Chicago and throughout the nation. We meet both in-person in our Chicago office and virtually through video conferencing and secure file transfer.
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