Nearly one out of every two engaged couples delayed their wedding ceremonies during the first year of the global pandemic according to a survey from The Knot.
If you’re a couple who put off getting married and are now heading back to that altar, you’ve probably put off having that money conversation, too. Regardless of when you’ve rescheduled your big day or whether you have a new date yet at all, now is the time to have the money talk.
Money issues are the second-leading cause of divorce, according to multiple surveys on the topic. That’s because every single person has a different experience and therefore different view on money. As with anything in life where opinions vary, there can be friction.
Growing up, my family owned restaurants and it was normal to be in debt at all times, paying up to 15% interest rates. My husband, on the other hand, grew up in a household where cash paid for everything, his parents never even had a checking account. So you can imagine when we talked about taking on debt, conflicts arose.
It’s these differing experiences that make up our individual “money scripts.” Brad Klontz, a financial planner and a financial psychologist, describes money scripts as “unconscious beliefs each of us have developed concerning money and life. Most commonly, money scripts are formed in childhood, shaped from both direct and indirect messages we receive about money from our parents, other significant people in our lives, our circumstances and society as a whole.”
Like it or not, those early experiences stick with you and influence how we view finances as adults.
This is why it’s important to go into money conversations with no judgment and more empathy. Understanding your spouse’s motivation for how they want to spend, save and invest can help you better appreciate their point-of-view and work through important financial decisions. Some couples are going to feel comfortable opening up about their money script right away, while others may not, especially if you grew up with financial trauma or are coming to the relationship with significantly more debt. But it really comes down to what’s best for your relationship and communication is key.
Money conversations may also uncover different expectations one spouse may have about their lifestyle compared with the other. Couples should realize that their lifestyle needs to line up with their actual income today—not what they wish it were.
Talking about money before tying the knot can also help you navigate things like charitable donations or imbalances in income. As silly as it might seem to a new couple so in love today, I’ve seen instances where one partner eventually earns more than the other, often by a wide margin, and feels entitled to the most financial say. That love can turn into resentment, causing big problems.
While money conversations should start by learning about one another and setting expectations, couples should also put pen to paper and do some planning. Here are my other tips for newlyweds as they start their lives together.
Yours, mine and ours
Couples are getting married nearly a decade later than their parents did. This means they come with financial baggage, which could be good or bad. For example, one may own a house or have a large inheritance. Or maybe one has significant debt. Managing money also differs depending on cultural backgrounds and for some couples, combining the finances from beginning makes sense. This includes checking accounts, credit cards and debt to make budgeting simpler. But for other couples, it likely is a gradual process of comingling assets while building wealth together.
Plan for short and long-term financial goals
The best way to plan for goals is to create a wealth plan together. Begin with the end in mind: define your goals, plan, save and invest with regular reviews. Being married means jointly deciding how to spend your money. Make a list of upcoming purchases — a new car, furniture or a pet — and prioritize them.
Create a spending plan
The 50/30/20 works generally well, meaning 50% for must-haves, 30% for wants and 20% for savings or debt reduction. Keep good records of everything and know where everything is, including bank statements, investment accounts and taxes. Part of your spending plan should prioritize saving for retirement. Keep it simple and put it on automatic and be sure to get the employer match.
You should also create an emergency fund as your first goal. That way, should something happen (e.g., unexpected auto repair), you can stay on track toward your goals. Financial infidelity can break the trust between couples. There should be no surprises. Any significant expense should be part of a budget or discussed prior to the purchase. Consider having a separate ‘fun money’ bucket earmarked for splurges or any unplanned spending.
Keep everything out in the open
This is how you avoid arguments about money, which can be among the top three motivators for marriage breakups. Never stash money or open accounts without the other spouse’s knowledge. Have mutual goals with an agreed upon way of achieving those goals. Create a realistic spending and savings plan and stick to it. Don’t be afraid to ask questions about your finances and don’t avoid the hard money talks. And finally, don’t overspend on your wedding, leaving you without the financial resources to start a life together.
As difficult as it is to talk about money, marriage is a partnership and your partner should be the person you are most comfortable sharing such important and sensitive details with. Just like regular date nights help keep love alive, sitting down regularly and talking about overall expenses, goals and future plans can help keep your relationship healthy.
Angie O’Leary is head of wealth planning at RBC Wealth Management–U.S.
RBC Wealth Management, a division of RBC Capital Markets, LLC, registered investment adviser and Member NYSE/FINRA/SIPC.