With wedding season right around the corner, a lot of soon-to-be brides and grooms are frantically nailing down their wedding and honeymoon plans. Before you marry and mingle your finances, be sure to carve out time for some candid conversations about your respective credit histories, your savings and spending philosophies, and your long-term financial goals as a couple.
We've all seen statistics about the high percentage of marriages that end in divorce and how money disagreements are the No. 1 cause of marital discord. If you can identify -- and diffuse -- potential problems, you stand a much better chance of living happily ever after.
Here are a few issues to put on the table:
Outstanding debts. Tally up all your outstanding debts and financial obligations, including student loans, credit card balances, car payments, apartment leases, etc. Be candid about past credit missteps, such as late or skipped payments, foreclosures or anything else that might negatively impact your ability to qualify for new credit together.
Keep in mind that although debts accumulated before marrying remain your own responsibility and shouldn't impact your spouse's own credit rating, you will be jointly accountable for any future accounts and debt you take on together. Thus, you'll need to budget for paying off old debt as well as new.
There are a number of online calculators that can help you determine the true cost of your debt over time and strategize how to pay it off quicker, including these at Bankrate.com and Dinkytown.net.
Credit reports. Because lenders often base credit decisions and loan rates on whichever spouse's credit score is lower, share each other's credit reports so there'll be no surprises. You can each order one free credit report per year from each of the three major credit bureaus at AnnualCreditReport.com.
You might also want to order your credit score to establish a baseline for where your credit stands. You can order your FICO score at MyFico.com. If one or both of you have low scores (say, below 700), you'll want to boost them before applying for a mortgage or car loan. The resulting lower interest rates could save you thousands of dollars over the life of a loan.
For tips on how to repair -- or protect -- your credit scores, visit What's My Score, a free financial literacy program I oversee for my employer, Visa Inc. The site also features a free FICO Score Estimator that can help you approximate your score, as well as a more detailed explanation of the differences between credit reports and credit scores.
Align your goals. Nobody expects spouses to share identical views on everything, but you could be headed for trouble if you don't reach agreements or aren't willing to compromise on important issues like home ownership, continuing education, starting a family, and when you hope to retire. Premarital counseling is always a good idea, and financial issues should be part of the mix. The American Association for Marriage and Family Therapy is a good place to search for a trained counselor in your area.
Share financial duties. Many couples opt to have one person manage all the finances, from balancing the checkbook to choosing retirement investments. But it's probably wiser for both to take an active role in all major financial decisions. Worst case -- what if something happened to one of you? The other should be able to step in and run the show.
One good way to make sure you're both on the same track is to sit down together and hammer out a workable budget that will help you track money coming in and going out so you can eradicate your debt and start saving for future needs. Numerous free budgeting tools, including interactive budget calculators, are available online at sites such as the U.S. Financial Literacy and Education Commission's MyMoney.gov, the National Foundation for Credit Counseling, Mint.com, and MSN Money.
Start your marriage off on the right foot by sharing an open and honest dialogue about finances.
This article is intended to provide general information and should not be considered tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how tax laws apply to you and about your individual financial situation.
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