10 Important Things To Discuss Before Marriage

7thingsbeforemarriage

10 Things to Discuss Before the Big Day

You are excited, in love, and planning the wedding of your dreams. Probably the only money questions on your mind are the down payments for the caterers and the florists!

Yet – whether your wedding reflects a minimalist sensibility or is a no-holds-barred extravaganza – it’s better to have a good understanding of each other’s finances before the “I Do’s”. This is a time when procrastination could cost you a bundle, even if neither one of you currently have a lot of assets.

Getting married is more than just substituting the word “ours” for “yours” and “mine”.  It’s combining your finances, histories, dreams, aspirations, possessions – even your music – and making all of that “ours too. Since a significant part of those dreams and aspirations involve money, having multiple financial conversations before marriage (or right after, if you’re newlyweds!) can help you start married life on a firmer footing, with regard to financial goals.

Here are a few conversations that will get your marriage off to a smoother financial start:

1) Views on money. How we feel about money is often very emotional and very personal. Our family’s views on money can have a big impact on the way we see finances. In some families money may not be talked about. In others, one partner may hide money or spending from the other. While we might not consciously have these same behaviors, our upbringing will have an impact on how we feel about money and how we save, spend, and budget.

The best way to address unconscious – and sometimes conflicting – money behaviors is to start by recognizing how you each feel about money. Then you can take a practical approach and implement the best strategies from the past and incorporate them into your new relationship. This will also give you a chance to address any not-so-beneficial attitudes and behaviors and work to consciously change them.

2) Spending/Saving Habits. Chances are the two of you don’t spend and save money the same way. The interesting thing about spending and saving habits is that they give insight into priorities, both financial and otherwise because we tend to spend money on things we feel are most important and scoff at spending on things we see as unimportant.  Some people value saving more than anything and could be considered “tightwads”. Other people have a “live for today” attitude and spend whatever they have available, saving nothing or little for later. Most of us find ourselves somewhere in the middle.

Not agreeing on spending priorities can lead to serious conflicts down the line. While there is no right and wrong answer regarding priorities and habits, it’s valuable to know and understand each other’s habits earlier rather than later.

3) Divvying Up the Bills. This is an important conversation about how you will manage your money together. Will you have separate or joint accounts? Who will be responsible for paying the bills and investing for long term goals? A realistic understanding both of your current incomes and current debts is important so you can create a realistic budget based on your combined income and expenses.

4) Credit History. No one likes to talk about credit ratings because they highlight past mistakes and spending habits. Yet it’s essential to know and discuss your credit histories. This can help you talk about past money mistakes, current debt loads, and how to address any issues that are lurking. Having this conversation now will also help if you’re planning to borrow money for a large purchase, such as a home or car; credit history will effect how much you’ll pay in interest for loans, as well as how much it will cost for things like insurance. Many companies even pull credit for potential job applicants. When it comes to credit, it’s best not to have surprises down the road, so have the conversation now.

5) Risk Tolerance and Financial Goals. Couples often have very strong – and differing – feelings about risk and money that are deeply rooted in past experiences.  Your family may have gone through periods of unemployment, for instance, or  you may have grown up taking financial security for granted. One of your parents may have owned a business and you saw it go bankrupt,  so you might be very conservative with your money and not want to take unnecessary chances. Or perhaps they invested in a business that was a huge success.

Everyone brings a different level of comfort when it comes to risk tolerance and it’s important to understand your partner’s because it has an impact on spending and savings habits – everything from where you invest to how much money you want to set aside. Money provides a level of security that can be very powerful and risk tolerance is directly linked to that feeling of security.

6) Ongoing Financial Obligations. If this is a second marriage, are there child support or alimony payments that need to be considered in the budget process? If so, how much and how long will the obligations need to be fulfilled. Caring for elderly parents might also be a long term expense you will be facing as a couple.

7) Net Worth. When it’s a first marriage, often neither partner has much in the way of assets, but if one partner has more than the other, are you going to want a pre-nuptial agreement? When discussing net worth it is valuable to discuss not only current net worth, but also aspiring net worth. What household income level are you both hoping to achieve. Will reaching those aspirations include additional education? Will it mean switching jobs several times early in your career? Will it mean working 80 hours a week for decades? As a couple, understanding financial expectations and future net worth aspirations will help you plan a life together that will meet both of your needs, financially and emotionally.

8) Family Plans. The family size you hope to have will also have a big impact on your financial needs. Children, as wonderful as they are, are very expensive to raise. Do you both want to have children and, if so, one child or several children? Discussions about how the children will be raised and educated are also valuable from a financial perspective. Will one of you stay home to raise the children? Will you pay for day care? How far apart should the children be? Each of these answers will have a significant financial impact to the family budget.

9) Combining Physical and Financial Assets. Particularly with couples getting married later, both partners will have accumulated possessions that now need to be combined. This can be as simple as which sofa and bedroom set to keep, or more complicated when multiple homes, retirement accounts, and other investments are brought into the mix. Discussing whether property, accounts, and debt should be left in individual names or held jointly is also an important conversation to have.

10) Wills, Trusts, and Life Insurance. When you’re getting married, you don’t really want to think about death. Yet wills, trusts, and life insurance need to be updated soon after you say, “I Do.” This is true especially if you have assets or children. The process of obtaining a will or trust is fairly straightforward; it’s the discussions that lead up to it that provide the most value. Both of you should have a good understanding of what you have and what you want to happen, should the unthinkable occur.

Financial advisors can be a real asset, when it comes to pre-marital financial discussions. They can help you determine when it is best to hold assets jointly or separately. Assistance with budgeting and planning for long term goals will help you create a strong financial plan. Advisors can also guide you in building a strategy for reaching financial milestones.

So, if you’re getting married (or just got married), congratulations! And while these discussions may not be the most romantic ones you’re having, they do have the ability to bring you closer together. Planning together and sharing your dreams will give you better insight into the mind and heart of the person you’ve fallen in love with and allow you to become stronger partners when it comes to reaching your goals as a couple, emotional as well as financial.

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The views expressed in this blog post are as of the date of the posting, and are subject to change based on market and other conditions. This blog contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Please note that nothing in this blog post should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax or legal advice. If you would like investment, accounting, tax or legal advice, you should consult with your own financial advisors, accountants, or attorneys regarding your individual circumstances and needs. No advice may be rendered by Sherman Wealth unless a client service agreement is in place.
If you have any questions regarding this Blog Post, please Contact Us.

Ep. 86 Launch Financial-How Rising Rates Will Impact Your Home-Buying Process

Overview: Join us for a very speicial episode of Launch Financial this week as we are joined with recurring guest, Jody Eichenblatt. On this week’s episode we are going to continue our discussion of rising interest rates and get Jody’s professional opinion on how these hikes will ultimately impact the consumer and the home-buying process. Tune in for a great episode! 

A little about Jody, Jody Eichenblatt (NMLSR# 181198) is a Senior Mortgage Consultant with over 18 years of experience in the mortgage industry holding a license in Virginia, Maryland, the District of Columbia and Florida.  Jody’s professional service is founded on delivering the best possible customer experience for his clients and partners.

Whether you are a first time homebuyer or seasoned refinancer Jody understands that each transaction is unique and special and treats it as such.  Listening to his clients objectives and clearly communicating all of the available options is what makes Jody a success.

Jody graduated from the University of Maryland Robert H Smith School of Business with a MBA, and a BS in Marketing and Logistics.   In his free time Jody enjoys running, hiking, biking, traveling and most of all spending time with his wife Kim, son Ryan daughter Taylor and mini Aussiedoodle Teddy. For questions about the episode, email info@shermanwealth.com. 

Check out this episode!

Why Reducing Your Tax Refund is a Good Thing

With tax day fast approaching, many people are counting on receiving a big check back from the Government. While you’re probably looking forward to this windfall, there are reasons why you may wish to minimize your end-of-year refund.

Why Big Refunds are Bad

Taxes are refunded to you when the Government takes too much of your pay each pay period. By overpaying each paycheck, only to get the money returned to you once a year, you are essentially lending the Government money at zero percent interest.

This is money that could have been budgeted for and spent, or invested, throughout the year. Even if you had put the money in a savings account over the year, you still would be better off.

How to Minimize Your Refund

In order to adjust the amount that is withheld for the IRS each pay period you need to fill out/change your W-4 form.

The W-4 allows you to specify allowances or exemptions that you are eligible for.

These can include:

  • Donations to charitable organizations
  • Interest on a home mortgage
  • Interest on student loan debt
  • Contributions to traditional IRAs

The W-4 form estimates the amount that you would receive from a tax refund. This amount is then distributed over the number of weeks remaining in the tax year, lowering the amount withheld from your paycheck each pay period.

You should also look into filling out a new W-4 every time you have experienced a major change in your life. Examples of this include:

  • Switching jobs
  • Marriage
  • Having a child
  • Losing a dependent (They either file their own tax return, or you can no longer claim them)

While trying to lower the amount that is withheld in taxes each pay period generally makes sense, it may be prudent to not list all of the exemptions you are eligible for on your W-4.

Why You May Not Want to Claim all Your Allowances

While having too much in taxes withheld can be compared to lending the Government money at a rate of zero percent interest, the reverse is also true.

If you underpay in taxes each paycheck, you end up owing money to the Government. In theory this is great. You could put the money in a savings account, and then at the end of the year pay back the Government while pocketing the interest that you collected.

In practice however this is not a prudent strategy for most people.

Individuals have a tendency to spend money that they have, and forget about longer-term consequences of their actions. Additionally while receiving a refund at the end of the year is exciting, the opposite is also true.

This is why it may make sense for you to leave a few deductions you are eligible for unlisted on your W-4. This ensures that you receive a tax refund, albeit a smaller one, rather than owing money.

What to Do When You Do Receive a Refund

While this advice can be helpful for next year, chances are this year’s tax season will provide you with a large refund.

If you do receive a large refund there are a series of things you can consider to maximize its value. Here are a few ideas to get you started:

  • Invest in yourself – Sometimes the best investment you can make is in yourself. Consider buying a book or taking a class to help improve your performance in work or at life.
  • Get your will done – this can often cost less than a $1,000 in total but can save your beneficiary’s significantly more both in terms of money as well as headache
  • Put money into a college savings plan
  • Pay down your mortgage
  • Invest in a non-tax-exempt account – if you have already maxed out your IRA
  • Save for a rainy day
  • Open/add to an IRA
  • Pay off student loan debt
  • Pay off credit card debt – if you have any credit card debt, this should be an immediate priority
  • Save the money and increase your 401(k) contributions – put your money in a safe place such as a savings account, and bump up your 401(k) contributions to reflect the fact that you have this money sitting on the side.

Regardless of what you do with your tax refund, it is important that you come up with a plan. A trusted financial planner can help you in the process of creating one.

With over a decade’s worth of experience in the financial services industry Brad Sherman is committed to helping individual investors plan and prepare for retirement.

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The views expressed in this blog post are as of the date of the posting, and are subject to change based on market and other conditions. This blog contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.

Please note that nothing in this blog post should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax or legal advice. If you would like investment, accounting, tax or legal advice, you should consult with your own financial advisors, accountants, or attorneys regarding your individual circumstances and needs. No advice may be rendered by Sherman Wealth unless a client service agreement is in place.

If you have any questions regarding this Blog Post, please Contact Us.