'Til Debt Do Us Part

WeddingsOnline.ie

"To have and to hold, from this day forward I take on your debt," is an unlikely wedding vow but a serious reality for most couples.
It's not romantic but talking finances - and debt in particular - may keep the divorce solicitors at bay. Money is the number one source of conflict in marriages and discussing each person's financial situation before walking down the aisle means making an honest start hand-in hand.

Taking a few basic steps will save headaches - and arguments - over the long term:

The Crystal Ball Plan
Sit down together and draw a picture of your financial life after marriage. Can you afford to buy a home within a few years? Can you afford to save one person's salary or have one person give up work to raise a child? Whether you like it or not, the other person's level of debt and savings is an issue in these decisions.

Plan to pay down at least some of the most expensive loans - usually credit card and car loans - before the big day. Although it's already an expensive year, this is one very practical way to reduce stress levels leading up to your wedding. Of course, those with longer engagement periods have more time to sort out their pre-nuptial financial arrangements.

A Friendly Merger
Opposites attract even in terms of finances and often a hoarder marries a spender. To alleviate the obvious financial stresses such a merger involves, you should talk about your shared dreams and come up with a game plan to achieve them.

First, write down all combined credits (income and investments) and debits (personal loans, car payments, mortgages, credit card, overdrafts, utility bills). Then list the outgoing debits in terms of the most expensive per month by either monetary amount or annual percentage rate (APR). Compare credits with debits and make a realistic and affordable commitment to pay off a percentage of the most expensive, or overdue, loans first.

Budgeting Bliss
Put the budget plan and personal financial commitments in writing and place them in a special "our finances" folder. This way, either partner can recheck their plan and agreed levels of spending when needed. A monthly budget review, followed by a treat you both enjoy - dinner out or a film - is a way to make it a positive experience worth repeating regularly.

After you are married, determine who will pay for which expenses and what you will pay for together. Many couples determine a figure based on an individual's percentage of household income. For example, if Sarah makes 60 per cent of the income she pays 60 per cent of the shared bills such as mortgage/rent, utilities and groceries.

Clothing, grooming and car-related expenses should be considered personal bills and paid by each individual. Shared credit cards are not a good idea if each partner wishes some control, and privacy, concerning their personal spending habits

Financial experts are split on whether couples should pool all their funds together in combined checking accounts, investment funds or pension funds. Don't be too quick to merge your finances as it takes time to work out a joint financial vision pleasing to both partners.

In general, there are three options - maintain separate accounts/funds, open a joint account/fund or do both. Money is a touchy subject for most people but unless total cash separation is a major issue for one partner, initially pool some of the funds into a checking account to pay joint bills and the mortgage or rent. Alternatively, pay an agreed percentage of your salary by direct debit into the main bill payer's personal account monthly.

Unless your investment styles and levels of risk are identical, keep separate investments. Pension funds should be separate as women's needs - breaks in payments for birth of a child and longer life spans - are different from men's.

Insuring the Future
Couples with children should definitely have an insurance policy providing either a lump sum or ongoing benefit if one partner falls ill or dies. In many cases, women are not covered although their unpaid labour contributes hugely to the running of the household. Replacing that labour - washing, childcare, cleaning, driving, meals - conservatively costs more than £18,000 a year according to a recent survey by assurance company Ark Life. Surprisingly, only 51 per cent of women surveyed had life assurance cover. Of these, the majority (38 per cent) only had cover for a total of less than £20,000.

Financial Health Check
Remember that financial well being - not wealth - contributes significantly to the health of your marriage. Money is the ultimate modern trust issue, so before making a frivolous purchase think how it will affect your future plans together.