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Starting Off on the Right Financial Foot

Starting Off on the Right Financial Foot

You're in love, you're engaged or about to move in together and you're probably not thinking about budgets, taxes, and debts. But maybe you should. Many people are uncomfortable talking about money, but you'll avoid the friction that money issues can ignite if you talk now about your current finances and how you want to handle your money in the near future.

What to Talk About

It's important to be completely honest with your partner, even if your finances aren't in great shape. That's not as easy as it sounds. A poll found that more than half of the people surveyed had lied to their significant other about money.

While what you include in your discussion will be shaped by your personal financial situation, there are some basics you should cover.

  • Disclose your debt: This is often one of the hardest topics. Many people are embarrassed that they've gotten themselves into debt, but the only way you'll get out of debt is if you're both aware of what you owe and put together a plan to pay your debts off. Make a list of all your debts (student loans, credit cards, personal loans, car loans, etc.) and how much each of you owes to each creditor. With that information, you can create a debt payoff plan. Some people decide that the person who built up the debt should pay it off, while others pool their resources and work on that goal together. If you've ever filed for bankruptcy, you need to let your partner know since it will affect your ability to get credit and qualify for a mortgage.
  • My money and your money or our money? Talk about whether you want to pool your money into shared checking and savings accounts or keep separate accounts. You'll also need to decide how to share the financial chores like balancing the checkbook, bill paying, and so on. Both partners should be in the loop and aware of all the financial information the other handles.
  • Build a budget and start a savings plan. List all your income and expenses, including debts, and put together a budget so you know where your money goes and whether you need to trim expenses. It's also smart to start saving, even if you can only put a small amount away each paycheck, so you have an emergency fund or money for a down payment on a home.
  • Talk about your investments. Share information about your current investments (mutual funds, stocks, 401ks and IRAs, etc.) and talk about how you'll handle investments. Are you both comfortable putting the money you're planning to buy a house with in stocks? Should you start a 529 plan to save for your kids' college? What about retirement savings?
  • Update your beneficiaries and insurance. In most situations, couples name each other as the beneficiary on life insurance policies and investment and retirement accounts. You'll also need to review your health, life, home, and auto insurance and decide whether your current insurance will meet your needs or whether you need to make changes.

Talking honestly about your finances can lay the groundwork for a more solid, less stressful financial life together.