How To Be Financially Prepared For Marriage?

Getting married is a big deal and one of the most exciting experiences of your life. You spend months planning and preparing — thinking about wedding dresses and the favours and organising DJ’s and bands for the reception.

But does every potential bride and groom sit down and have a conversation before the big day about finances and expectations? The answer is no - many don’t.

It is an incredibly important conversation to have, well before you book the venue or pick the rings. You don’t want to get married with the spectre of awkward conversations hanging over you, or worst still, getting married for it not to work out and not having your finances in order.

Sadly, the divorce rate hovers around 42%, which is a lot of people who have to untangle their finances at some point and figure out who is entitled to what. It is even more important to be financially prepared for marriage if one of the parties has come to it with significant wealth or assets, or there are children from other relationships involved.

Here, we are going to look at some of the steps involved in being financially prepared for marriage.

Have an open and honest conversation

The first step in being financially prepared for marriage is to sit down with your loved one and have an open and honest conversation about what each of you is financially bringing to the marriage and what the expectations are for each other. Hopefully, you will already have aligned your values and thinking around money and are both on the same page, but if not, this is the time to hammer it out and talk about budgets, debts, lifestyle, future children and retirement plans. Of course, it is fine to not agree on every element, but you do need to come to a compromise if you don’t.

Check your credit scores

Not enough people are aware of their credit scores, but it is important. If you want to get a mortgage, take out credit cards, apply for a loan or even get a mobile phone contract, having a good credit rating is necessary. The problem is if you financially link yourself with someone — for example, take out a joint bank account — credit lenders may also look at their score, as their financial situation can have an impact on your ability to repay. If they have bad credit, it is not going to do you any favours. Before you agree to anything, check your credit scores. If one of you has a poor one, reconsider the joint account for the time being and work on building their credit up. It also gives you an insight into whether there are any unknown debts — if there is, that is something you really need to sit down and talk about.

Discuss whether you want a prenuptial agreement

This is a bit of a controversial one, as some people think it is essential if one of the partners is bringing more assets or wealth to the marriage, while others think that once you are married, finances should be shared. They are most commonly used if there are children from previous relationships involved. This is something that you need to talk about with your would-be spouse.

If you do decide to organise a prenup agreement, it is important to remember that this is not either of you anticipating the end of your marriage before it has even started. It is more of protecting yourselves, and your extended families should the relationship not work out as planned.

Prenups may involve things like estates not going to the new spouse in the event of a death, and go straight to the children from a previous relationship, or the children being the main beneficiary of life insurance.

If there are no children involved, a prenup probably is not quite so important and can be limiting and counterproductive, especially if you are hoping to take advantage of any of the financial benefits of being married.

It is also important to bear in mind that a prenuptial agreement can be challenged, especially if the terms are seen as unfair. If you decide to have one drawn up, make sure that both of you have legal advice.

Protect your assets

You may want to consider keeping any assets that you have separate and in your name only. This protects you should you get divorced in the future, It also protects if you from creditors if your spouse gets into a financial mess and ends up facing bailiffs or bankruptcy. Anything acquired before the relationship should remain in your name only as once you start combining them, they become marital assets.

Discuss a savings plan

You may well have hammered your savings on booking and arranging a wedding, but it is important to talk about what you will do when it comes to family savings. You may want to consider putting it away in an ISA, for example, as this comes with some tax benefits to help you to make the most of your money. You may also want to look into other ways of investing your money, to give you a financial safety net in the future or for your retirement.

Talk about retirement

It might feel like the retirement age keeps retiring, and you will never quite get the chance to put your feet up, but it will creep upon you. If you are not prepared for it, it will take you by surprise, and you may find yourself not quite as comfortable as you could be. Talk to your future spouse about when you hope to retire and what you intend on doing. This will impact directly on how much money you put away into savings or voluntary contributions to your pension pot. If you can, now is the time to set up a private pension and begin to pay into it.

Talking about money and preparing financially for marriage may seem a little unromantic, but it is necessary. It takes away the pressure of talking about it at a later date, when it might be much more difficult to discuss and sort out.

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