The Personal Finance Podcast - 5 Personal Finance Conversations to Have Before Getting Married (And Why You Should Blow Money!)

Episode Date: March 3, 2021

Episode 43: 5 Personal Finance Conversations to Have Before Getting Married Got questions? Ask me on Instagram Here. @mastermoneyco This is the fastest way to get a response from me.  Personal Capital Free Wealth Management and Budget App  CIT BANK (Best Savings Account) The conversations we should have before getting married.  How to plan to build wealth as a couple How to set up blow funds  How to reduce money fights  What to do if your spouse has debt  Got questions? Ask me on Instagram Here. @dollaraftrdollar Want to read more? The Ultimate Guide to Saving an Emergency Fund Check out all the Stuff I Recommend!  M1 Finance Best Place to Invest  Personal Capital Free Wealth Management and Budget App  CIT BANK (Best Savings Account) ** Some links may be affiliate links and we earn a small commission at no extra cost to you. We only recommend products we truly believe in.  Check us out on social fam!  Twitter Dollar After Dollar Instagram Learn more about your ad choices. Visit megaphone.fm/adchoices

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Find your advisor at IG Private Wealth.com. On this episode of the personal finance podcast, we're going to talk about five personal finance discussions to have right before you get hitched. What's up, everybody, and welcome to the personal finance podcast. I'm your host, Andrew, founder of dollar after dollar.com. And today on the personal finance podcast, we're going to talk about five conversations that you need to have before you get married. And this is an extremely important topic for most people.

Because if you have any aspirations or dreams to get married or you're already in a relationship or you're already married, then these five conversations are going to apply to you because this is extremely important for the sake of the long term of your relationship. And at the same time, it's extremely important to ensure that you guys are on the same track to building wealth. One of the biggest reasons that people go into divorce is they're fighting about money. and they disagree about money. But if you can get aligned on these five conversations, then you're going to be much better off in the long run. And these are five conversations that my wife and I had

over the course of the time that we were dating prior to getting married. And we aligned on these goals, made sure these are the things that we wanted, and we're still working on these items as time goes on. This is not something that you're just going to fix overnight. But personal finances we've talked about is extremely personal. And so each person has a specific dreams and aspirations. But if you talk about this up front and you understand this up front, it's going to create so much more of a strong relationship.

And these are conversations that you can start having when you're dating. Maybe you're not even ready to marry someone. But these are good topics to have conversations around. So let's get into the five conversations that you need to have before getting hit. So the first thing you want to do before you get married is review your credit history and debt together. Now this is a two-part conversation because you want to look at your credit history first and then you can review the debt. Because what happens way too often when people get married is a lot of times they don't realize a person's credit score may be as bad as it is. And so what happens is

maybe one spouse's credit score is fantastic and the other spouse's credit score is not so great. And the spouse with a great credit score is unaware that the spouse with the not so great credit score was not as responsible with their finances as they thought they were. And this causes a bunch of issues if you don't bring it out up front. So reviewing these together and understanding this up front is extremely important because this can impact your ability to be able to buy a home, purchase cars, get loans for different items that you may need or you may want as you get to the point where you're maybe having kids. So reviewing your credit scores together is a fantastic place to start. And I'll leave a link in the show notes for places that you can review your credit

score for free so that you both can get a good idea of where you are. And then the second part of this is reviewing your debt together because obviously your credit score and your debt are intertwined. And there have been countless stories of people getting married and not realizing how much debt their spouse is in, and all of a sudden, they are, boom, $200,000 in credit card debt. And this happens over and over and over again. So being upfront with your future spouse or being upfront with your current spouse and telling them about your debt, maybe you have student loan debt where one spouse went to school for free and the other spouse carried a massive load of debt. Well, guess what? When you get married, now that debt is both of yours. What's mine is

yours and what's yours is mine. Even if you keep your checking accounts separate, which we'll talk about that in a second here, you still both are going to own that debt. And so what's happening here is you need to get on the same page with this. And as you're reviewing this debt together, if you have a significant amount of debt, you need to figure out a plan on how you're going to take care of that debt. Now blame should not be taken here. Nobody should be pointing fingers. I know this can get emotional, I know that this can set off fights and problems and things of that nature. But realize that you're now in this together. And there is no reason to point fingers here. People make mistakes. Now you are where you are. How are you going to fix this? How are you

going to get out of this? That's the question you need to ask yourself. And then you need to go at it and attack it. Because if there's significant debt in the relationship and you're already married, then you just need to go after it and take care of it. Now, I've read way too many stories where people will be absolutely surprised because of the amount of debt that their spouse has. And usually it has to do with either student loans or credit card debt and they hit it from their spouse. And it caused major marital issues. And this is where a lot of money fights will happen is if people go into significant debt without the spouse knowing. This is a major cause of divorce in this country. So make sure you're up front. Make sure you're honest. Go through your debt and then get an attack plan. If you haven't heard the episode where we talk about debt and you're in significant debt, go listen to that episode because that is the fastest way to pay off debt. is to go ahead and chase after it with a debt avalanche. Don't do the debt snowball. Look at it as a debt avalanche. Pay the highest interest rate first and then go down the list.

That is the fastest way to pay down debt. It would be a great option for you if you want to get after your debt and get it out of the way. I remember when I needed to hire someone fast, but finding the right person quickly felt impossible. And if you've ever been there, you know how stressful this can be. That's where Indeed comes in. When it comes to hiring, is all you need. Instead of struggling to get your job post noticed, Indeed's sponsor jobs help you

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Now, this is one option that you can think through it. Maybe you both want to retire at the same time. Maybe both do you want to work 15, 20, 30 years? It doesn't matter. Figure out when you want to retire and then work backwards, because you have to figure out the correct savings rate and then move forward from there. The next thing you have to figure out is, do you guys want to own a house in the future? If you want to own a house, then that's something that has to be part of your savings plan.

It has to be something that you're putting money aside for so you can go towards the down payment. Now, we've had multiple episodes on how to buy a house. We've just had an episode last episode on the FHA loan, how you can buy a house with 3.5% down. But these all have to be implemented into your plan if your goal, is to buy a house. But not everybody wants to own a house. Maybe one of you wants to rent a house. You like the flexibility. You like the freedom of renting. You don't have to fix leaky faucets and things like that. That may be a fantastic option for you, but you both have to get on the same

page with that prior to getting married because you don't want tension down the road with these types of big decisions. And then discussing your financial goals also has to align with, well, do you guys want kids? And if you want kids, what kind of child care do you want provided for them? Does one of you want to work? while the other one stays home with the kids, do you both want to pursue your careers and you get a nanny or a daycare or something like that?

These are conversations that you need to have because then you can get to the outcomes and your goals. Because having a clear vision of where you both want to go is going to change your life forever. And that's how you build wealth as having a clear vision and having clear goals

and having systems in place that allow you to achieve those goals. So figuring out those goals and align your spending habits will allow for much less stress, much less anxiety, and much less fighting. Compromise is the name of the game when it comes to this. Number three, decide whether or not you want to have joint or separate accounts. You may be asking yourself, well, what's the best option?

In my personal opinion, I think the best option is to have a joint banking account. I think all of your money needs to be there. It all needs to be in front of everyone. everyone needs to see the spending, everybody needs to see how much you're saving. Because there are statistics that have come up that show that couples who do not have joint bank accounts actually have an increased likelihood of getting a divorce. And I don't really see the pros in having separate bank accounts. I truly, truly don't.

I don't completely understand why people separate their bank accounts. Because if you're getting married, then you're in this thing together. And to separate your bank accounts makes no sense to me. Now, for me, there's a bunch of pros to having a same bank account. A, we can make decisions on the fly. We can do things quickly. If opportunities arise, we don't have to transfer money all over the place and try to figure out where to take this money.

No, the money is all there. All of our money is there in the same accounts. And we can move quickly on opportunities. And we've had to move quickly on opportunities before in the past for investment opportunities, maybe properties, things like that. And at the same time, maintaining those joint bank accounts also just make sure that you're both on the same page. Because separate banking accounts just increases the possibility

of one person or the other person hiding something. And hiding something just creates more and more problems. You have to have honesty when it comes to your money in a marriage. Now, some of you may say, well, what about spending money? Let's talk about spending money. If you haven't heard any of the budget episodes, one of the coolest things I do in my budget line item is that I create a blow fund for each of us.

So it's still within the same accounts, but we each get a certain amount each and every month that we can just blow money on whatever the heck we want. This is extremely important to have in a marriage. Because money fights come up when people say, hey, why are you spending money on this? Or why are you spending money on that? No. If you have a blow fund, if you have money set aside where each of you can just blow it,

no questions asked. If I want to buy a golf club to strike my driver right down the middle of the fairway for $400 and I've saved up my blow fund, I can do that all day long. If my wife wants to buy Christian Lupitons and walk down with those red bottom heels, which is the dumbest thing I think in the world, she could do that all day long. We could do whatever we want with that blow fun. And that is the power of having this.

Because if you're working extremely hard building wealth, if you're working your butt up, both you are working all day long and you're just trying to save every dollar so that you can build true wealth or put it towards your new house or put it towards anything that you want to do, you need something to be able to relax with your spending.

You need that psychologically because money is completely psychological. It's completely psychological. And if you don't understand, that understand that now so having a blow fund having the ability to spend money freely and a specific account is fantastic for both of you you can do whatever you want with that money it doesn't matter put it to the side so if you don't have a blow fund right now you can leave it commingled in your checking count that doesn't matter as long as you have a budget line item set there you can leave it

commingled in your checking account but make sure you have something aligned like that so that you have parameters set to hey you got money to blow number four we're right on online with number four. Draft up a budget together. Now, there's two ways to budget that I always talk about. There is the easy way to budget, which is what I call the reverse budget, which is where you just take your savings off the top, the amount of money you want to save. So the amount of money that's going to go into your investment accounts, the amount of

money that you're going to save in your emergency fund, and the amount of money that you're going to save for any other big item expenses, take it off the top. Maybe you want a house in there or something along those lines. And the rest of the money, you spend on what you want. so your savings comes off the top and then spin whatever is left over. That's the easiest way to budget. That's the way I think most people should budget.

Most couples should budget that way. You don't have to worry about it so much. And then along those same lines, the other way I like to budget is a zero-based budget. And this is a traditional line-by-line item budget. Now, budgets aren't sexy, but they create freedom. They create freedom from stress.

They allow you to allocate your dollars on what you want them to do. But creating a budget with somebody else makes it even harder because you've got to figure out what both of your priorities are. So once you figure this out and once you get the hang of this, you're going to see that your priorities are going to align.

Let me give you an example. My wife and I completely disagree on how much money we should be spending on groceries. She thinks we should be spending 10 times the amount that I think we should be spending. But guess what? We both have young kids. We both work a lot. And so allocating additional dollars towards that grocery bill so it can make it easier on both of us is something I'm going to do. The reason why is because it needs to align with our priorities.

So we can compromise on that. This is why having the budget is vital because it still sets those parameters, but you can increase it as you see needed. And it makes you both aware of what's going on with your finances. So you can use programs like personal capital. One of my favorite things to you is it's a free program.

Or you can use a paid program like Wynab. Or you can use a spreadsheet. It doesn't matter what you do on a line by line at a budget. But creating one just keeps everything organized so that you know exactly where your money is going. Because the last thing you want to do is get to the end of every single month

all your money's gone and neither of you have any idea where it's going and guess what's going to happen fingers are going to start getting pointed and hopefully it's not the middle one so make sure that you have the budget ready make sure you have it set up correctly and it's going to reduce stress in your life trust me on this and then number five decide who is going to head up the finances your boy heads up the finances in our household i bet you already guessed that who's going to head up the finances in your household because one person has to take the reins. The reason why is both of you are going to let it sit there and nothing's going to happen if one person doesn't take the reins. One of you has to have the main responsibility

of taking care of the finance. And then your partner has to know how to manage the finances, but they don't have to take the reins every single month. This is the best way of doing it. And then you guys have conversations every single month to make sure on the same page with the budget, with your saving, with your investing, with your living situation. All of those pieces need to align. But figuring out who's going to take care of the bills, who's going to take care of all those nonchaline items will just make it easier for you. So nothing sits there. It all just gets done.

And usually, it always seems that one person within each couple has more interest in the finances than the other person. That's probably the best person to take over this job. But it just increases the likelihood that this is going to go over smoothly if one person takes it over. Now, the person who takes over the lion's share of actually overseeing the finances, that does not mean they make all the decisions for the finances. All that means is they're doing.

the work that needs to be done for your finances to make sure it gets done right. If you set up your finances the right way, this is extremely simple because all you're doing is just checking and tweaking and making sure everything is automated and going to the right places. We're going to come out with a course in the future called Money Made Simple. And Money Made Simple is going to show you exactly how to set up your finances so that you don't have to worry about them all the time. It's going to make everything extremely easy for you. And this is how it should be. That person who is in charge should have everything automated and they should just be checking to make sure everything is going in the right spot every month. And that's it. It's not hard. But making

sure you both align on those priorities and making sure that you have everything in place is going to increase the likelihood of both of you hitting your goals and achieving financial success and building true wealth for you in your family. That's what truly matters here. That's what you both really truly need to do is to build wealth for your family. And the only way to do this is to align your priorities and have these conversations. Thank you guys so much for listening. And if this is your first time listening, consider subscribing so you never miss an episode. And share this episode with a friend.

And don't forget to leave a rating and review on iTunes as well, because our goal is to bring as much value to you as possible. And we're trying to spread this message that money can buy freedom. That's what money is there to do, is to buy more freedom. So thank you again so much for listening, and I hope you have a great day. minutes. Sounds like Ojo time. Let's play. Feel the fun with Play-O-Joe.

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