LOS ANGELES – Love, as it turns out, is not all you need.
Not if your goal is to avoid the No. 1 reason marriages end in divorce: Money problems. Love, and a reluctance to take a hard look at our own financial habits, often keep us from seeing, much less confronting, potential financial troubles in a relationship. “Mature, responsible conversations about money are a sign of a marriage that’s going to be healthy and wonderful and enduring,” says Brooke Salvini, a certified financial planner based in San Louis Obispo, Calif. “If you can’t talk about money when you are dating, that is a red flag right there.”
Here are seven steps experts recommend to steer clear of potential marital money troubles:
1. DISCLOSE FINANCIAL RECORDS
Before corporations merge they look at each other’s financial records. Take the same approach before you get hitched.
Swap statements for your bank accounts, credit cards, student loans, retirement accounts and so on. Also share credit reports and FICO scores.
“Not only can you start to put together a balance sheet of what the two of you own and what your debts are, you can start to discuss ‘Do we want to combine our checking account?’” says Salvini.
2. DISCUSS FINANCIAL GOALS
A huge part of getting in sync with your spouse begins with discussing major life goals and financial commitments.
Discuss short-term goals, such as paying off credit card debt, and then craft a budget that sets you on a path toward your goals.
3. BUDGET YOUR SPENDING
Start off by listing monthly income. Add interest earned on money-market accounts and dividends from investments. Then add up expenses.
If you’re making more than you spend each month, you can begin planning for long-term financial goals. If not, consider ways to cut spending.
4. TREAT YOUR MONEY AS OUR MONEY
Many newlyweds see the money they earn individually as their own. They keep separate bank accounts and pitch in to pay bills.
If both spouses work, arrange for paychecks to be deposited directly into a joint account that’s used to pay all shared expenses, says Anthony Chambers, a clinical psychologist at the Family Institute at Northwestern University.
If each spouse feels they need to have some of their own play money in a separate account, that’s fine. But Chambers says the funds should come from the joint account so both spouses know where the money is going.
5. KEEP CREDIT CARDS SEPARATE
It’s not necessary to make your spouse a joint accountholder on your credit cards, especially if he or she has a poor credit history, which can drag down your own credit rating. Instead, make your spouse an authorized user of your credit cards. This will avoid any potential impact to your credit rating. As a safeguard, authorized users are also able to check account balances and track spending on the card.
6. DON’T SPLIT COSTS 50-50
In marriage as in most other scenarios, money is power. Although splitting household costs may work early on in a relationship, it can breed resentment in a marriage when one spouse makes a lot more money than the other. It also can foster a sense that the person who pays more should have more say in financial matters.
“Very few things in marriage are exactly 50-50,” says Chambers. “And that can really start to bring up all of these other issues of fairness.”
It’s important that each spouse hold equal say in making money decisions, he said.
7. TALK ABOUT SPENDING
Even after you’ve reviewed all the financial paperwork, sometimes it’s even more important to find out how your spending habits match up.
“The central task of marriage is the management of differences,” says Chambers. “So you want to be able to know early on what those differences are.”