Failing in love and getting married is arguably one of the most exciting times of your life. The dating years seem to prepare us well for selecting a mate. By the time you find the person of your dreams, you've likely gone through enough heartbreak and mistakes to know who your ideal emotional companion is. But the cold, hard - often unspoken - truth is that in a marriage, emotional compatibility is only half the equation. Anyone who's been married for any length of time knows this all too well: financial compatibility is just as important, maybe more so. Love does not conquer all, and financial misalignment can destroy a union.
The bottom line really is that you need to ensure you're financially aligned before you get married. This means full financial disclosure on both sides and honest conversations about your life goals and how you're going to get there - together. It's that simple, but it's hard for people to do. As open as we've become as a society - just think about how much we're willing to share on Facebook and Twitter - we are simply not comfortable talking about our finances, not even with the single most important person in our lives. It's shocking. But consider this: If you do bite the bullet and have those tough conversations, hash it out, come to a consensus, map out a life plan and stick to it, then, wow, do you ever have something to be excited about.
So, where should new couples start to figure it out?
First, by coming clean on their personal balance sheets - what they own and what they owe, including student loans and all credit card debt. This doesn't mean you suddenly need all of your money in joint accounts; however full disclosure at the outset and throughout the relationship is critical. Cash flow is another conversation - is your soulmate spending more than he earns, what is he spending it on? If you are planning a wedding and discover that you're both in debt, does it really make sense to buy a big engagement ring, throw an elaborate celebration and sink further into debt? The answer may be a smaller, more low-key celebration, or fewer guests. According to Weddingbells' Annual Reader Survey the average expected cost of a wedding in 2011 was $23,330. That's a lot of money that can be put towards building your future or paying down debt.
Another option some people consider is living together before marriage - and holding off on the wedding until you are in better financial shape. While I recognize that it's not an option for some people given their personal beliefs, I think it's a relatively low-risk way to really determine if you and your partner are financially aligned. Living together, whether married or not, puts theory into practice and makes you fully accountable to your partner. And, it may uncover fundamental differences. I would argue that you're better off knowing that ahead of time than finding out when you're already married.
Whether you choose to live together or get married, once you've come clean on your financial situation, it's time to talk about the future. What are your life goals? Do you want one kid, two kids, no kids? Do you want to vacation every year? Where do you want to live? The answers to those questions come with a budget number attached. And you need to make sure that you're grounded in reality when you're budget planning and setting goals. You may even want to consider a marriage contract. Michael Cochrane, a prominent family lawyer, is an advocate of marriage contracts as a way to provide clarity and focus.
"A marriage contract at the outset of a marriage or even to restore financial balance after one spouse has had problems can be a tool for strengthening a marriage by creating a clear realignment of the partners' goals"
It's tough. There's nothing romantic about money.
It's not why you fell in love and wanted to get married. But getting it right can help ensure you stay married, and happily so.
Patricia Lovett - Reid
October 8, 2011
Patricia Lovett-Reid, senior vice-president, TD Waterhouse, is one of Canada's leading and respected authorities on personal finance