Smart couples realize that hiring a financial advisor as soon as they have a “ring and a date” can be one of their best investments in a happy future.
A 2013 survey of 191 Certified Professional Divorce Financial Analysts noted that 22% of married couples end up in divorce court because of money issues. While the survey found that basic incompatibility and infidelity are the leading causes of divorce, financial mistakes are often in the background of these marital headwinds.
Whether you’re getting married for the first time or trying again, there are four compelling reasons to hire a financial advisor as a new couple:
- Understand your relationship to money.
- Set a budget.
- Save for goals.
- Plan for risks.
- Say “yes” to a strong financial future.
Understand your relationship to money
Each person has a unique belief about money, often influenced by past experience, what they have learned from parents or significant adults, or mistakes they have made in the past. Most couples will talk about the kind of life they envision for themselves, but fail to address what baggage they bring into the relationship.
Suddenly, when two people try to pool their money into a joint account, they realize that they may have conflicting opinions about saving, major purchases, debts, and even how money is allocated.
One topic that is increasingly prominent in these conversations is the balance of power that income can represent. Historically, men earned more than women and it was not uncommon for the woman to be a stay-at-home parent. Today, both men and women can be the primary breadwinner in a family unit, and one or the other can be the primary caregiver for the child. Additionally, older married couples may find that aging parents are in the mix. Even here, traditional roles have blurred, but expectations may not have been clarified.
Money itself is usually not the reason people end up getting divorced, but rather the arguments around issues involving money. These arguments can bring considerable stress to a relationship, especially when a couple lacks an unbiased sounding board with a competent financial advisor.
A financial advisor can help each person articulate their personal money needs and wants while finding common ground between the two parties. By discussing these key issues before marriage, each person can be sure they have a say in their future together.
Establish a budget
It is not uncommon for first-time couples to marry at a time in their lives when their incomes are changing rapidly. Each person may have a different level of financial literacy and may bring different levels of savings and debt to the relationship. Middle-aged couples may have obligations to children from previous relationships that they must deal with.
A financial advisor can provide cash flow guidance as to how much the couple can safely spend on housing, utilities, leisure activities and planned major purchases. They can also help create a debt reduction plan to pay off credit cards and other loans so the funds can go together into the future.
The overriding issue for most couples is to combine their finances. Couples can choose to combine all or part of their budgets, and the counselor can help them understand the pros and cons of each scenario. Additionally, a smart advisor can introduce other key members of a team, such as an accountant, to help them understand the impact the marriage will have on their taxes.
Saving for Goals
The first major purchase for a newly engaged couple is often the wedding itself. According to The Knot, the average wedding in 2021 cost $34,000 including the ring. A whole industry of wedding loans has sprung up, where couples can borrow the majority of expenses with repayment periods of three to five years, but often at significantly higher interest rates, even with credit scores. exceptional. While this can give couples looking for Instagram-worthy weddings the money they need, this path can easily set them back on all their long-term goals, like buying a house, having kids, and even starting a business.
A financial advisor can be a sounding board for discussing the pros and cons of heavy debt at the start of a marriage. They can also model different approaches to achieving priority goals and show how different trade-offs can allow the couple to have their dream wedding without breaking their budget.
Plan for risks
When a couple first hires a financial planner, the advisor will ask a series of questions to assess the couple’s risk profiles, both individually and as a couple. This will help the advisor create investment portfolios that match the couple’s risk tolerance. This is especially important because couples don’t always mirror each other.
Another source of stress is when a partner invests in a way that makes their spouse uncomfortable. The advisor can provide advice to offset different risks or suggest more mutually acceptable alternatives.
Plus, through the advisor’s network of fellow advisors, they can make sure the couple has met their life and disability insurance needs; maximized their employer’s benefits; established wills, trusts and guardianships for minor children; and covered the potential for economic downturns, layoffs and other unfortunate surprises with an emergency fund. Through these key discussions, a couple can determine that a prenuptial agreement is an important addition to their planning – whether for a first marriage or a later marriage – and the counselor can introduce them to a lawyer. appropriate to establish these documents.
Say “yes” to a strong financial future
A marriage is a happy event, and one that can truly last a lifetime with the right partner. Good financial planning can help any couple start with confidence and can often stop arguments before they even start. More importantly, a solid financial plan that is regularly updated to meet changing goals can really bind two people together in marriage in an impactful way.
Feeling safe and protected during tough times can be especially comforting for a couple and give them the mental space they need to keep moving forward as a team. In order for “two to become one”, they must build trust. Working with a financial advisor helps a couple learn to communicate with each other about their most important matters. Being vulnerable to asking for professional and expert knowledge also adds a layer of mutual respect that can carry them through the rocky parts of the path that will come in any relationship.