Newlyweds are no longer just considered to be “twenty-something” in age as many Canadians are waiting longer to get married. In addition, many partners are getting married for a second or even third time.
Sound financial management of assets and liabilities plays a major role in any relationship, regardless of the age of the couple. Here are a few items that anyone can benefit from in order to maintain harmony over money matters.
#1 – Talk About it!
Yes money can be an awkward subject, but both of you need to know how the other feels towards spending and saving. Who is the saver/hoarder and who is the spender and how are you going to compromise?
How do each of you feel about debt and at what point would a debt load exceed your comfort level?
Are you a “gambler” when it comes to making investment decisions and does your spouse have more of a safe Canadian Savings Bond mentality?
These subjects have to be addressed immediately before a major purchase is made or before long term debt obligations appear.
#2 – Set a Realistic Amount for the Wedding & Honeymoon
The goal is to create a memorable day for you, your closest friends and family members. It is not advantageous to overspend and force you into debt that may take years to pay off. Realistically, if takes more than 1 year to pay the expenses off for a nice wedding and appropriate honeymoon, you might want to downsize your expectations.
#3 – Disclose Everything about your Financial Past & Future
Do you have financial obligations to an ex-spouse or children from a previous relationship? Is your business overextended and bankruptcy a possibility? Is the car you drive unaffordable, but you can’t imagine life without it? Are you a risk-taker with your investments? Did you put a previous relationship in peril because of your financial decisions?
While not the most romantic thing to do after the honeymoon, the reality is that both partners need to know the other’s financial history. Order copies of each other’s Credit Reports so that you know exactly what you are dealing with. This is to be done before applying for a mortgage so your banker doesn’t have to disclose the bad news if you are declined.
#4 – Decide on Single or Jointly-Owned Bank Accounts
Depending on the answer to each other’s feelings on money and their past financial misadventures, you can decide on how bank accounts should be structured. There is no law that states the bank account must be jointly owned, but for budgeting purposes and the paying of monthly expenses it is advantageous.
Some couples agree to save one partner’s salary while using the other’s salary to pay all living expenses. Is this realistic in your situation?
#5 – Review Each Other’s Group Benefit Package
If you both have the luxury of employer-sponsored dental & medical plans, decide if you will retain coverage under both plans or carry coverage under one policy.
Change the beneficiary designation under the group life insurance option and ensure that income protection options like Weekly Indemnity and Long Term Disability are adequate.
#6 – Look at Retirement Plans Already in Place
Do you have both have company pension plans and are they Defined Benefit programs (considered the most valuable) or are they Defined Contribution (also called Money Purchase plans) which are considered less valuable?
Does either employer make matching contributions into a Group RRSP? If so, should you load up on contributions to this form of pension plan and forsake the other’s pension for the time being?
Ensure primary beneficiary designations are changed to reflect your new spouse and a contingent beneficiary is appointed for existing children from a previous relationship.
#7 – Examine Personally-Owned Life Insurance & Disability Policies
Do you each carry enough coverage to withstand the financial shock if either of you dies? Is it time to rename the beneficiary designations or should this be kept in the name of an ex-spouse or child from a previous relationship?
If both of you are working with your own insurance advisor, is it appropriate to stay with two different brokers or retain one advisor to service all policies?
#8 – Update your Wills and Power of Attorney (POA)
Marriage typically annuls previous Wills so it’s time to meet with your lawyer or notary to draft new ones. At the same time have a POA and a Living Will done to ensure your wishes are carried through in the event of complicated health issues. Discuss with your new spouse your views on a funeral and how you wish to be treated in the event of mental incapacitation.
#9 – Are you Going to Work with a Financial Advisor or Are You a “Do it Yourselfer”?
Do either of you have a trusted financial advisor to guide you through life’s money challenges or are you the DIY type? If you are prepared to do it on your own, take recognized financial courses together so you can make informed decisions. If you are going to do it on your own, be prepared to put in the work necessary to make sound financial decisions. Time is money, and you must be prepared to research investments on your own or have an advisor assist you.
#10 – Should You Rent or Buy?
For a young couple just starting out in life this is a major question that needs to be answered. If you are going to take the real estate plunge, work with an advisor to ensure you are saving an adequate amount monthly and that you have the proper product and investment vehicle.
If you are at a more mature stage of life and this is a second marriage, you may both already own your own homes. Should you sell one and live in the other or should the second property be turned into a rental home to supplement your monthly cash flow?
#11 – Protect Existing Family Assets
In the last two months, one of Vancouver’s wealthiest family’s (Aquilini family and owner of the Vancouver Canucks) went through a very public and messy divorce. To protect you and your parents’ wealth, make sure you talk through the implications of your marriage with a legal professional. This is extremely important if your parents are considering a substantial gift or early inheritance as a wedding gift. A Prenuptial Agreement may be in order or even the use of Trusts or loans to protect the assets.
Open and unemotional discussion about money can be a strong factor to ensure long-term happiness in your marriage.
Have the discussion early on to avoid major complications later.