Friday, March 31, 2006

LOVE & MONEY The Wall Street Journal (subscription required) lists nine questions partners should ask each other before the big day. Among them:
2. How do you use debt?

There's a big difference between $30,000 in school loans and $30,000 of credit-card debt.

So ask each other: Do you amass debt in the present, figuring you'll earn more money later in life and can pay it off then? Do you abhor debt and refuse to own a credit card? Either approach could cause marital strife if your partner isn't on the same page.

Pay attention while dating, and you can begin to see telltale patterns. Maybe the love of your life uses a credit card for every purchase, even the $1 soda at the local mini-mart. Maybe your partner seems to be driving a more expensive car than he or she should be able to afford.

Use those observations as entry points into discussions. Ask whether your partner generally carries a balance on a credit card and how he or she envisions paying it down once you're married. Ask if your partner borrowed money to buy his or her car, or relied on a lease. (A lease often allows people to drive a pricey car they otherwise couldn't afford using cash or a loan.)

The point is that you must know if you are marrying into a potential debt problem. Any debt you accumulate together may be partly your responsibility if the marriage falls apart -- even if you didn't actually make the purchases.

Scott D. Cole, a financial planner in Bessemer, Ala., suggests one way to get into this conversation: Offer your partner a copy of your own credit report. "Say something like, 'I'm excited about our life together, and I realize money is a part of our life. I've made some mistakes in the past, and I have some student loans, and I just want to show you my credit report so that you can see how I manage my debt,' " Mr. Cole says. "The point is that by being vulnerable yourself, maybe your partner will open up as well. You don't want to look like you're snooping into their affairs, though."

With a credit report, you'll see, among other items, how many credit cards your partner has, the balance carried on each card and how rigorous he or she has been at paying on time and paying off the accumulated debt. Consumers can request a free copy of their credit report once a year from each of the three major providers -- TransUnion, Experian and Equifax -- at [...]

7. How do you propose we divide financial duties?

In many a marriage, one partner often takes the reins of the family's finances. The other is glad to let go.

But sometimes it's not that simple. When both partners either want the money duties, or both want to slough off those duties onto the other, "you need to discuss what your individual strengths are," says Ms. Hughes, the California counselor. "You might be really good at investments -- or at least willing to handle that part of the family's financial life -- and so you can be in charge of that. Your partner might be good at managing the bills and bank accounts, so they take that piece."

But even when one spouse willingly cedes the money duties, that spouse must remain up to speed with the checking account, the credit cards and the investment and retirement money -- if only to prevent getting blindsided by a crisis. At the same time, the spouse in charge of those duties must make it a point to keep the other partner up-to-date, so that unspoken concerns don't grow into resentments.

Family finances, says Mr. Cole, the Alabama planner, work best when both partners know what's going on with the money. "Otherwise," he says, "the strains build over time and you wonder one day how it got to be so bad."

8. Will we operate from one checkbook or three?

Young couples often assume they must have a joint checking account to prove they're united. Older newlyweds, accustomed to managing their own money, often want individual accounts to retain their autonomy.

Neither approach is necessarily wrong -- though neither is particularly right, either.

Jumping into a joint account as newlyweds isn't always the smartest approach until you've had time to learn each other's financial habits. For instance, if one partner puts every purchase on a credit card, and the other uses only cash, the family's income may not stretch across the monthly paychecks -- especially if neither spouse keeps close track of how much they've spent.

Better to operate from three accounts early on: a joint account that each of you helps fund to handle combined expenses such as food, housing and utilities; and two individual accounts into which you each dump a monthly allowance that pays for individual discretionary wants.

Of course, continuing to operate from individual accounts isn't always the smartest approach, either. For one thing, those accounts can mask a family's true financial picture, since the money is often viewed as "mine" and not "ours." As such, says Ms. Fleming, the planner in Walnut Creek, Calif., "families have a hard time saving for important wants when their individual paychecks are going into separate accounts. There is value in feeling like you're a unit, striving toward something important to both of you."

Moreover, if one partner saves in that individual account instead of spends from it, the situation could bring financial tensions. The spender could see all the cash the saver has socked away, and all the spending that represents, and get jealous.

If you ultimately choose to operate from a joint account, allow each partner to spend a certain amount monthly without permission from the other. And agree on a limit beyond which a purchase must be discussed. For Ms. Sozanski and Mr. Pironti, the Boston couple, that amount is $250. Anything pricier they must agree on before buying. If, however, your partner is a serial violator, overspending his or her amount month after month, then it's probably best that both partners stick to individual accounts.

Meanwhile, if you operate from individual accounts, both of those accounts should ultimately be made available to help afford family purchases that the joint account alone can't handle.


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