Talking about money difficult but important
Money matters, but for many, talking about it can be difficult.
"We grow up with our family's money management styles and are taught that it's not polite to talk about money," said Kristy Archuleta, a Kansas State University faculty member who teaches financial planning.
Archuleta, who also is a licensed marriage and family therapist, said she's counseled couples who are planning a wedding, but have given little thought to how they will pay for the wedding--or their life ever after.
She also said that young adults have a higher, but often inaccurate, perception of their financial situation.
Charlotte Shoup Olsen, K-State Research and Extension family systems specialist, also reported observing a lack of knowledge and understanding about money management among families she encounters in her work.
"People don't know what they have, or how much they owe," Olsen said.
Failure to talk about money and shared goals in money management can erode relationships at any stage of life, Olsen said.
And, while a young couple just beginning a life together can struggle with the openness they need to communicate, it's not unusual for spouses or partners who have celebrated a long and happy life together, to have failed to talk about money. In those situations, a surprise can be in store.
Olsen cited the example of a spouse who learns that his or her spouse who died unexpectedly had been spending down a retirement account or mortgaged the house.
While trust in each other is key to a couple's willingness to begin the conversation, Olsen advised couples to start talking about money before they need to.
Request a free credit report
To begin, Archuleta advises prospective spouses and partners to each apply for a free credit report (www.annualcreditreport.com) from one of three credit reporting services (Equifax, Experian or Trans Union).
"A credit report is a good tool because it identifies assets and liabilities, accounts and activity on them, payment history, and reflects spending and saving styles," Archuleta said.
That's important, because if one or both partners thinks making the minimum payment each month is acceptable, his, hers--or their--financial future could be in jeopardy, she said.
If paying the minimum balance becomes a habit, the card holder is adding expense unnecessarily, said Archuleta, who encouraged credit card holders to review their statements and note the difference in the long-term cost when making only minimum payments.
Try not to charge more than can reasonably be paid at the end of the billing cycle, she said.
In noting that school loans have surpassed credit card debt, the financial management pro and counselor encourages couples considering marriage to pay attention.
For example, a man has school or other loans, and his prospective spouse is debt free.
Once the couple marries, both spouses may have to work to pay off the other's student loans, and that can mean postponing other financial goals, and include limited funds for everyday needs, saving for an emergency fund, buying furniture, or replacing an aging car, Archuleta said.
This can lead to distress, resentment, and conflict in the marriage.
Failure to pay down debt can limit the ability to borrow, and, when negotiating a future loan, increase the interest rate. And, if payments on student loans are allowed to lapse, the federal government is entitled to garnish (take) wages, she said.
Make a budget
After reviewing their credit reports, Archuleta advises couples to make a basic budget, with available financial software, such as www.mint.com.
Some expenses like rent or a house payment, car payment, taxes and tags, payments on school or other loans will be easy to identify.
Others, such as paying for lunch when you forget to take one from home, grabbing a soda or snack from the vending machine at work, or picking up a birthday gift on the way home, can add up, said Archuleta, who advised tracking incidental or out-of-pocket expenses for at least two weeks to see what see what you are spending, and consider what's important--and what isn't.
She recommends budgeting for savings, an emergency fund, and extras such as a weekend get-away.
Archuleta said she's often asked if couples should "pool" their money.
There isn't one right answer, she said, as the assets each person brings to the marriage, debt, and shared goals can be factors in making the decision.
In saying that, however, she noted that couples who have a shared view of money management--"we," rather than "I," "me" or "mine"--typically express greater marital satisfaction.
Couples who have been co-habiting prior to marriage may have established ways of covering expenses and the marriage commitment may change how they view "his" versus "her" money.
Archuleta and Olsen agreed that communication is key in building a sound financial foundation.
Discuss financial goals, values, and boundaries - and respect them, Olsen said.
More information on basic budgeting and managing money is available at K-State Research and Extension offices throughout the state and online at www.ksre.ksu.edu/financialmanagement.