Discuss your finances before tying the knot

February 18, 2013|By Carolyn Bigda

Did you propose recently? The holidays and Valentine's Day are popular times for couples to get engaged.

It's an exciting period, but on the road to marriage, experts agree it's important to learn how to communicate about money. According to a survey done last year for the American Institute of CPAs, 27 percent of couples married or living together said money issues were likely to lead to an argument, more so than other topics such as children, chores or work.

A primary reason behind the arguments is a lack of communication, the survey found.

"Communication is hugely important," said Tracy Stewart, who serves on the AICPA's National CPA Financial Literacy Commission. "If you can communicate effectively about money, there's less chance of a misunderstanding, or at least you may understand where the other person is coming from."

So what's the best way to talk about finances with your significant other?

Know your money personalities

The first step is to understand each other's attitude toward money, say Bethany and Scott Palmer, authors of "The 5 Money Personalities: Speaking the Same Love and Money Language," (Thomas Nelson, $15.99).

The Palmers have identified five money personalities. You may, for example, be a spender or a saver, a risk taker or a security seeker. Knowing those attitudes — the Palmers say we each have a primary and secondary money trait — can help diffuse conflict down the road. To start, take the quiz at themoneycouple.com/money-personality-profile (the quiz is free, once you've provided your name and e-mail address).

"If you don't recognize where the other person is coming from, that's where the nitpicking and nagging start," Bethany said.

What if you discover you and your significant other have different attitudes toward saving and spending?

It doesn't necessarily mean you have to call things off. In fact, of the nearly 3,000 couples the Palmers have worked with, 80 percent to 90 percent have opposite personalities, Scott said. The key is to "go into the marriage with eyes wide open," he said. "You will do so much better."

Swap credit reports

In the same spirit of honesty, Gregory Kuhlman, a professor of psychology at Brooklyn College, who runs premarital seminars with his wife, Patricia Schell Kuhlman, said it's important for engaged couples to put "all their cards on the table."

Those cards are the specifics of your own financial picture: student loans, credit card debt, and retirement savings, among other things.

Lisa J.B. Peterson, president of Lantern Financial, a fee-only financial planning firm in Boston that caters specifically to young couples and individuals, said after getting engaged, partners should pull their credit reports together (by law, you can get a free copy from each of the three main credit bureaus once every 12 months at annualcreditreport.com).

"The credit report is the truth of the story," she said.

What if one report is better than the other?

"This is not about blame," Peterson said. "This is about establishing the foundation and knowing what you're working with."

Create your own plan

Once you've done the homework, you can begin to put together a plan for managing your money as a married couple.

But keep this in mind: there is no one right way of doing it. Your money habits and financial circumstances are as unique as your relationship. Couples tend to have more success in their discussion about money when they focus on getting to know each other better, not trying to conform to a certain view.

"Think about these things not as right or wrong, your way and my way," Gregory Kuhlman said, "but how do we do this as a team."

E-mail Carolyn Bigda at yourmoney@tribune.com