Before getting married, one must complete financial literacy training and demonstrate a certain degree of proficiency. In other words, before getting married, couples should make some financial plans. Typically, a forensic accountant becomes involved in a marriage case when there have been financial transgressions or errors.
When we enter the picture to determine what went wrong and how it happened, it is frequently too late for one or both parties to restore their financial security. My own financial success is somewhat reliant on other people’s bad luck. However, I would be thrilled if every couple beginning a long-term committed relationship, such as marriage, took some time to talk about their financial routines and expectations. To each other, they should declare and provide documentation of their earnings, possessions, and debts. Couples should make a plan for what will happen if the unimaginable occurs. Without preparation, their happy beginning can have an unhappy conclusion.
I now realize that buying insurance is equivalent to financial planning before marriage. The majority of individuals don’t want to spend time or money making plans for a negative situation that might never arise. Putting it off and acting like the awful thing won’t happen is much simpler. A couple preparing for marriage is frequently so hopeful and enthusiastic about their future together. They could believe that thinking about how to handle potential issues in their relationship in the future is unlucky or a sign of mistrust. Relationship breakdowns do, however, occur, just like hurricanes, earthquakes, auto accidents, and sicknesses. When they do, those who took the time and made the investment to protect themselves might be happier than those who choose to avoid a difficult subject.
Not just for couples with large incomes and/or assets, but for the majority of couples as well, financial awareness and preparation are essential. Having open lines of communication and ensuring that both parties have at least a basic education are the two most fundamental components of financial preparation before marriage. Everyone should be able to create a budget and keep track of their spending and income. You can select your preferred software, whether it’s a spreadsheet, a chequebook, or something else. Although the points below touch on some of the more significant financial matters to discuss with your potential spouse, this is by no means a comprehensive list of subjects. Use this as a starting point to determine how to finance your relationship.
Spending or saving?
The parties need to discuss their respective spending patterns with one another well in advance of the wedding. Conflict will undoubtedly arise when one partner is exceedingly frugal and the other is a spendthrift. Financial uncertainty and even a stable financial condition for a relationship can cause conflict. To manage a budget and any significant purchases during your marriage, you must be on the same page.
It is advisable to determine a spending pattern that both parties can live with and whether or not the pair will make decisions together for purchases that exceed a specific threshold. Is it acceptable, for instance, for one spouse to purchase a pricey item of jewelry or a car without first informing the other? You should also decide if you want to use a budget to control your spending. You should talk about how you will achieve your retirement (401(k), IRAs, etc.) or other savings objectives, as well as how to finance large expenditures, as part of your budget.
Premarital property:
A couple should make a list of their respective sources of income, assets, and liabilities and discuss it before getting married. Say, among other things, that one party has inherited furniture from a relative that has special historical and sentimental significance to that person’s family. It might be crucial for this object to stay in the family for future generations. Therefore, identifying such items and coming to an agreement on how to handle them in the event of a divorce or death will go a long way towards preventing future conflict.
Participation in or ownership of a family business may be another crucial aspect. Ownership by people outside the family may be restricted or dilution of family ownership through marriage or divorce may not be desired, depending on the terms of shareholder agreements. Prior to the wedding, these matters must be resolved.
Joint or individual accounts?
The couple needs to decide whether they will keep separate accounts, joint accounts, or a combination of both. Each circumstance has advantages and disadvantages. For instance, both parties will be able to access the accounts if you elect to set up your accounts in joint names. Both of you will be able to see where the funds are coming from and going. It also gives one side the ability to empty the joint account(s) and leave the other with nothing. Keeping assets and income separate may be made easier by maintaining different accounts. It might also help you if you want to keep certain things apart in the event of a divorce. Additionally, having separate accounts could obstruct the disclosure of a couple’s finances.
Who handles the money?
Choose the person who will be in charge of paying the invoices. Most of the time, one spouse is in charge of paying the expenses; occasionally, the burden is shared between spouses. The cost of daily living could be paid. While one person covers fixed costs like the mortgage or car payment, the other does so. Instead of one partner having total control over all financial decisions, it is better to incorporate both spouses.
Additionally, it is prudent to securely document all accounts, including assets and liabilities, as well as pertinent access information. This may assist in preventing a scenario where the spouse in charge of the finances becomes incapable or passes away. With enough planning, the other spouse is not placed in a predicament where they are unable to manage the funds. Future unforeseen issues could be avoided by making a decision in advance that both parties will be involved in and aware of the couple’s money.
