If you're planning on getting married, before you even think about saying "I do," you better start thinking about due diligence.
When two companies announce a corporate merger, the event is often likened to a marriage between two people. And just as two merging companies conduct fiduciary due diligence in preparation of the union, so too must couples as they prepare a lifetime together.
OK, so maybe you won't find that kind of marital advice in a Lord Byron love poem, but if you don't think being financially responsible is one of the most important aspects of a happy marriage, think again. According to
The Heart/Credit Connection
, a 2006 study conducted by Opinion Research and
, a lack of financial responsibility is a greater cause of martial stress than infidelity.
So to make sure your love union doesn't become the next
, here are five financial planning tips for newlyweds:
1. Discuss Financial Goals and Attitudes
While most engaged couples focus their attention on things like the wedding, the honeymoon and thank-you notes, it's far more important to discuss finances. "In a relationship, you have to talk about money and about what it means to you," says Morris Armstrong, a certified financial planner and owner of Danbury, Conn.-based Armstrong Financial Services. "It's not the most romantic thing in the world, but you should know what you're getting into."
Armstrong says that many couples are reluctant to talk about finances, and a difference in attitude can be a source of tension down the road. He's found that when it comes to money, opposites often should not attract. "The spendthrift and the saver usually don't get along," he says. "Too often marriages have ended because each party has a different idea about what money is for and how to handle it."
2. Review Your Credit History and Debt
When companies merge, an important consideration of the due diligence is how much debt the new partner is bringing to the relationship. And it is just as important for couples to review each other's debt, because one person's bad credit can be a problem for the pair -- particularly if they are planning on buying a house some day.
"It's horrible when you run a credit report and find out your loved one's credit is bad, and now your score is down the tubes," he says. "Before tying the knot, it's important to be honest with your partner about what you have and what you owe."
If one partner has bad debt, but the other one is a significantly higher earner with good debt, then they can simply leave the one with bad debt off a loan application. However, if this is not the case, then they will have to work at cleaning up their credit. "If you and your spouse apply for a loan and the loan goes south," he adds, "it's your joint responsibility. So it will affect both your credit."
3. Update Beneficiaries, Will and Legal Documents
Another important thing to remember when getting married is to update your will and your beneficiary designations. Although most things automatically go to the spouse upon the other's death, your beneficiary designations on your 401(k) or estate-planning documents will remain in effect until you change them.
Armstrong also says it's a good time to update your will and to get a power of attorney and health care proxy as well. He cites the famous Terry Schiavo case, where the spouse and parents of a comatose woman endured a brutal court battle in 2005 over her medical fate. "You have to choose who is going to make decisions for you -- your spouse or your parents," he says. "No one wants to think it can happen to them, but it does happen, and it's not a bad idea to get the documents taken care of right away."
4. Create a Budget Together
Armstrong also suggests couples complete the tedious -- but important -- task of creating a budget. This is also a good way to bring each spouse's spending habits more in-line with each other's. "You don't want to get in a hole early on in the marriage," he says. "Many people may think a budget is restrictive, but you should look at it as an empowering tool that everyone should have."
5. To Commingle, or Not to Commingle
Couples about to get married also need to consider whether they want to commingle their assets. This doesn't have to be an all-or-nothing decision, however, as couples can choose to combine some of their finances, while keeping others separate.
"You need to decide if you are going to have separate or joint accounts and how you are going to manage the checkbooks in these accounts," Armstrong says. "If you decide to have a joint account, make sure everyone knows what's going in and out to avoid overdraft problems."
One area couples should strongly consider combining, he says, is insurance. If both spouses have insurance through their employers, they should compare who has the better benefits and go with that one.
But one thing no couple likes to discuss before marriage is the grim reality of the 50% divorce rate in the U.S. Because half of all marriages fail, it's important to keep this in mind and have some assets set aside for yourself should you find yourself on your own again.
Michael Katz has been a reporter at Forbes and an editor for two custom publishers, SmartMoney Custom Solutions and HNW Inc. He also worked in London as a freelance media reporter and foreign correspondent for Broadcasting & Cable magazine.