John Lowe of MoneyDoctors.ie advises all couples to come clean when it comes to money from the start, especially those in the throes of living together.
You may think you are the perfect match, but one of the biggest compatibility tests for couples is bringing the finances together. Will this kill your romance? Are you afraid you might just open a can of worms?
Discussing credit cards and spending habits are not generally on the love agenda – well, at least not at the start.
But somewhere between proposing and saying "I do" there are some key questions you and your better half should be asking each other.
1. Do you have any debt?
Not exactly an ice-breaker but if you're going to be marrying this person and sharing their life you should both volunteer this information freely and hold nothing back. In an age where student loans over €30,000 are not uncommon, this debt discussion is crucial. Entering a marriage with hidden debt can be a disaster and start a marriage off on the wrong footing – mistrust can set in. It will come to light anyway when applying for a joint mortgage.
2. Do you have savings?
Yes, that's an easy one. You might have been going out a couple of years, gone Dutch on the holidays by paying for yourself, but have you saved any money away for the Rainy Day including the home deposit? White goods are usually the first purchases for couples – they need their fridges and washing machines. How are you going to pay for this? What about the wedding itself, the 10% deposit for the house, the car, the honeymoon, and of course, remember today’s lenders want to see regular savings that together with your current rent or money to Mum exceed the new mortgage repayment you are about to start.
3. What about our children?
If you're thinking of becoming parents, and you haven't broken up over the debt and savings questions, this is a good one to ask. Most couples address the 'when' and 'how many' when it comes to discussing children, but children are expensive – from birth to completion of 3rd level education, costs come to about €240,000 per child – so the financial impact should also be considered.
Do both spouses want to pay for private schooling? Who will pay for 3rd level college? Perhaps you will invest the €140 per month Child Benefit from day one for those now 18 full years when it stops at that point, amounting to €30,240 – still €12,000 per child shy of what is needed for 3rd level education alone. Will one spouse stop working – financially – to take care of the children?
The answer to the last may be predicated by the financial commitment of both spouses to the mortgage until maturity – normally the mortgage is based on your joint annual income for the full term.
While we’re at it, what's fair pocket money allowance? And are we going to buy a TV for our darling son's bedroom the first time he asks? How much money will our daughter get when the Tooth Fairy visits? You could go demented raising these issues but you will get a sense of where your partner stands making them even more potentially compatible with your own views.
4. What about our parents?
Easy to forget, but the type of spender or saver you want to marry probably are a mirror image of their parents – warts and all. From early age, we are so influenced on how our parents spent or saved and how we now spend or save. It's important to examine how we were raised and how our pecuniary habits were formed so that we can make changes now if change is needed and change can be effected.
5. Who is paying for what?
How will money be handled in your household? Will you use a joint current account, or separate current accounts, or one joint one? Jointly assessed or separately assessed? Who is in charge of paying the household bills and budgeting? Is it fair to have one person be responsible for paying the bills for the rest of your married life? On the other hand, what if one person is really organised and the other isn't, does the organised person have to be the one to pay the bills? What happens to that person if you divorce?
This is also the time to ask your partner a few testing questions. For instance, if they have a gambling or shopping problem, even a drinking or smoking issue - is this a problem for you now and are you prepared to live with it?
Other questions include what kind of lifestyle do you see yourselves living, and how much will it cost? What is your approach to saving and investing? Meaning, how important is saving for retirement especially when there is every chance there will be no State Pension by the time you retire? Saving for your children's college education? Are you averse to risk or a risk-taker?
The point of asking a lot of these financial questions isn't to map out your entire marriage, but to see if you both truly are financially compatible, or you're just actually hoping to give your local friendly solicitor some business in the years ahead!
In fact, if you are marrying, I would contend that the most important person you should consult with as a couple isn't the wedding planner – it's the financial planner.
For more information click on John Lowe's profile above or on his website.
The views expressed here are those of the author and do not represent or reflect the views of RTÉ.
