John Lowe of MoneyDoctors.ie advises all couples to come clean when it comes to money issues from the start, especially those in the throes of living together.
When you start to build a relationship with someone, 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 it might open a can of worms?
Discussing credit cards and spending habits are not generally a topic of conversation on first dates. But somewhere between proposing and saying "I do" 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. Entering a marriage with hidden debt can be a disaster and start a marriage off on the wrong footing – mistrust will set in.
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 salted any money away for the Rainy Day Fund? White goods are usually the first purchases for couples when they move in together – 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?
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 – costing, from birth to completion of third level education, 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 third level college? Even if you were to invest the €140 per month Child Benefit from day one for those 18 full years, until it stops on the child's 19th birthday, amounting to roughly €30,240 without any interest, it is still €12,000 shy of what is needed for third level education alone. And most families use that Benefit for the every day expenses of raising a child.
What about childcare? Will one spouse stop working - financially - to take care of the children? The answer to this may be predicated by the financial commitment of both spouses to the mortgage until maturity, as normally the mortgage is based on your joint annual income until the end of term, generally 30 years.
While we’re at it, what's fair pocket money allowance? And are we going to buy a TV for our son's bedroom the first time he asks? A mobile phone from age 12? How much money will our daughter get when the Tooth Fairy visits? Communion money? 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? Joint current account? Separate current accounts and 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? This could be the case – make use of each other’s talents.
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, or 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. 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.
The views expressed here are those of the author and do not represent or reflect the views of RTÉ
For more information, click on John Lowe's profile above or on his website.
If you have been affected by any of the issues raised in this article, you can visit RTÉ Helplines.
