You’ve probably heard the saying, “The first marriage is for money and the second marriage is for love.” But, as I counsel my financial planning clients who are embarking on a second trip down the aisle, it’s important not to let happiness overshadow the need for the “money talk.”
In fact, the requisite prenuptial financial meeting can be even more important the second time around — when both spouses may be more advanced in their careers, with significant assets and, perhaps, children to plan for.
So if you’ll be tying the knot for a second marriage soon, here are four smart money moves to consider making:
1. Put all your financial cards on the table. Although financial transparency is essential, a poll by the National Foundation for Credit Counseling found that 68 percent of engaged couples held a negative attitude about discussing money with their fiancé. And we have all read the statistics on financial issues driving separation.
A prenuptial financial meeting can be even more important the second time around if both spouses have significant assets and children.
So it is vital to openly discuss finances when taking your second walk down the aisle, to help make sure it is your last.
I advise clients marrying for the second time to set up a meeting to discuss their finances. Before this meeting, it is ideal to pinpoint the items that will be covered, so each partner can plan for what will be addressed.
There, in a judgment-free zone, each person can come clean about assets and liabilities. It’s also wise to share financial documents, including tax returns, pay stubs, bank and investment statements, and even a credit report.
Sometimes a series of meetings is warranted.
Also, if you and your spouse-to-be have financial advisers, make introductions to both parties and then stay on the same page.
2. Explore your money personalities. Many couples are a spender and a saver because opposites attract. However, identifying money differences is just the starting point for working on your joint finances before a second marriage.
Merging your financial philosophies can be especially difficult if there are children involved, issues with the ex-spouses or a wide socioeconomic gap between you. The key to success is gaining some appreciation for each other’s perspective and strengths.
Then, soon after the marriage, simple role reversals can be effective. The saver might take over the spender’s grocery shopping and the spender might take up the saver’s role of paying the household bills for a period of a few months.
3. Set joint priorities: The older you are, the more engrained your spending and savings habits may be. So, it can be tough to start afresh, even when there is more than enough cash to fund short- and long-term goals. But you should figure out how to work as a financial team.
Disagreements can range from the size of a mortgage to carry to the amount of risk to take with your investments to how much you’ll each contribute to your kids’ college education.
When setting financial goals, one of the first questions couples face is whether to open a joint checking account. Many of my clients who are remarrying choose to have smaller separate checking accounts and a larger joint checking/savings account. For people combining lives and finances mid-life, having an ample joint account is helpful, since this account is where most couples pull from.
Think of having the equivalent of three jars: Yours, Mine and Ours. That way, he pays for the extravagant birthday gift for his brother and she pays for the beach weekend with her college friends.
The rules for these jars vary from couple to couple, from not having any restrictions on the Yours and Mine jars to agreeing to always discuss purchases above a certain dollar amount.
Whatever your rules are, I encourage you two to comply with them fully. That’s apparently easier said than done. According to a 2014 Harris Poll for the National Endowment for Financial Education, one in three adults who’ve combined their finances admit to committing financial infidelity against their partner — they’ve either hidden a purchase, bank account, statement, bill or cash from their partner or spouse.
4. Update your wills. Signing a prenup (which I advise all my clients to do) will guide the disposal of your assets should your marriage dissolve, but you’ll want to update your wills to ensure your assets will be divided as you wish after your death.
To avoid a situation where your children feel like their stepparent inherits all of their money, many remarrying couples buy life insurance or establish a QTIP trust. With life insurance, you name your children as beneficiaries, so they’re guaranteed money. Alternately, a QTIP trust can hold assets you intend for your children but allow your surviving spouse to collect income from the trust during the rest of his or her life. In either case, it’s imperative to involve your estate-planning attorney.
Years of experience with clients has taught me that that taking care of these steps can get a marriage off on the right foot and provide a solid financial foundation for the future.
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