Financial Planning Blog

Jeff Opdyke previously wrote a weekly column called “Love and Money” in the Wall Street Journal and on Wednesday he provided some sound advice regarding money and marriage in “With this Debt, I Thee Wed”. (I’m sure its appearance on April 1 was not an intentional comment on the seriousness of the topic).  The article was adapted from his recent book “Financially Ever After: The Couples Guide to Managing Money.” I haven’t seen or read the book, but in the article he had some good advice for couples, beyond pointing out the obvious fact that finances and the stress of debt can take a heavy toll on marital bliss.

I think everyone agrees that communication on finances is critical for couples.  Jeff gives some very practical things to talk about—specifically what your philosophy is regarding debt and regarding savings?  Of course, the two are intertwined. These are really just part of an overall “financial mission statement” or a set of agreed upon values for the couple to discuss.  (Now this is starting to sound like too much work! Let’s go to the movies, instead.)

His example of this foundational statement was: “We agree to live below our means, not to pursue material wants without the money to afford them, never to use emergency savings for consumer purchases and to take on debt only when it benefits the family’s long-term goals or needs.”  (Sounds pretty good to me.) Of course, more detail on how this affects your behavior, is critical.

A discussion of how you will use debt is pretty standard advice for couples.  For example, discuss and agree on:

• Will we pay by cash, or will we use a credit card?
• Will we pay off our credit cards every month, or will we carry a balance?
• How big a balance a balance are we comfortable with?
• Will we save for large purchases, or can we occasionally overspend and pay them off later?
• When will we use debt, and when not? (He discusses good debt vs bad debt.)

An equally important discussion regarding the use of savings is more easily missed.  However, it is important to get agreement (which may involve a bit of compromise) up-front regarding:

• How big of an emergency fund do we need?
• Will our savings account be available for non-emergencies?
• What defines an emergency? (Hint: a sale at Macy’s or REI is not an emergency.)
• What are our short and long term savings goals?

This isn’t rocket science, but apparently many people go into marriage without this kind of discussion and understanding. Fortunately, pre-marital counseling (e.g. through your church) often helps couples work through these discussions. If not, a couple should be encouraged to read a finance book for couples, or consider talking to a financial planner who enjoys working with those starting out in life.