We all know that when it comes to money, people can get very strange. That’s why it is a good idea to be prepared for anything and everything when it comes to merging your finances before your wedding, especially if one of you earns significantly more than the other.
The best thing you can do is to have an open, honest conversation about money and bills and who will pay for what. This is critical if you are paying for your own wedding but important even if you aren’t. Although most people have a negative view of pre-nuptial agreements, they are a great way to tackle estate planning and cover the big question of what to do in case of death, job loss or other unforeseen problems. I’m not a boy scout but I still think it is good to always be prepared.
Before your decide to merge all of your finances and go full force into joint checking, saving, home loan and credit debt, here are some things you will want to consider:
Get a copy of your credit report before you begin wedding planning. This goes for both of you. Sit down and compare your credit reports and find out what is on there that can be removed, offer to help your partner, if you are able. Focus on things like charge-offs, which can affect your credit score up to 200 points. A charge-off is an account that has gone unpaid for more than 180 days and generally the credit company has ceased trying to collect. Look at the amount, decide how much of it you can pay and call the company that issued the credit (not the collection agency) to dicsuss removing this from your credit report. This will be tricky since they may have to dig up old records and you may be put on hold and called back several times but, it’s worth it. Be persistent and polite (it is YOUR debt, not theirs) and make payment arrangements. Pay in full if you can or make monthly payments. Whatever you can negotiate with them will serve you well.
Make a monthly budget as individuals and as a couple. Use a calculator, pencil and paper – leave nothing to the imagination. Write down how much you make and what bills you have together and separately. Decide who pays what and how. Did you know that you can set your due date on most bills? Yes! Contact utilities, credit cards, etc and ask them (again, politely) if you chould have your bill due on a certain date, they will comply if it is within reason and if you are current on all of your debt. It is important to know what is going to be pulled out each month for bills and for incidentals so you may want to pad the budget a little. While you are at it- don’t forget the little things like tollway passes, lunch costs, birthdays of family and friends, health care co-pays and other incidentals. Toll violations get reported to the credit bureau within 3 months and can drag your score down over 100 points. ONE toll violation can costs you hundred of dollars and render you unable to obtain a home loan if not handled properly. Myinstantoffer pre approval is a good option.
Joint credit cards are not always a great idea. The main reason joint credit cards are not a good idea is because both of your salaries will be taken into consideration when determining the credit limit. The limit may be significantly higher than if you each applied solo. Although this sounds like a good thing it is the easiest way to get into debt. Credit cards are great but, try to maintain a balance you can pay off every month. Another reason they may not be a good idea is that if something happens and one of you loses your job or becomes unable to pay, you are both still responsible for paying the card. A better choice may be an authorized user. This is someone who is not responsible for payment but can still use the card. Thats sounds great, right? Actually, this is only a good idea if you have firmly established trust and are assured that your spouse isn’t going to charge like there’s no tomorrow. The main reason this is a better idea is that you will be able to use the card in an emergency but will not have to sign on and be approved which sometimes comes with an additional fee. It is also a great help when one party makes significantly less money or is working on repairing their credit. However, being an authorized user will not improve your credit score . The best way to do that is to start with a card that has a low limit and work your way up. You will slowly but surely get approved for more and more credit after you are prompt with payment and your credit score improves. Why did my credit score go down when nothing changed? You should take a closer look at this.
Combine balances, close accounts you never use and do not open a credit account at every store where you shop even if they offer you massive discounts on your initial purchase. Confining your credit usage in the beginning will lead to a brighter future. Keep the big cards and look for cards that offer incentives such as: miles, cash back on different services (like these listed in the 2019 review of Bestow term life insurance), lower interest, no annual fees, no interest if pai in full every month, etc.
According to Forbes, the most common mistake couples make when they are about to be married is opening joint accounts for everything. It is always good to keep an additional account in your name only to protect yourself in case of illness, job loss, bankruptcy,etc. You are not protecting yourself from your partner, but you are protecting your partner from unforseen, unknown factors and outside influences.
When it is all said and done, the single best way to merge two lives is through honesty and determintaion. Relationships are hard work and finances can be a touchy subject especially if one of you has had financial trouble in the past. This is the perfect time to put that all those negative reports behind you and work together to build a platinum future!
-Penny Frulla for Bridal Expo Chicago
