Thursday, December 1, 2011
Wealth Creation Lessons for Engaged Couples
Congratulations on your engagement! This is another significant milestone in your life as it marks the first step to cementing your relationship. You may have started discussing with your partner your initial set of expectations - where you will live, how many children you will have and whose career move takes precedence. But does your premarital agreement include anything about how you will handle your finances? Do you even have an idea how you two will go about it? If not, read below the wealth creation lessons and principles to get you started.
1. Find out how much debt each person is bringing into the marriage. Money is always a delicate subject. Having debt makes it worse. If you have a pile of debts - credit card bills, student loans, a mortgage and the sort - that you are struggling to pay off, be honest with your partner. It's important that you lay all your cards on the table so you will have an idea how you will budget your money as a married couple AND find out if you can really afford that fancy wedding. Obviously, the more debt you have, the more you'll need to scale back on your wedding frills. It's good wealth creation practice to pay off your debts first and avoid accruing new ones.
2. Discuss your credit rating during premarital agreement talks. If both of you have a bad credit rating, this will severely impact your ability as a couple to apply for a mortgage or other loans you may need in the future. If only one of you has a bad credit score, discuss the possible ways you can undertake to improve that score. You might need to bite the bullet and help pay for your spouse's monthly repayments. But if you really love each other, it's a small sacrifice that will eventually pay off. Wealth creation is a partnership so do your best to support each other.
3. Individually discuss your money management methods. For example: your idea of savings is setting aside twenty percent of your income each month and depositing that money in an account that you never touch. Your partner, on the other hand, might save only five percent or none at all because he or she is still paying off debts. Help your partner find a solution that will enable him or her to pay bills on time and still manage to have some money left over for your wealth creation efforts.
4. Discuss your spending habits. Your premarital agreement should cover your individual spending patterns. When you shop for a particular item, do you buy just one piece or get it in all colors? If your neighbor has the latest gadget, do you feel the need to buy the same thing or do you make do with what you have until it breaks down? All of us have our unique spending "triggers", which may appear either as practical or otherwise in the eyes of our partner. You can't achieve your wealth creation goals if you two are always at odds about your spending. Find a middle ground when discussing your purchases, especially the big-ticket ones.
5. Live within your means. This translates to spending no more than your monthly income. Try to live on a cash basis and not depend on your credit cards or borrowed money even for normal living expenses. It also means exercising restraint and discipline in order to control impulse buying. It is a good idea to include in your premarital agreement what type of purchases fall under credit card usage. If you can't make those clear distinctions before you get married, your wealth creation endeavor as a couple will not succeed.
It's understandable if you're nervous about discussing money in your premarital agreement. Sure, it's unromantic and awkward at first but it is only practical and fair to set those baselines to help you manage your money correctly as a married couple. Keep communication lines open and always be supportive to each other. Good luck in your wealth creation endeavor and may your marriage be a strong and happy one.
A successful young businessman, Nathan Skidmore has dedicated his life to helping others, providing entrepreneurial advice and wealth creation tips to those who need it.