What is Premarital Financial Planning?
Before taking the leap into marriage, it is of the utmost importance to discuss what it will look like when the time comes for spouses to combine their assets. Premarital financial planning establishes an organized structure for how finances and/or debt will be tended to post-marriage. This includes student loan debt, personal monthly income, savings, credit card balances, etc.
Most will understand what you are talking about if you were to say, “my fiancée and I are going to sit down and have a premarital agreement done before the wedding.” That is a straightforward idea that most will relate to. Now, say to the same people, “my fiancée and I are entering into mediation to complete our premarital financial planning,” and you will likely gain a lot of questions. First, the two ideas are similar, like fraternal twins. The differences lie in the fact that one results in a premarital agreement (or a prenup) and one may not.
Understanding Premarital Mediation
Let’s take this conversation back a couple of steps. I think it is important to understand the difference between what you see in the movies and what entering a premarital mediation is (or can be). In the movies, it typically goes something like… it’s the day of the wedding and the rich partner is forced to make their soon-to-be spouse sign a prenup because the parents of the rich spouse are forcing them to do so. Neither party really understands much about the process and isn’t doing it because they sat down together, brought their financial lives to the table, and had a hard discussion (or discussions) about where they are, where they have been, and where they want to go in life.
Now, let’s look at what we are discussing here. With premarital financial planning, you and your fiancée are both asked to complete some paperwork to give your mediator a snapshot of your current finances. Then, the two of you come to the table and have an open conversation about what that looks like. Questions that will be discussed, include, but are not limited to the following:
1. What is your current net worth?
You need to sit down and be honest about your current debt and calculate your assets to understand where you will stand financially together.
2. What is your credit score?
You should both run your credit report and credit score and share that with your partner. Your credit score can impact your ability to purchase and get credit down the road.
3. How much do you both make?
Knowing how much your partner makes will assist you both in creating budgets and determining your financial goals.
4. What are your spending habits like?
Are you a frugal penny-pincher, an excessive spender, or somewhere in between? When you combine two people’s spending habits they can clash so it’s helpful to know upfront how your partner spends.
5. How was money discussed when you were growing up?
How we were raised and how our parents felt and discussed money can impact our relationships going forward. It is important to look at each of your upbringings and decide what you want to keep and what you would like to toss out and redesign based on you and your partner’s core values.
Avoid Risks with Premarital Mediation
Whether you are entering into the process to have a prenup prepared, or instead, you just want to start the marriage off on the right financial footing – the process will look the same. Having a prenup prepared for your upcoming nuptials need not be an emotional rollercoaster like it is in the movies. And having these financial discussions are important even if you don’t plan to have a prenup prepared. You may be young adults just starting out and have no financial worth to speak of, and that is ok too! This process is not only for the wealthy who have assets they want to protect (again – think movies), but also for those just starting out in life! Going through this process together helps to create a solid financial foundation that will stay with you throughout your marriage. It is truly the best gift you will ever give to your new spouse.
Marriage Longevity through Premarital Financial Planning
Imagine the harmony that develops when starting out with smart, defined choices in your household. You’ve seen those couples, the ones who radiate happiness. Not that I am promising to deliver happiness to your doorstep, but you have seen it yourself when a couple is in harmony, or you’ve envied those parents who don’t seem stressed when directing their children’s activities. It can happen to you too.
At West Coast Family Mediation Center, we have years of experience guiding families in all stages of their relationship, through the necessary communication and process of outlining everyone’s needs in a family. We want to help you begin this process early and help you have a successful marriage. Schedule a free consultation today!