By Matthew Goldberg
For most couples, the engagement ring is the binding object.
But for Catharine Driever and Jason Tondreau, a larger and much more expensive joint purchase preceded the ring.
About five months before their September 2017 engagement, the couple bought a condominium in New Jersey.
“It’s definitely a huge decision,” Driever says. “We had talked about marriage before we bought our (condominium) together, which is huge. You have to be on the same page about everything before you make a financial decision like this.”
The couple, who started dating in September 2015, needed to assess their joint finances and have deeper financial conversations before and during the real estate purchase process.
Driever, 32, and Tondreau, 34, are getting married in September. The property purchase accelerated the process of becoming one financially.
“I think a lot of people can get hung up on a ring and a wedding,” Driever says. “But you really have to think about your life long-term. … It’s very important to set your financial goals.”
Before committing to purchasing the property, Driever and Tondreau had a conversation about many of the following banking topics for engaged couples.
1. Should you get a joint checking account or keep accounts separate?
Driever and Tondreau opened a joint account a few weeks before their mortgage closing in April 2017.
Opening a joint checking account is a great way to test the waters of combined banking without jumping in the deep end. It may be a great way to separate money from individual accounts, pay for wedding items or deposit engagement party or wedding gifts.
Of course, the joint checking account is also essential if you’re going to pay all your housing and utility bills from an account that you have together.
“Sometimes one person will handle the utility bill or the rent, and then the other person will Venmo them half the money, and it just gets very confusing,” says Liz Landau, a financial planner in White Plains, New York. “That’s why I like the joint account. I think people should know what their fixed monthly expenses are and then figure out how to contribute accordingly because it’s just easier to track. You can’t manage what you don’t monitor.”
A lot of couples will decide to keep at least one account separate and then maintain a joint checking and hopefully a joint savings account as well. Personal preference and the conversation you have with your significant other will best determine what option is right for you.
2. When should you share the details of your finances?
The best time to start having in-depth financial conversations with your significant other is once you know you’re serious as a couple, preferably well in advance of the engagement.
“This is one to definitely get out in the open and discuss early and often,” says Greg McBride, CFA, Bankrate’s chief financial analyst. “Don’t sweep it under the carpet. It will only cause problems later.”
McBride says these conversations will help you determine whether you are savers or spenders, and other financial tendencies. You should also try and ask each other questions about the future. If you are planning on having kids, will one person be cutting back on their work schedule? Will that impact the family’s budget?
“Being very open and upfront about the financials is kind of something that most people keep on the back burner till the last minute,” Tondreau says.
Debt is also a subject that needs to be addressed early on, and your credit score is going to be a key component of your financial picture as well.
It’s also good to crunch the numbers to see what kind of mortgage you’ll be able to afford. For example, Bankrate’s Debt-To-Income-Ratio Calculator can help you determine where you stand. (Generally, you’ll want to keep it below 36 percent.)
You will also need to decide whether you will remain separate on credit cards, add your spouse as an authorized user to an existing credit card or apply for a new credit card with one of you listed as an authorized user.
3. How will you handle paying bills and saving?
You will need to talk about how bills will get paid. One person might be responsible for all bills, or duties may be split. The decision to pay certain things, or everything, out of the joint account should also be discussed.
Also, the couple need to determine whether employment direct deposits will be put into the joint account or transferred over as needed.
Landau, whose practice is geared toward millennials, young families and individuals, recommends that joint expenses are paid with a joint account, even if the couple is going to lead separate financial lives.
“Look, I don’t like to wreak havoc in people’s systems of financial management,” Landau says. “But I do think that when the right hand doesn’t know what the left hand’s doing, that there is more opportunity for either spending creep or going over your budget because it’s not so clear what each partner is doing as far as spending.”
Driever says an automatic, recurring transfer into their joint account helped them properly save and move funds into their bill-paying account.
“We contribute extra to it each month, so it’s growing in addition to paying our monthly expenses,” Driever says. “… We feel like we’re building something together.”
4. How will beneficiaries be treated after the wedding?
Financial conversations aren’t just about bank accounts and bills. Risk management is also an area that Landau says needs to be addressed. Beneficiaries on accounts may need to be updated or they might stay the same. Some account types to review your beneficiaries on are your 401(k), IRA and life insurance policies. (Don’t forget about your life insurance policy at work, if you have one.)
“If you have different things together, you need to address that as far as the estate planning piece as well,” Landau says. “And it can be super simple; it doesn’t need to be complicated or costly. It just needs to be addressed.”
In addition to beneficiaries, a conversation about a prenuptial agreement might also be a relevant topic as well.