If your to-do list before tying the knot consists mainly of choosing a pretty wedding dress or having a bachelor party your friends will never recover from, you're probably not ready to get married yet. While you might not be getting married "for the money", when two become one your finances merge.
And before that happens, there are some very serious financial discussions you will need to have as a couple to make sure both of you are on the same page before you become husband and wife. Here are four things you simply must do before you ROM.
1. Decide what big ticket items you want to save for and how much
Big ticket purchases such as a home and a car are no longer purchases you will make on your own moving forward. While you might have dreamt of buying that chick magnet two seater, unless you're wealthy enough to each get your own vehicle, you can be sure your significant other is going to want a say.
Discuss which costly items you intend to purchase, and then work out the sum you're willing to pay for each. There's no point in saving up for your dream home if one of you is thinking of a luxurious condo in the heart of the city while the is aiming for the cheapest HDB flat you can qualify for. When you can put an approximate figure to the purchase, it will be a lot easier to determine how much each of you needs to save and when you can realistically expect to achieve your goals.
Having this discussion before you tie the knot will also help you make sure you're on the same page. If one of you wants to buy an expensive continental car while the other is happy taking the MRT, you'll need to decide just how much both of you are willing to pay and come to a compromise.
2. Have a realistic conversation about the budget for your wedding and honeymoon
If every conversation you've had about your wedding and honeymoon has contained the word "dream" and revolved around how wonderful it's going to be, both of you need a reality check before you do something stupid like this couple who spent $110,000 on their wedding, and then regretted it later.
Yes, it's easy to get carried away when you're fantasising about a grand European tour or a wedding featuring actual white horses. But many couples make the mistake of not budgeting before the fact. Instead, they spend as and when the fancy strikes them, only to be confronted with horrible amounts of debt later. Don't let that happen to you-do the math before you spend any money. Decide how much you're willing to spend and then do everything in your power to stay within the budget.
This could mean you end up cutting a certain number of tables from your wedding guest list or realising that you can't stay at five star hotels during your honeymoon. But the great thing about planning in advance is that you can make cuts in areas that don't matter as much to you-for instance, if you really want to go to Europe for your honeymoon, you can, but you might have to stay in budget hotels.
3. Work out your new budget as a couple and build your emergency fund pronto
As a single person, you probably had a good idea of how much you needed to survive each month. Getting married and merging your finances, however, can be very disorienting. You now need to learn how much it costs to run your own household. You might have survived on a diet of cereal and McDonald's before, but now that there are two of you, your food budget is bound to evolve. If you're moving in together for the first time, you'll also have to get used to consolidating your bills.
This means that your previous monthly budget is going to become obsolete quite quickly. The emergency fund you built up before is going to have to be increased to reflect your changing financial situation and monthly expenses.
These changes are best dealt with even before, or at least soon after you move in together. Work out how much your new lives cost, and then construct a new monthly budget together. You'll then need to get to work putting together your emergency fund. If both of you have a good amount of savings, you simply have to decide how much each person contributes to this new emergency fund.
4. Full disclosure of your financial situation
We understand that talking about your finances, even as a couple, can be a little tricky. Probe too much and your spouse-to-be might have run a mile in fear of the gold digger he or she got duped into agreeing to marry. Yes, we get it. But now that you're about to tie the knot for real, it is important there be no secrets when it comes to money.
As awkward as it might be, you need to sit down and fully disclose your financial situation to your partner, and make sure he or she does the same. Full disclosure means you come clean about any debts you might still be carrying or any serious damage your credit score might have sustained in the past. As you'll probably be applying for a home loan together, it is imperative that you disclose anything that could affect your loan application.
As you'll probably be merging some part of your finances, it's also important to receive an accurate picture of what your monthly liabilities will be like. If a chunk of your income is going to go into repaying the debts of your spouse, you can be sure you'll want to know about it before you walk down the aisle.
This article first appeared in MoneySmart at http://blog.moneysmart.sg/family/4-big-financial-responsibilities-every-couple-must-fulfil-before-getting-married/
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