How To Talk About Money

Many young married couples find it easier to talk about sex than money.

That may be because money is The Last Great Taboo or because many young couples simply don’t know what’s important when discussing household finances. In any case, talking about the household budget is about as romantic as taking out the trash.

“It’s important for a newly married couple to set aside time to talk about money each month,” says Mark Stempel, a certified financial planner and principal at Mark Stempel & Associates in Tucson, Ariz. “Ideally, they should meet with an adviser before they’re married and develop a statement of net worth so each partner knows what they’re getting into. They need to talk about what their expenses will be and how to handle them.”

Failure to discuss financial matters can be catastrophic. Many experts say money problems – not bedroom games – are the major cause of divorce.

Keep initial discussions simple and plan to have them once a month. Details can be added as you learn more and your net worth grows to include a house, retirement funds, stock, savings, house medical insurance – all that stuff – and, who knows, maybe kids.

At first, take about 30 minutes to review last month’s spending. Make adjustments as needed to keep expenses in line with income and look ahead to next month. Don’t let this degenerate into a bean-counting session where one spouse accuses the other of spending frivolously. That can be avoided by setting aside a small amount for each spouse to spend on personal interests.

The monthly discussions will assure that both partners are informed, in the loop on future expenditures and there are no secrets. This avoids blame and shame. Think of the sessions as taking your bank account’s pulse: Did you meet your goals? If not, what can be done better? What changes need to be made? Are there problems ahead? If so, what can be done to avoid them, or at least limit the financial crunch?

Budget each month for fixed expenses such as rent or mortgage, utilities, food, transportation, insurance and student loans.

Be sure to set up a savings plan. Take money off the top each month – think about setting up direct deposit from your paycheck. If you don’t pay yourself first, your plan will fail because expenses have a way of increasing to meet available income. The flip side: Set aside a little mad money each month for goofy good fun.

Outside interests such as hobbies, ski trips or photography don’t evaporate after saying “I do” and setting up his, hers and joint checking accounts is a good way to keep the spending about even and to avoid squabbles. Separate accounts allow each partner to spend freely up to a pre-determined limit on books, CDs, baseball games – whatever is important to that person. Shop around for a bank because you don’t want to get clipped for monthly service charges on three accounts.

Secrecy, or what can be mistaken for secrecy, can kill a marriage – and it need not spring from a grand conspiracy to spend on the sly. Many couples now get married in their late 20s or early 30s and have established a history of handling their money independently. That may be hard to break after marriage. Separate checking accounts allow each spouse to maintain financial independence as a couple while promoting full disclosure. Each spouse should tell the other how, in general, personal funds are spent. Don’t make the discussion an inquisition. The goal: to avoid arguments about a pricey lamp or an out-of-town trip with the guys to follow the team. Remember that separate accounts without disclosure defeat the purpose of independent expenditures.

After a few monthly discussions, you and your spouse will better understand each other’s financial style: spender or saver and how to accommodate it within the marriage.

Beyond that, one spouse may have been raised in a traditional family where the father made the financial decisions and handled the money while the other spouse may have grown up in a household where money matters were openly discussed and decisions were made jointly by both parents.

The newly married couple should quickly decide how financial decisions will be made and who will handle the duller-than-refried-dirt work of paying the bills and balancing the checkbook.

You can still make cow eyes at each other while planning for the future. Set up equal contributions to separate Roth IRAs as quickly as possible. If there’s money left over, think about setting up a 529 Plan for your children’s college education, but don’t do this at the expense of your own retirement.

Use credit wisely. Remember that credit is short-term debt – not free money – and the 20% interest rate (or more) on an unpaid balance can devour your budget. Keep in mind that constantly running an unpaid balance on a credit card will hammer your credit score. This could make it more difficult and expensive to secure a home loan in the future.

Finally, make and exchange lists of long-term goals. It’s always nice to dream – and it’s never too early to start planning for the future, especially buying a house.

The wise use of money can be a tool to build a lasting marriage. Get it wrong and you’re headed for trouble, no matter how much you love each other. Monthly discussions about your finances can help you avoid what’s now unthinkable – divorce.

“Keep all discussions about money simple and direct,” says Stempel.

Many brokerage firms have Web sites offering financial planning tips, including T. Rowe Price (TROW), Merrill Lynch (MER), Goldman Sachs (GS) and Morgan Stanley (MS). Major banks also offer solid information, including JPMorgan Chase (JPM), Bank of America (BAC), Citigroup (C) and Wells Fargo (WFC).