Ahhh marriage. It's wedding season again and while many young people are actually delaying marriage into their late 20s and early 30s, there doesn't seem to be much improvement along the lines of being truly responsible with finances. I was part of a focus group with CNN Money a few years ago and was asked about some of the issues that Millennials face with money, in particularly with money and relationships.
You can read more about the piece by CLICKING HERE, but below you'll find the 5 most common issues with marriage and money below, and how to avoid these issues into the future. Happy Marriage!
1. Don't pay a TON of money for an engagement ring
While you really want to impress your fiance with a ton of expensive diamonds, this is one of the biggest wreckers of marriages from the get-go. A recent student of more than 3,000 married persons in the US showed that the more money spent on an engagement ring, the shorter their marriage is likely to be. It's true! Shelling out that much cash shows not much maturity when it comes to spending in the long-run. According to The Knot, the average engagement ring cost over $6,000! Both parties need to be on the same page when it comes to rings, and it's important to find one that won't strain your finances or send you into debt as you're first starting out. Believe me, it is possible.
2. Also, Don't Pay too much for a wedding
Equally important, you should not spend a load of money on a wedding. The average wedding cost about $35,329 in 2016. That's nearly enough to pay of the average student loan debt all instead going to pay for one big party. If you're shelling out this much cash for a wedding, there's not much hope for the down payment on a house anytime soon either. In fact, couples who have weddings with a price tag of $20,000 or more are 3.5 times more likely to divorce than couples who spend $5,000 to $10,000. How can you save money? Considering getting married on a Friday or Sunday or even during the week when prices are lower, rent a wedding dress and pick a location in nature that's beautiful without the need for a ton of decorations. This is about starting your life together in a way that's lovely and fun, not trying to out-do your friends with a wedding that is "Pinterest-perfect."
3. Be sure to talk about finances BEFORE you get married
Studies show spenders and savers tend to marry each other because each is unhappy about their own relationship with money and they tend to be attracted to someone with the opposite attitude. talk openly about money now before you get married, things are only going to get worse as your financial obligations increase with the house, kids, and thousands of financial decisions that come up in your lives together.You're headed for trouble if you don't have this one down ASAP. Not surprisingly, this leads to a lot of fights about finances: the greater the difference between the spending and saving habits of spouses, the more likely it was that money arguments would arise and the lower rates of marital satisfaction couples reported. That doesn't mean you need to walk away from them though! You can make a plan to deal with your differences, or work with a financial adviser to help mediate if you think things will be rough. Seriously though, if you are unable to
4. Don't ignore the discussion of student loans
This is a reality of most Millennial couples: paying for student loans. In 2016, the average college graduate left with $37,172 in student loan debt with delinquency rates now above 11%. These are a HUGE burden and will not go away, even in bankruptcy. Your partner needs to know about your student loan debt and how huge it is when you get married. Not only do you need to know whether your partner has student loans, but you also need to be aware that marriage could affect income-contingent loan repayment. If you file your taxes as married filing jointly and your household income goes up, then your income-contingent student loan payment could rise dramatically, or you might become financially disqualified from being able to make income-contingent payments. Addressing who has to pay what and when is an important step to figuring out the budget of the rest of the household going forward.
5. Understand how marriage effects your taxes!
Many couples don't think or discuss this very important point. While being in a relationship allows you to be an official couple on social media, marriage makes you an official couple in the eyes of the law. While you can file your taxes as married filing separately if you don't want to submit a joint tax return, there are some benefits that will be affected by your marriage. For instance, you could lose your Earned Income Tax Credit, among other valuable credits, if you submit a return as married filing separately. Additionally, because you have 2 incomes, your marriage could also push you into a higher tax bracket, the two of you could pay more in taxes. Additionally, if your combined incomes are too high, you could lose the ability to contribute to tax-advantaged individual retirement accounts, and you could face other limits on deductions for those who make more money.
For fun, you can check out CNN Money's interview with actual millennials about relationships...and yours truly is one of their interviewees :)