Yahoo Finance 10 Ways to Achieve Marital and Financial Bliss
Insert chirping-bird and flute sounds here: Valentine's Day is upon us, a time when the chocolates fly, the mushy poems lie, and investors in love decide how much they'll buy. From each other, that is.
As a force of irrational exuberance even former Fed Chairman Alan Greenspan cannot explain, love is indeed too often blind when it comes time to unite portfolios and pool finances. Think of it like an investor who pours money into a pet stock without taking time to check the numbers. And here's one statistic that cannot be ignored when it comes to couples and their money: Half of marriages still end in divorce.
"Financial issues consistently are among the top reasons why marriages fail; complex emotions are tied to money," says Stephen T. Diltz, senior financial advisor and senior vice president of Diltz Schroeder & Associates of Merrill Lynch, located in the Chicago area. "Whatever a couple's biases, hopes and expectations are about money, they should commit to the responsibility of open and regular dialogue at the time they combine their finances."
So between the investment you make in your partner and the cold, hard truth that love is an even-money crapshoot, what can happy couples do to grow an investment future together while protecting themselves -- and each other -- from unforeseen consequences? Financial experts offer 10 tips to make the most of marrying investments and finances.
Newlyweds: It's time to get fresh. No matter where you and your better half stood financially before you stood at the altar, you have a rare opportunity to chart an entirely new course. "Starting fresh is always a good idea," says Monica Bucciarelli, a member of the AICPA's National CPA Financial Literacy Commission. "Consider new bank and investment accounts and new wills, all geared toward the realities of the new relationship and situation. Starting fresh usually makes both parties feel invested and in control as opposed to just being inserted into old or existing ways of doing things."
An advisor swan song: Breaking up is hard to do. Marrying your partner doesn't mean a union of financial advisors; in fact, that's a tough feat to pull off. "If assets are combined, having two financial advisors could make it difficult for them to do their jobs and for the couple to receive value," Diltz says. What to do, then? "The couple should consider having a primary financial advisor positioned as a holistic planner," he says. That could be one of the two -- or someone entirely new -- who helps the couple "understand their combined asset allocation, risk tolerance and asset location," he says.
Tricks of taking love to the bank. If you and your honey start by keeping separate bank accounts, be careful. "It seemingly encourages the attitude that my money is mine and mine alone," says Min Zhang, CEO of Totum Wealth in Los Angeles. "However, if one has automated payments and credit cards, it can be difficult to reorganize this, not to mention ordering new checks." A good mutual target, Zhang suggests, is to start a new joint account that allows for spending transparency and a gentle path to financial union while preserving some autonomy.
Your better half may have a worse half. In today's cash-conscious climate, "You never told me about that old boyfriend" might as well be replaced by "You never told me about that car loan default." "Recognize that when you marry, your credit score will be impacted by each other's history," says Bellaria Jimenez, managing partner of MetLife Premier Client Group, based in Cranford, New Jersey. "This could negatively affect the purchase of a new home as an example." You may also discover that your partner has a spotty or even nonexistent investment history, another factor in creating financial imbalance.
Speak now or forever hold your pieces. If you thought picking out china patterns was tough, wait until it comes time to align your investment priorities. "Complicated issues are important to discuss," says Larry Athan, partner in the Trusts & Estates Group of Posternak Blankstein & Lund, a Boston-based law firm. "Couples often have different philosophies regarding spending, saving, investing and incurring debt -- and this can cause major long-lasting divisions between couples if not discussed and resolved early on."
Re-marrieds with children: Don't kid around. Previously married newlyweds with children shouldn't count on financial bliss of Brady Bunch proportions, says Keith Baker, a professor of mortgage banking who teaches personal finance courses at North Lake College in Irving, Texas. "You're now combining two families and need to think about keeping your assets separate," he says. After all, it's for the kids: "to maintain your ability to transfer assets to your children, and at the same time, your new spouse's assets can go to his or her children," he says.
One time to say yup to the prenup. This issue isn't so clear-cut as when a princess marries a pauper. (After all, the pauper may want to hang on to his beer can collection at all costs.) "One common practice I usually recommend to clients in a family business is to keep the business assets separate, especially when other family members are involved in that business," says Chuck Mattiucci, a financial advisor at Fragasso Financial Advisors in Pittsburgh. "In the unfortunate event the couple should divorce, the business assets won't be affected, therefore insulating the other family members and stakeholders."
True love has its limits. Especially if you want to set common investment goals, you have to share common priorities that put the curb on, say, retail therapy. "Set a threshold for purchases that needs to be discussed as a couple," says Mikel Van Cleve, director of personal finance advice with USAA. "For example, if a purchase exceeds $100, you must agree as a couple before the purchase is made." (Whether you want to make exceptions for stock purchases is your call.)
Spenders and savers need mediators. "The most common problem I see from couples is that one wants to save for the future and one wants to spend everything now," says David Henderson, a financial planner with Client One Securities, located in the Kansas City area. "This can be a real challenge and can cause major problems long-term if it isn't resolved. Sometimes going to a counselor is a good way to work through these issues."
Make goals the goal. Before landing that catch, you had the objective of meeting Mr. or Ms. Right. With that off your bucket list, now's the time to take that first shared leap of faith as you invest your way to happiness. "Goals are so simple but so powerful," says Laura Catalano, manager of E-Trade Financial's Chicago office. "Setting and agreeing on financial goals will allow couples to be on the same page, alleviate future money concerns and ultimately support a prosperous marriage."
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