Big Money Blunders to Avoid: Engaged Couples

Here's a piece from the Motley Fool that lists big money blunders to avoid. There are four of them in all (engaged couples, saving for college, buying a home, and getting divorced) and I'm going to cover them one at a time throughout this week so I have a chance to comment on each one.

Today we'll be looking at what the Fool thinks is the biggest mistake people make when they get married:

They don't talk about money. It is not a romantic subject, but we must share our life goals with the person that we are marrying. If we haven't done it before marriage, we had better be doing it during marriage because [those goals] do evolve and change.

I think this is dead on. It should be talked about, though most people don't do so -- they are too caught up in the "romance" of the event. However, not talking about it now could lead to big problems in the future.

I must admit that my wife and I didn't talk much about finances prior to getting married. Thank God, we're very compatible in that area, so money has never been a point of conflict for us. But we were taking a risk by not talking about it in detail before we tied the knot.

I've written a lot on money and marriage and if you're interested in exploring the issue farther, check out these posts:

• Good Money Skills More Important than Sex
• Wedded, Wealthy, and Wise
• Marrying for Money Actually Works
• Impact of Marriage on Net Worth
• She's a Saver, He's a Spender
• MND: Both Spouses Must be Frugal

Comments

[Amanda]

I agree 100%. I am getting married in June and my fiance and I have had endless money discussions since even before we were officially engaged almost a year ago. I recognized from the get-go that we had different saving habits (neither of us are "spenders", but I am a much more agressive "saver" than he is) and our different backgrounds (my fiance has some significant student loans). Approaching these differences - and how we plan to deal with them - has been essential to us both. We've realized 1) that we are able to communicate on a rational level and 2) that talking about money with your partner can actually be romantic (I mean, its really about planning for your future, isn't it?)!

[allegra]

hi
what is the best way to buy a house while you're still engaged and prior to a wedding?
First: have a joint checking?
second: should i put both incomes in pre-qualified loan application to get an accurate amount of loan?
I am afraid that the chance of approval decreased if the couples aren't married yet. Any advice?

[FMF]

Allegra --

I'll post your question in a week or so. Stay tuned.

[Matt]

Allegra,

My wife and I were still engaged when we bought our first house. We were shopping 5 years ago, so the lending climate was significantly different than today.

We got the loan on my salary only. My fiancee was finishing college, but had a lot more money in the bank, so we got most of the down payment from her. We didn't have joint accounts (at the time), which wasn't a big deal. We did have to submit two sets of bank statements, etc. Our bank didn't seem to have any misgivings about lending to an unmarried couple.

Definitely decide how much you want to spend BEFORE getting a pre-approval, and I'd recommend using only one income. The lender will likely quote a very large sum, and when a bank tells you they'll let you borrow that much, people's brains immediately start dreaming of what a great house they can get with all that money. This is dangerous. This is how people get into mortgage trouble. I keep hearing lenders are more risk-averse now (as they should be), but I know the first time we sat down for a pre-approval my head was spinning with the maximum loan they quoted me, which was something like 4x my annual salary. By using only one income, if you do give in to your heads and take the biggest mortgage you can, at least you'll actually be paying for it with two salaries. Oh yeah, that amount you two decided you wanted to spend? Stick to it.

Regarding FMF's advice in a previous post about not going into debt with someone unless you're married, I definitely see his point, but it doesn't necessarily apply in all situations. My wife and I had already been together 5+ years at the time, and lived together for most of our college careers. We both knew exactly what we were getting into, and couldn't wait to get started.

Only you can make the decision. I'm just providing one success story.