For New Brides
After saying 'I do,' many new brides bask in the glow of newlywed bliss. The last thing on their mind is the fact that 9 out of 10 of them will have sole responsibility for their finances within their lifetime, between divorce and widowhood. And yet 79 percent of women have not planned for this. In the first year after a divorce, a woman's standard of living drops an average of 73 percent. To avoid becoming destitute, put a financial plan in place now and avoid these five money mistakes new brides make.
It's not fun to think about being alone and financially adrift, especially right after you've tied the knot. But if you don't think about it – and make plans for the possibility – you could end up being one of the 7 out of 10 women who lives in poverty. Here are five common statements I hear from new brides, and solid advice I offer them.
1. It will all work out—we're in love!
Just because you have strong and tender feelings about each other doesn't mean that the two of you also share ideas about handling money matters. Do you want to maintain separate checking accounts, or will you split all the bills 50-50 and pool your money in a joint account? It doesn't really matter what finance approach you take. More important is talking about and mutually agreeing on how you will handle your money together.
2. Let him worry about the finances.
You are an adult and an equal partner in this relationship. Letting one spouse manage all the money is a recipe for disaster. Sit down with your spouse and make a budget. Agree that you will share the responsibility for managing household finances together. Delegating this task to your spouse could leave you financially insecure both in the marriage and if you divorce.
3. For better or for worse.
What if your spouse has lousy spending habits? Here's how to find out: Ask to see his FICO score. FICO scores offer a quick and accurate snapshot of how you've each handled your money, including student loans, car payments, credit cards, etc. FICO scores also reveal who has more financial acumen and if there are areas that the two of you need to discuss. How your man handles his finances can tell you a lot about his values, character, and future money behavior.
4. We're in this together, so everything should be in joint names.
Did you know that joint accounts impact your individual FICO score? I always advise wives to keep credit in their own names so that their FICO scores remain separate after marriage, if a divorce or death occurs.
5. We'll retire on his 401k and pension.
It would be nice if that were a sure thing. But the fact is, you just can't count on your husband's retirement. Agree to allot a portion of the family's income to a spousal retirement account if and when you start a family. You are still eligible for an IRA spousal account – a tax-deductible or tax-deferred retirement account in your own name – whether you work or not. Talk to a financial expert for more details.
All women, married or not, need to be financially savvy. Develop smart habits around money and investing. Maybe some of your money smarts will even rub off on him!
More financial tips for brides and brides-to-be
For more money smarts, visit www.DeborahOwens.com or check out Deborah Owens' book A Purse of Your Own: An Easy Guide to Financial Security (Simon & Schuster, 2010).