Remarriage: Merging Assets…Again: Tips for Entering Into a Financial Merger
Once you have made the decision to be remarried, there are so many steps in the process. Where will the wedding be? What will you wear? The task list seems endless. Often, the less fun tasks, such as figuring out your financial game plan, falls toward the end of the list. According to many experts, discussing your financial portfolios should be the first order of business.
The Glazer of Glazer Financial Advisors, a San Diego, Calif.,-based financial planning firm, says couples should identify and discuss their money personalities before they begin planning a wedding. Glazer has specialized in financial planning for couples for more than 20 years and has developed a money personality quiz on her Web site, which gives couples a comprehensive understanding of each person’s money management style.
“If you have two different styles and different backgrounds, it can be a nightmare,” she said. “I have seen the underlying cause of divorce being not necessarily a lack of money, but couples struggling with their different ways of managing money. What proper money management means to people can be very different.”
“After couples have identified their money personalities, it is then time to establish a financial plan, she said. The couple should bring their most recent copy of their credit report to the table. As much as you love each other, people hide things,” said Glazer. “I once had a client who married someone who had a huge IRS problem and she had no idea. They were able to work out a payment plan, but it was rough for a while and they barely made it.”
Going through each person’s credit report will give the couple an idea of what they are facing financially. It also gives couples an opportunity to put together a plan to clean up any indescrepencies. Glazer recommends that each person try to clean up their own credit problems before opening joint accounts. “I prefer this method so that bad debt doesn’t spill over into the other person’s financial pictures,” she said. It’s best to keep things separate until any credit messes are cleaned up.
Glazer advises her clients to maintain separate bank and credit accounts and then have one account for household bills. “I always say it’s best to keep something separate,” she said. “My plan of choice when it comes to accounts is that you have yours, I have mine and we have ours, for a number of reasons.”
Don Taylor, Ph.D., CFA, CFP, of bankrate.com, agrees. He advises couples not to confuse the issue of bank accounts credit accounts. “Avoiding bounced checks and insufficient funds is important, but won’t have a big impact on your ability to get credit. That comes from managing your credit and paying as agreed on credit accounts,” he says. “You’ll each have your own credit report, but joint credit obligations show up on both credit reports. That’s where things tend to go bad if a couple splits up.”
Melanie Johnson, of Athena Financial Group in Austin, Texas, advises that when it comes to issues of credit, couples would do well to keep credit obligations in mind whenever they opening a new account. “Most couples can buy a car, open credit card accounts and many other things in one spouse’s name. Just remember the creditor will come after that person and that person only in the event the marriage does not work out, regardless of what the decree state,” she said.
Another consideration for couples remarrying is the issue of child support or alimony. For a new couple just starting their life together, these kinds of obligations can leave behind feelings of resentment in the new spouse. Glazer says couples should begin by identifying prior obligations to ex-spouses and children. “Then, create a spending plan for the family that considers those obligations. You have to know how is coming in and how much is going out,” she said. “Then, keep those obligations separate from everything else.”
In this case, Johnson says knowledge is power. It is so helpful in structuring a future plan.Since every state has its own family code, knowing what is his, mine, and ours is vital. “Then financial advisor can create a plan for future investment and other important decisions,” she said. “In my case there were three children in my first marriage and college expenses were a big hurdle for my new husband and I.”
Despite all of the potential financial pitfalls, Glazer says a number of problems can be avoided by clear communication and financial planning assistance. “Knowing what each other’s attitudes towards money are is critical to fostering good communication,” she said. “A lot of couples simply don’t talk about money in a very effective way. However, if you are both open and establish clear goals and plans and stick with them, money will be the least of your problems.”
FIVE FINANCIAL TIPS FOR REMARRIAGE
1. Be up front about your credit history.
Do not allow your partner to be blindsided by any problems on your credit report. After all, your credit issues will now affect them as well and it is only fair to let them know ahead of time what they are facing.
2. Refrain from opening many accounts in your first year of remarriage.
Take the time to feel each other out and get an idea of the other person’s money management style. Get a grip on your new household bills and how your combined income works for your lifestyle before you open any new credit accounts.
3. Keep past obligations separate.
If you are paying child and/or spousal support, do not pay for it out of a joint account. Keep that obligation separate. The last thing you want is for your new spouse to have any resentful feelings about contributing to pre-existing support obligations.
4. Make financial decisions together.
Come up with a spending plan and stick to it. Many couples make a pact to discuss large purchases together ahead of time. Try not to make extravagant purchases without running it by your new spouse first.
5. See a financial counselor.
Not only can a financial advisor help you learn good budgetary practices, but they can also help you put together a long-term financial plan that will see you through your retirement years and beyond. It is important to be prepared for unforeseen events as well as gain a good understanding of savings and investments. A financial advisor can help you to incorporate good practices into your current financial routine.
About the author: Lynda Moultry is a freelance journalist in Tallahassee, Fl. She has been a writer, editor and graphic designer for more than a decade and is the Specialty Products Editor for the Tallahassee Democrat, a daily newspaper in Florida’s capital city. Lynda is also the author of “101 Plus-Size Women’s Clothing Tips” and has written for a number of different national publications and Web sites.