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Hey, newlyweds — time to talk about money

For many young couples, talking about money is more difficult than discussing sex. Little surprise, given that experts say financial problems — not bedroom gymnastics — are the major cause of divorce.
/ Source: Forbes

For many young couples, talking about money is more difficult than discussing sex.

Little surprise, given that experts say financial problems — not bedroom gymnastics — are the major cause of divorce.

"Many young couples are so busy being romantic that they forget to talk about anything practical like personal finance," says Sheryl Garrett, a certified financial planner and author of "Getting Married. "Money isn't a romantic subject, but marriage should be seen as entering into a financial as well as a romantic partnership."

Garrett suggests a monthly meeting to discuss the basics of personal finance. It doesn't have to be elaborate and can generally be wrapped up in about half an hour.

The couple should review last month's expenditures, make adjustments as needed for the current month and look ahead to next month. This isn't a full-bore, bean-counting session, but an effort to keep basic expenses in line with income.

"This way, both spouses are kept in the loop, and there are no secrets," Garrett says. "There's no blame, no shame. It's taking your financial pulse: Did we meet our goals? What can be done better? You don't want to beat each other up — you want to make the finances work better."

Money should be budgeted each month for fixed expenses such as rent or mortgage, utilities, food, insurance and transportation.

If both spouses work, a good starting point is a 50-50 split of all household expenses. However, if one spouse's income is significantly higher, consider prorating the monthly contribution based on a percentage of the income gap.

Many couples set up his, hers and joint checking accounts. The joint account is used to pay household expenses, and the personal accounts are used for trips to the spa, golf course or other special interests, such as books and CDs.

Hobbies don't vanish after saying "I do," and the personal accounts will allow both spouses to spend on their interests as they see fit within a predetermined limit.

"Secrecy can be a killer," Garrett says. "Many couples get married in their late 20s or even early 30s and are used to being independent. Having separate accounts allows the couple to maintain some financial independence while being completely open about it."

Establish a savings account, make regular contributions and don't forget to set aside a little mad money for a night or two out. (See: "Getting The Most From Savings Accounts.")

Understanding each other's financial style will avoid squabbles in the future. One spouse may have been raised in a traditional family where Dad made all the financial decisions and handled the money. The other spouse may have been raised in a household where major financial matters were freely discussed and decisions represented the views of both parents. The newly married couple must decide how financial decisions will be made and who will handle the basics, such as paying the monthly bills and balancing the checkbook.

"For most of us, it took years to develop bad financial habits, and it will take at least the same amount of time to create the good habits we want," Garrett says. "People spend more time planning their annual vacation than discussing their personal finances. That's not healthy, especially for newlyweds."

It's never too early to start planning for retirement and the children's education. Garrett urges newlyweds to begin equal contributions to separate Roth IRAs as soon as possible. (See: "The Too Good To Be True Tax Break" and "Seven Deadly Sins Of Retirement Planning.") If there's money left over, consider setting up a 529 Plan for your children's college education. (See: "Saving For Retirement vs. The Kid's College.")

Be careful with credit. Banks, department stores and gasoline companies are likely to send you "preapproved" applications. If you haven't already established credit, select one major bank card and one oil company credit card (a good way to get started and build a credit rating). Cut up the rest. You don't need more than two major credit cards, and a wallet stuffed with plastic may tempt overspending.

Pay the balance due in full each month. Remember: A credit card is short-term debt — not free money — and the interest rate can punch a hole in your budget. (See: "Establishing Credit," "Using Credit Wisely" and "Deciphering A Credit Report.")

For other long-range goals, Garrett suggests that both partners should note things they'd like to do in life and then exchange the list. This can help define future financing.

Anna Bengel, 27, and her future husband, Joshua Green, 33, both of New York, plan to marry Nov. 4. She's a freelance writer and assistant Web editor at a theater trade publication, and he's managing editor at an educational software company and a published poet who teaches in the undergraduate creative writing program at Columbia University.

"We've spent more time talking about our wedding than our finances," Bengel says. "And we haven't done anything about our finances."

They've discussed a joint checking account, but are now considering the use of a joint credit card to help track household expenses and provide the data needed to draft a budget. So far, the couple hasn't filed a credit-card application.

"I think we've fallen into a common trap," she says. "It's more fun to call the caterer and discuss the food than go to a bank and talk about a joint credit card. The wedding is an event, and you want it to be wonderful because it's romantic. Calling the bank just gets pushed into next week."

There's a ton of information about starting a household available to newlyweds from LendingTree, a division of IAC/InterActive, and major banks such as JPMorgan Chase, Bank of America, Citigroup and Wells Fargo.

When in doubt, talk to your future spouse and ask questions.

"I think people are reluctant to talk about money because there's always a scorecard--a bank statement, a credit report, a pay stub--and if you screw up, it's right there," Garrett says. "But with sex, it's easy to be Don Juan or Donna Juanita. I think the record of past transgressions in black and white is why money is our last taboo."