Tuesday, June 26, 2012

Know Your Fiance's Financials

I was reading an article in a financial planning journal, titled “Couples Choose Love, Despite Financial Woes."   In the article, 32% of people surveyed by TD Ameritrade said they would call off the wedding if their partner declared bankruptcy, while 27% said they would hesitate or postpone the wedding, and 41% said they would do neither.  In other words, they would go ahead and get married.  Ladies, if you fell into the 41% who would do nothing, please read on.
One of the first steps you should take before you move in with or decide to marry someone is to discuss and be open and honest about your financial situation.
If your partner is evasive, or not willing to share financial information, this should be considered a warning signal.  I’ve said this before in my blog, but it is worth repeating, “many people are more willing to discuss their sex life than discuss their current financial situation."  Please note, just because someone is in what you perceive as a high paying position, or earns a big salary, does NOT mean they are a good stewards of money.  You have to delve in deeper to understand your partner’s money personality.
In our court system, there is a process called voir dire, which means “to speak the truth."  Schedule a time to have an open discussion about both your current situations.  It is imperative you share any financial baggage you have and uncover any financial issues your partner may have.  This will allow you to have a full understanding of what you are getting into from a financial perspective.  Why, you may ask?  Once married, your spouse’s credit rating can have a negative impact on your credit rating.  You may not be able to quality for a home loan, a car loan, or a new credit card.  A person with a bad driving record can cause your insurance to be cancelled.  These are just a few of the consequences of being involved with a partner who does not manage their finances properly.   
How do I know this?  From personal experience.  When I was divorced 23 years ago, my husband had charged our credit cards to the max and was not paying the bills on time.  Once we were separated and ultimately divorced they became my responsibility, but the damage was already done!  I was embarrassed when I could not qualify for a car loan and when I could not refinance a 12% mortgage because of my tarnished credit history.
I managed to pay everything off, but not without irrevocable damage (temporary, but 7 years is a long time!).  This often happens post-marriage, as it did for me.  You can avoid further problems with your fiancé or partner in advance by open honest discussions.  This is the only way to make an informed decision if your partner’s money history is less than squeaky clean.
It is better to know and work through this on the front end then to regret it and suffer from the consequences.  This is serious business and it is your financial future.  Don’t take it lightly!
Check back for next week to read about the red flags to be aware of.

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