‘Til Debt Do You Part
Marriage is about many things. Many hopeless romantics get lost in the fantasy and splendor of it all. But some forget, marriage also involves the merging and protection of assets, being able to protect your money and having to share it with another person who might be hiding his or her own financial woes. There are many unromantic but essential financial issues an engaged couple should consider handling before they head down the aisle, such as obtaining a prenuptial agreement, checking credit scores and getting a solid credit education. Here are a few tips to handle them with care so that the wedding won’t be called off.
First of all, when thinking of a prenuptial agreement, or a “pre-nup,” (called a “matrimonial agreement” in Louisiana) get any preconceived notion of out your head because getting married and combining bank accounts today is a lot different than it was when your mother and father got married. These days, couples are getting married a lot later in life. They have better jobs, more solid finances and have accumulated a lot more assets by the time they’re ready to settle down and get married. On the other hand, today’s marriages are also more likely to end in divorce, so couples are more likely to protect themselves and their assets through a pre-nup.
The basic definition of a pre-nup, or a matrimonial agreement, is a division of each spouse’s assets in order to ensure, in case of divorce, that the couple will be seen as never having shared anything financially. So, in other words, whatever a husband and wife earned separately before and after the marriage will remain theirs and whatever was jointly owned, e.g. property, will be divided.
The main goal of a pre-nup is to decide what will happen to all of your money. In order to do that, you will both have to fully disclose all of your assets, including your source of income and any inheritance you have. Then you and your lawyers will agree on how it will be divided if the marriage ever ends. This includes who will get the money, as well as how it will be spent or invested.
A lot of pre-nups these days include more specific terms and stipulations, such as if a spouse starts doing drugs, stealing money or cheats, the other spouse is entitled a certain amount of money. More specific types of stipulations can be set into a pre-nup but the government can only enforce so much. In other words, a woman might put into her pre-nup that her husband has to always vacuum the house but the government has never had an instance where a husband has been dragged away for his lack of cleanliness.
In some ways, drawing up a pre-nup can be seen as a good step because it forces newlyweds to start thinking about their finances early, rather than several years down the line when the time comes to start planning for a family, buying a house, etc.
Credit Scores and Debt
What many happy couples in America might be hiding before or even after they get married, is the amount of debt they have. Not only are they hiding it from the outside world but in some cases, they may be hiding it from each other.
When you think of how many ways there are to acquire debt these days, it’s easy to believe that many people are bringing thousands of dollars of debt into their marriages. Whether it’s college loans, credit card debt or even money owed to family, single people are quickly acquiring more debt each year. According to Layne McDaniel, president of Noesis Data, LLC in Baton Rouge, “When a couple is talking about getting married, they are thinking about happily ever after, but they need to discuss how bills are to be paid.”
The amount of debt a couple has really comes in to play when trying to purchase the main things many newlyweds buy within their first few years of marriage, such as a house or a car. This is especially crucial because it affects a couple’s credit score.
A credit score can range between 300-850. The higher the score, the more likely one is to qualify for better rates and terms. There are five key factors that make up your credit score:
1. Credit payment history – 35%
2. Amounts owed – 30%
3. Length of credit history – 15%
4. New credit – 10%
5. Types of credit – 10%
The top two are the most important. In shaping your credit score, how quickly you make your payments and how much you owe on your accounts carry the most weight. So if nothing else, the best advice for a better credit score is to make your payments on time and keep your balances as small as possible.
If you have a poor credit score, have a significant amount of debt or just have concerns about handling your money before getting married, it’s a good idea to consult a professional. It is always better to know about your money and handle whatever problems before you get married, than pretend they don’t exist.
The bottom line is, money will become an issue in any marriage, so sometimes it’s best to deal with it up front before “’til death do you part” because it might end up being “’til debt do you part.”