Financial planning, and sometimes a prenup, for engaged couples

An engagement to be married is often a time of joy, excitement and stress.

Couples must balance their anticipation with the practical realities of preparing for marriage and building a shared future.

During this period, couples should discuss their money beliefs and financial status. These conversations may feel difficult, but they are essential for building a strong foundation for a successful marriage.

There are many topics couples may need to address before marriage.

Conversations about money habits are not meant to be judgmental; they help you understand your partner’s financial circumstances, habits and beliefs. Consider scheduling uninterrupted time to discuss your individual finances and share your thoughts on what you would change after marriage.

Explore your financial background

Before diving into the details of your finances, share the money messages learned from your parents.

How do spending and saving make you feel? Talk about both the positive and negative money management habits you’ve observed.

Did your parents struggle to pay the minimum on credit cards each month or avoid budgeting and run out of money? Or did they live within a budget and save before spending? Identify the habits you want to embrace and those you want to avoid.

Other important discussions include identifying short- and long-term goals, such as having children. If you decide children are important for your family unit, will both partners continue working, or will one stay home? If your goal is to buy a home, what is your target price, and how much will you need to save for a down payment to afford the mortgage?

Share individual financial information, including your credit score, annual income, tax returns, monthly savings, assets and liabilities (what you owe.

Do you need a prenup?

Determine whether your individual net worth warrants a prenuptial agreement. A prenup is a legal contract prepared by an attorney that allows a couple to keep their finances separate. It outlines how assets and debts will be divided if the marriage ends.

Discussing and implementing a prenup may not feel romantic, but it is a wise step—especially if one partner has significantly more assets than the other.

How will you manage finances together?

—Will you maintain individual accounts, joint accounts, or a combination of both?

—What types of accounts will you use for savings?

—Who will pay the monthly bills?

—How will you pay off existing debt?

—How will you manage the monthly budget together?

If you have never budgeted before, a budget is a personal plan for managing income and expenses each month. It can help you identify and monitor your spending. Simple as it may seem, a budget is the foundation of sound money management.

Communicate about finances

Establish a regular time to meet and review your finances together. A monthly meeting works well to discuss what is going smoothly and what needs improvement. These conversations may not feel easy or natural, but they are essential for long-term success.

As you develop patterns and routines and begin meeting your goals, you may not need to meet as often. However, if you are accumulating additional debt, consider meeting more frequently—perhaps weekly—to stay on track.

If debt is a problem, make a list of your debts, noting the lender, terms, balance owed, interest rates, expiration dates of promotional rates, and minimum payments. Excluding your mortgage, sort the debts in descending order from the highest interest rate to the lowest. Together, determine a timeline and strategy to pay off the debt, and include the increased payments in your monthly budget.

Additionally, consider scheduling an annual review at the same time each year to discuss your statement of net worth (assets minus liabilities) and how it has changed over the past year. Use this meeting to identify short- and long-term goals and determine how future expenses will affect your monthly budget and savings.

According to Fidelity Investments’ 2024 Couples and Money Study, communication between partners has a positive impact on financial health. The survey found 57% of couples who communicate well rate their household’s financial health as excellent or very good, compared with only 34% of couples who do not regularly discuss money. Couples who communicate effectively talk about finances at least once a month and report that money is not their greatest relationship challenge.

After marriage

In addition to regularly communicating about your finances after you’re married, you should:

—Review and, if appropriate, combine your health, property, and casualty insurance policies

—Update beneficiary designations on life insurance policies, retirement accounts, and annuities

—Determine whether you need life insurance

—Review and discuss your tax returns together with your Certified Public Accountant

—Meet with an attorney to implement appropriate estate planning

Money conversations with your partner may feel daunting at first. Take time to learn how to communicate effectively, and don’t give up when the discussion becomes difficult. Couples who communicate and work toward shared goals have a greater chance of achieving financial success and creating a prosperous future together.

Teri Parker is a certified financial planner and vice president for the Riverside office of CAPTRUST Financial Advisors. She has practiced financial planning and investment management since 2000. Contact her via email at Teri.parker@captrust.com.