Getting engaged is a joyous moment, but also an opportunity for smart financial planning. Depending on things like when and how you want to get married, as well as how much you’ve already saved (or haven’t saved), you have different financial hurdles ahead of you. Weddings are expensive. Even a simple at-home event involving a caterer, dress, photographer and cake can run in the tens of thousands of dollars. While the subject of expenses might be a delicate one that causes discomfort between you and your partner or parents, it’s a very important one. The money-related decisions you make while engaged can give you a sense of how well you will manage money in a marriage. Here are five money tips to consider when getting engaged:
1. Budget, budget, budget
After checking prices at a few prospective contractors, come up with a realistic budget for your wedding together with your partner. Determine a spending budget for the wedding. It’s probably a good idea to spend an amount that is within your means and not take out loans in order to have “the best wedding ever”. Determine how much you will feel good about spending, how much you will be able to save by the time you want to get married, and how much you might receive from parents as contributions.
2. Save, save, save
The time to start saving money for your big event is now. Right now. You will need as much as you can save – weddings always involve hidden and unforeseen costs and things don’t always go according to plan. The more money you have as a security blanket, the less stress you’ll feel when planning the wedding. But that doesn’t mean that you have to spend everything you saved – stick to your budget and keep extra savings for a honeymoon or down payment on a house, later on. Help accumulate savings in the coming months by curbing spending and even giving up a rental apartment.
3. Check credit
Personal finances are not very sexy, unless you happen to be a debt-free millionaire. However, before you legally attach yourself to another person’s destiny, you should know their credit history and status. Credit scores and credit reports carry a lot of weight in the financial world and will determine what your partner and you will be able to do and buy in the future. Asking to see your partner’s credit report isn’t an invasion of privacy – it’s homework. A couple’s combined income and individual credit scores will directly determine the mortgages and car loans they will or will not be able to qualify for in the future. Furthermore, it’s fair game to want to know exactly what type of budget your joint life will be working with.
Many married couples choose to have a joint bank account, usually used for household and joint expenses. In the excitement of the moment, engaged couples sometimes rush to set up joint accounts, which might make sense for wedding-related expenses. However, merging all your financial accounts – including personal checking and savings – is inadvisable until a decent amount of time after a wedding. While unfortunate, it’s best to keep things as clean cut as possible until you’re legally married, in order to avoid unnecessary troubles if something should happen.
5. Reduce debt
The best advice you can get about starting a healthy marriage is to do so with a clean slate when it comes to debt. While major debts like student or home loans probably cannot be totally eliminated in a short time, things like credit card debt can be reduced significantly. Alternatively, you and your partner can come up with a plan for reducing debt and modifying spending habits. Avoid using credit cards as much as possible when paying for wedding related items – you want to be cutting back debt and not adding to it.