The Most Important Financial Conversation To Have Before Marriage
Getting married can be overwhelming because of how many things you have to think about—just the wedding planning alone can dominate your free time for months. While there are several financial discussions you should have about marriage, there’s one conversation you should prioritize above all others: when it comes to your assets and debts, your income and expenses, what falls into these three buckets—mine, yours, and ours.
Understanding State Laws and the “Ours” Bucket
State laws vary across the country, but one similarity is that the law generally treats everything that you or your spouse own as falling into the “ours” bucket. Even assets that you bring into marriage and keep in your own name aren’t protected. My 401K starts out as mine, but as soon as I contribute to it during marriage, some of it becomes legally ours. The law looks at your paycheck as “ours,” so anything you use your paycheck for eventually becomes “ours.”
The Changing Landscape of Marriage and Finances
This rule was fine 60 years ago when couples got married at age 21 and both spouses were starting from zero and built their entire financial lives together. But in today’s world, where most people get married closer to age 30 or later, we’re not starting from scratch—you have bank accounts, credit cards, retirement accounts, student loans, a car, and maybe some equity in a home or a small business. Most couples open a joint account but still keep their separate accounts. It doesn’t make sense for us to throw everything into the “ours” bucket.
Clarifying Ownership and Responsibility
If this describes you, it’s important to be clear about who owns what and who is responsible for which debts. Will your paychecks go into the joint account, or will they go into a separate account and you contribute a portion of it to the joint account? The same applies to your assets—do you consider everything you are bringing into your marriage to be immediately jointly owned? For most couples, the answer is no. We have a joint checking account and joint investments, and we own our home together, but we also have separate retirement and bank accounts.
The Role of a Prenup
If you’re not putting everything you both own into the “ours” bucket, then you should spell out where things fall in a prenup. At its heart, that’s what a prenup does—it makes clear what’s mine, yours, and ours. You don’t have to be rich, and it doesn’t mean you’re keeping your finances 100% separate. It just means that you and your spouse are being intentional when it comes to combining your financial lives.