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Do You Take This Woman's Debt...

When you've found that special someone, and the two of you agree to spend the rest of your lives together, ideally money will have played only a small role in that decision (unless your name is Anna Nicole Smith, of course). Nevertheless, while it's not the most romantic aspect of marriage, how you and your spouse deal with your finances will play a key role in your relationship. It's generally accepted that financial fights are a leading cause of divorce, so you'll want to face any potential money problems head-on, either before or soon after you take the marital plunge.

To that end, we've gathered seven questions for you to consider, whether you're just married, about to be married, or think you might get married one day. You many also want to have your significant other check out these questions as well. No matter how long you've been together, if either of you are interested in learning more about handling money with your honey, be sure to check out our Couples & Cash Seminar.

Let's begin with a touchy-feely question:

1) What baggage do you and your partner carry regarding money?
As any relationship guru appearing on Oprah will tell you, fights about money are frequently about more than just the latest bills. As a result, you may want to sit down with your spouse or partner and talk about where you come from, financially. How was money handled in your family when you grew up? What habits did you develop as a result? What attitudes did each of you form about spending, saving, and debt? Plenty of couples, despite whatever else they may have in common, have had different financial experiences, which can create conflicts and misunderstandings.

2) How will you handle pre-marital debt?
Perhaps you'll be lucky enough to marry someone who is debt-free, but between student loans, credit card debt, car loans, and mortgages, that's unlikely. Even if you do, perhaps you're not debt-free. In either case, you and your spouse will have to figure out how to deal with debts that one or both of you incurred prior to getting married.

To begin with, it's important to get this out on the table as soon as possible. You may be surprised to find out what you don't know about a person's finances, even if you've been dating them for years. Once you've established where the two of you stand, important questions naturally follow: How much of your income or savings would you be willing to direct toward paying off your spouse's debts? And vice versa? If you decide that the person who incurred the debts should pay them off with just his or her own income, how will this affect their ability to contribute toward joint savings and expenses?

3) Will you have joint or separate checking accounts?
For many couples, the fact that you'll be sharing most of your lives together means you ought to pool your money as well. However, the decision may not be so simple. There are advantages and disadvantages to both joint and separate accounts.

Certainly, a joint checking account will be easier from an organizational standpoint, and you'll probably spend less in banking fees. In addition, handling mutual expenses for children or your household will be easier with a joint account, rather than having to figure out "who pays for what." Finally, joint accounts should encourage plenty of communication, as you'll certainly have to check with each other before making any significant purchases.

On the other hand, there are plenty of advantages to separate accounts. You're less likely to make errors since both of you won't be using the same account. Separate accounts will also enable some independence within your marriage, and help you to avoid disputes over every last dime of hobby-related or frivolous spending.

Of course, you can also open both joint and separate accounts. Either way, this can be a complicated decision, so take your time and remember that you can always rearrange your accounts to find the right fit. In addition, as pointed out in our Five Ways to Save Money Through Marriage, be sure to link your accounts to qualify for lower fees. We also cover this question in more depth in our Couples & Cash Seminar.

4) How will you handle bills and savings?
Certainly, one way to avoid financial spats in your relationship is to make sure all the bills are paid on time. But if that's only getting done thanks to the efforts of one person, friction may still develop.

So consider the following questions: Will you split up the bill-paying duties equally, or will just one of you do it? Are either of you more interested, or simply more likely, to track your spending and savings? Or will you have to share those duties, perhaps rotating them every six months? If only one person will be doing most or all of the work, then what can the other spouse or partner do to make up for it? (Do more of the other household chores? Cook a nice dinner every now and then?)

In addition, consider what you will pay, and what you expect your spouse to pay, toward the household bills, in both dollar amounts and as a proportion of income. If you and your spouse have disparate incomes, should you each pay equal dollar amounts, or equal chunks of your salaries?

5) How will your taxes change after marriage?
As pointed out in Roy Lewis' (TMF Taxes) article on the "Marriage Penalty," many couples -- especially those with two relatively equal incomes -- are hit unexpectedly with a tax hike when they file their first return as a married couple. (Incidentally, you will pay taxes as a married couple for the entire year, regardless of how long you were actually married that year.) While you really shouldn't postpone or avoid marriage just for tax reasons -- though if you do, we'd love to hear how you explain it to your beloved ("See, honey, line 47 on the 1040 says...") -- you ought to be prepared for any changes. The Fool has plenty of tax info for married couples and families in our Tax Center.

6) What are your financial goals?
Most couples can probably agree on some general financial goals: debt reduction, a house, college education for the kids, retirement, vacations every so often, a large-screen projection TV, a 40-foot catamaran.

Nevertheless, within each larger goal are important distinctions: Are you saving for a "starter" home or something bigger? Are you saving for a state university tuition for your kids or for private college tuition? When would you each like to retire?

Whatever you decide, keep in mind that having clear, shared goals can help with the less pleasant aspects of financial management. Instead of just nagging each other about expenses, having specific goals in mind enables you to remind each other of what you're saving for. So the next time your special someone wants to buy something unnecessary, just ask, "Is this going to help us ______ [buy a house, retire early, take a vacation, etc.]?"

7) How will you track your progress?
The first question here can be the toughest: What degree of budgeting are you and your spouse or partner comfortable with -- detailed tracking of every expense, or something more general? Plenty of families would benefit by simply looking at their monthly income and comparing it to their fixed expenses. Getting on the same page regarding budgets is important, as is figuring out how you'll divide the work. (One place to start is our recent two-part Foolish Financial Checkup).

Nevertheless, this is about a lot more than just budgeting. In order to keep your eyes on the prize, you'll need to regularly check in with each other on the current state of your finances, and where you are in relation to your goals. It may help to have a Financial Manifesto, or some other written reminder of near-term and long-term priorities.

Take your time
With your financial goals in hand, enjoy your time together as you strive toward them. In addition, remember that even by just getting married you've taken a positive step: as the bestseller The Millionaire Mind points out, in its light-hearted way, "Studies have consistently found a significant correlation between length of marriage and wealth accumulation." 

Finally, if you need any support along the way, please stop by the Investing for Couples discussion board. And thanks to the Fools there, particularly Lydia Vorsteveld, who helped inspire the idea for this article.

Chris Rugaber has a significant stake in his marriage to wife Liz, which he hopes will provide bountiful long-term returns. To see what else Chris is invested in, visit his profile. The Motley Fool is investors writing for investors.


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