Have that money talk -- for better, not worse -- Page 2
By Ellen Goodstein • Bankrate.com

What to discuss: 9 steps to financial harmony
Don't leave these money conversations to chance. Get organized and work together toward a lifetime of financial harmony. Here is what the experts recommend for couples just starting their lives together.

1. Exchange full and complete financial information with your future spouse.
Begin by making a list of all your assets and liabilities, says Welch. Write down everything you own and everything you owe. The list should be complete and include the value of all bank, savings and money market accounts, stock, bond and mutual fund investments, retirement funds, real estate and personal property such as cars, furniture and jewelry.

On the liability side, be sure to include credit card debt as well as personal and car loans, mortgages and any other unpaid liability.

"Sharing personal financial information is an important building block for your marriage," says Welch.

"If you're going to entwine your lives, you should know what each other has," says relationship expert Gilda Carle, author of Don't Bet on the Prince: How to Have the Man You Want by Betting on Yourself. "If either of you has money problems, you can identify them early on and begin solving them together."

2. Make a list of short-term, medium and long-term financial objectives.
Short-term objectives are goals that can be accomplished in up to one year; medium objectives are those that can be accomplished in one to five years and long-term objectives are those to be accomplished in more than five years, such as saving for retirement.

Welch suggests that each person creates a list of short, medium and long-term goals and then both compare notes. From the two lists, compile a common list of your goals. Prioritize by asking yourself, if you could accomplish only one goal, which would you choose? Having accomplished that goal, which would be next? Continue this process until you have prioritized all the goals on your list.

3. Develop a written financial plan.
Studies indicate that 95 percent of all Americans never achieve financial independence, primarily because they don't develop a written plan, says Welch.

"Something magical happens when you set a goal and write it down," he says. "Over time, if you develop a detailed written plan, stick to it, making adjustments along the way, you can accomplish all of your goals."

Start by focusing on your No. 1 goal. Clarify what you want, how much money you need to get there and how long you think it should take. Develop a written plan of action that you believe will best accomplish this goal in the shortest period of time. Once it is completed, move to your next goal.

4. Commit yourselves to a continuing dialogue about money.
You must talk -- and talk frequently -- about money, say the experts. It's important to develop a financial dialogue that lasts the rest of your lives.

Once you have a budget in place, have regular meetings to discuss progress, likes, dislikes, etc., either once a week or once a month. Whether it's the first Friday of the month or some other day, you both need to keep on schedule and not let anything else interfere.

"Turn off the phone and give yourself a reward afterward," suggests Welch. Review what you said you were going to do last month, what worked, what didn't. Review your checklist of goals and determine what progress you're making.

5. Share your money history and your financial phobias.
Take turns sharing your childhood memories about money, advises Mellan. How did your parents save it, spend it and talk about it? What specific money messages did you get from family, friends, even religious teachings and how might they be affecting you today?

Share your hopes and dreams as well as your fears and hurts over money. Talk about your worst financial nightmare, says Welch. If you identify problems, you can begin to work out solutions.

6. Develop a budget together.
Determine what you have spent in the past. Look at your canceled checks and credit card statements. Discuss ways you can trim your expenses. The money you save can be used for savings and investments. Once you establish your budget, you will need to compare your actual expenses with your budgeted expenses. You will probably have to make some adjustments to your budget over time.

"Don't be discouraged. It takes most people one to two years to become proficient budgeters," says Welch.

Begin by budgeting for your essential spending, such as housing, food, transportation and healthcare, says Philip H. Friedland, CPA, CFP, PFS in Delray Beach, Fla.

Once you've established your essential expenses, budget for your discretionary spending such as vacations, entertainment, charities and such.

Make saving money part of your budget, says Friedland. Save at least 10 percent of your annual gross income -- 20 percent would be an even better goal.

7. Decide who pays for what.
Review your budget together and decide who pays for what. One way to do this, says Welch, is to divide up the expenses based on who usually pays each kind of bill. For instance, if one person does most of the grocery shopping, that person could be responsible for the grocery bills.

Will you keep separate or joint accounts? Welch recommends opening two checking accounts to minimize confusion. Both accounts can be joint.

Mellan advises couples to keep money separate and slowly merge unless both parties want to merge right away.

This takes into account money differences between the genders, she says.

"When it comes to merging money, men and women have different concerns. Typically men want to merge all the couple's money while maintaining primary decision-making power. Women want to keep at least some of their money separate as an expression of their need for healthy autonomy."

"Couples can merge some of their common assets for joint expenses, savings, and investing and keep the rest separate," she says.

8. Consolidate insurance and benefit plans.
Take a careful look at employee benefits, insurance policies and financial accounts to look for ways to consolidate and save money. For instance, by comparing employee health insurance plans you may find your future spouse's employer offers more benefits for less money out of pocket. It may be less expensive for one of you to become a dependent spouse on the other's plan. Or if one person's employer offers a higher percentage of matching funds on a retirement account, you should consider maxing out that partner's account first.

Combining individual auto policies might get you a discount if you insure more than one vehicle.

9. Build emergency reserves.
Financial surprises occur with amazing regularity, says Welch. They can place considerable stress on any relationship. To be prepared, you need an emergency account equal to three to six months' income. To build up this account, have between 2 percent and 10 percent of your paycheck automatically deposited in a savings account.

Whatever you decide to do, talk. Reportedly, 80 percent of divorced couples cite money problems as a major factor in their marriage breakup. So, start talking now.