Take heed young lovers! Before popping the question, check with your financial advisor

Before popping the question this Valentine’s Day, consider checking with your financial advisor first.

Love is in the air, with America’s favorite Hallmark holiday hitting on Friday. And while one may believe that this is a time to shop for flowers instead of financial advice, there is a strong case to be made for including an advisor in the decision-making process before settling down with that special someone.

Yes, it’s true. Two’s company, three’s a crowd. But when that third person can spot the red flags that may prevent you from embarking on a lifetime of financial misery, then maybe it’s worth a quick huddle before pricing wedding rings.

Open hearts and balance sheets

Dann Ryan, managing partner at Sincerus Advisory, believes the “discovery part” of the financial planning process is critical when assessing a couple's financial compatibility.

“For many couples tying the knot, just opening their entire balance sheet to one another is scary enough, as they’ve likely never done that with another individual before. But beyond that, stating your financial goals and how they connect with your life goals out loud is often a first-time experience,” Ryan said.

In Ryan’s view, each partner should have a space to do this separately, without the influence of the other, so they can then compare and make a plan.

On the other hand, Eric Herzog, certified financial planner at Prime Capital Financial, prefers to bring the two partners together first to assess their “money personalities” and how they might mesh in the future.

“I think it's super helpful for couples to go through a goals exercise or do a money personality test on each other. It's not so much about finding out ‘Oh my gosh we are so different, this isn't going to work!’ But, instead it can help strengthen their relationship with money and better understand how they each think and feel about it,” Herzog said.

Typically, the first time Herzog meets with a couple, he facilitates a fun and easy card game activity that helps the client prioritize what is important to them. The only rule? They can't influence each other!

“It gives the future non-CFO spouse in the relationship their own voice,” Herzog said. “At the close of the meeting, they then get to come together and identify their goals together as a couple." 

Sharing without sacrificing

Advisors also contend that couples can create shared financial goals without sacrificing independence. As long as they plan ahead.

While some goals fall into being obviously shared - like home, family, vacations - others that might seem joint - like retirement - are not necessarily so, according to Sincerus’ Ryan. This can often mean one partner lowering the priority of, or even abandoning, a particular goal. That’s why Ryan believes working on a plan that creates a logical sequence to the goals, so that everyone knows the inflection points, can mitigate a lot of potential resentment later down the road.

“Marriages are all about compromise, and what better way to start than with projections going out 50 years,” Ryan said.

Meanwhile, when it comes to managing a household’s daily cash flow, Prime Capital’s Herzog encourages clients to maintain a joint checking account where monthly paychecks are deposited. This will act as the household "bill-pay" account and most expenses will be paid from this account.

If a couple is operating this way, Herzog is in favor of each spouse also setting up their own "slush fund." This is usually in a separate checking or high yield savings account that they can transfer a predetermined amount into each month and each spouse can then save or spend it as they please. 

“One spouse can be the main bread winner spending more hours at the workplace while the other partner can spend more time maintaining the household,” Gunderson said.

Avoid these mistakes

One of the biggest mistakes couples make is their use of debt. Debt can be a very emotional subject, based on life experiences, and that’s often not appreciated enough, in Ryan’s view.

“When one partner might be very comfortable with debt, the other might not, and this can lead to a lot of strife in the relationship. Obviously, too much debt can destroy a financial plan, but the wrong amount for everyone involved can ruin it much earlier,” Ryan said.

According to Herzog, the biggest financial mistake a couple can make is not having a plan.

“We coach couples through the five factors to their financial plan that they are in control of: spending, savings, timing, risk, and legacy. Having a plan takes guessing out of the equation and gives them a lot more confidence and clarity to design the life they want to lead,” Herzog said.