IT'S HARD enough managing one's own money, but navigating through financial issues with another person can be even more frustrating. I often get questions about marriage and money during my weekly online chats. The following are answers to two recent questions.
"What happens when someone with a FICO score of 800-plus marries someone with a score of 400? I anticipate getting engaged soon but am not sure where to start dealing with financial matters. I love my boyfriend, but financial management is not one of his strengths, though it is one of mine. I want to ensure my credit and other related finances are not impacted. Planning to prepare a prenuptial agreement is one first step. What else should I plan to do?"
Your credit files aren't merged after a marriage. Couples don't have joint credit reports or credit scores. You are scored by the credit bureaus based solely on information in each of your individual credit files.
So if you marry a credit-challenged man, you don't inherit his bad credit. You don't, that is, unless you co-sign with him. If you do, and his bad history of handling bills continues with the new accounts, then, yes, his behavior impacts your credit history.
I recommend you take a premarital class that has a good financial component so the two of you can work out how and why you handle your money differently and develop strategies to handle those differences.
This next question concerned marriage and money as it relates to taxes: "What do you think about the ways married people are penalized by our tax code? I finally make a high salary, and got married around the same time of my pay increase. All of a sudden we are hit with enormous tax liability! We have a child, but we don't get the tax credit, which is only $1,000 anyway. I did the math and if we were not married and split housing, day-care and health-care expenses equally, we would pay $8,000 less in taxes. I want a divorce on paper, because the tax code does not seem to think working families are important. I never considered the tax burden we'd face when we married, and I actually regret making it legal now. I know that sounds horrible, but really I do."
Do I think the tax code is overly complicated and often unfair? Sure. But I've been married 23 years and don't regret for a nanosecond my decision, even though it created a larger tax burden.
Please consider that there are a lot of financial benefits to being married. When it comes to your estate, the tax law favors marriage. So does the gift tax. If you have a traditional pension, retirees can opt to have payments made to a surviving spouse.
There's a plus to being married when it comes to Social Security. What if at some point you want to be a stay-at-home parent? A lower-earning spouse is eligible for benefits up to 50 percent of the higher earner's work record. In the case of divorce, if you were married at least 10 years, you can collect retirement benefits on your former spouse's Social Security record if you are at least age 62, unmarried and if your former spouse is entitled to or is receiving benefits.
You should count the cost of your decisions. But some things come with a price that's worth the extra money.