Expert Tips on Marriage and Personal Finance
An interview with MoneyGeekWednesday, 03 November 2021
This is an excerpt from the Financial Playbook for Married Couples from MoneyGeek.com. Please click here to read the full article.
Many people promise their partners to love and to cherish one another for richer or for poorer. Yet many skip the financial part of the vows and avoid talking about money, leading to trouble in the relationship. A CNBC survey found 56% of divorced Americans said they never talked about their finances with family members.
Not talking about finances eventually leads to arguing about it. Multiple studies and surveys show arguing about money is strongly correlated to divorce. While the topic can feel taboo, discussing money can lead to a better marriage.
Because finances in marriage can make or break a relationship, MoneyGeek created a playbook for couples to take control of their shared finances and build a strong partnership for the future.
What is your advice for couples beginning a conversation about money?
As a society, we are reluctant to talk about money and have potentially uncomfortable conversations. Generally, we don’t learn this skill from our parents or schools. Yet, our money story begins in childhood and continues throughout adolescence and into adulthood. The lessons we learned at a very young age mold and shape how we react to money as adults. Money provides the opportunity to live a certain lifestyle, but it also creates complications as two people come together with separate money values and family histories around money. I recommend setting aside time for key conversations that explore each other’s values and money history. Questions can include: what is your earliest money memory? What messages around money did you learn from your father and mother? What are the best financial decisions that you have made? This foundation will set the stage for future conversations around financial numbers and financial goal setting.
What are the keys to building a strong financial partnership?
The keys to building a strong financial partnership include setting a regular time to have money conversations. This could be a weekly, bi-weekly, or at minimum a monthly meeting. It is important to choose the right environment and timing to avoid distractions. A standing agenda is also helpful. Key agenda topics include setting and reviewing financial goals together, reviewing a summary of all assets and debt, reviewing recent expenses, and discussing upcoming expenses. Other topics include periodically reviewing current insurance such as home, auto, life, and disability coverage, along with health insurance and estate planning goals.
Is it better to combine accounts?
There are many solutions that work when it comes to the mechanics of banking and credit cards. Some couples prefer one joint account for their spending, while others prefer having separate accounts. There is no right or wrong answer, but it is important to get a system that seems fair for both spouses. Above all, couples need to be honest with each other and have transparency in their finances.
How should couples address different spending habits or debt disparity?
Couples often come into a relationship with their own unique money values and family history around money. One partner could be a spender, the other a saver, and unless they come to a middle ground, they will inevitably experience money stress. Another example is credit. Some believe it is ok to borrow to buy something right away, and others believe in saving for the bigger purchase. Autonomy in certain spending decisions can be important for some individuals. In this case, I recommend setting spending limits where when a spouse plans to spend more than a certain amount that they run these out of the ordinary purchases by their spouse. For each couple, they will need to determine the right amount; for some, it could be $250 and for others, it may be less or more.
What are the common mistakes you see couples make?
Money is certainly one of the top reasons listed for divorce and can cause many arguments. I think the biggest mistake that people make is not talking about money both before and during the marriage. Money certainly provides for many good things in life, but it also has a complicated side and can be emotional for many individuals. People come into a marriage with two sets of money values and unique family histories around money, both from their family upbringing and in some cases, a prior marriage. For some families, the topic of money is taboo and filled with secrecy. Individuals also bring their own interpretation of wants versus needs as they make spending decisions. Communication is key to a healthy relationship with money.
Another mistake is not getting clarity on each other’s financial situation before the marriage. It is important to gather financial history, including a summary of their assets, liabilities, income and spending. It can also be helpful to share credit report history and a credit score so there are no surprises down the road.
Another mistake is to have one spouse make all the financial decisions. Both spouses need to stay involved in financial decisions. As couples get busy, it can be natural to defer most of the decision to one person, but both spouses need to remain engaged and keep each other accountable. It is important for both spouses to remain engaged. One person can pay the bills or manage the investments, but both parties need to be in the know of their financial picture. This is especially true to keep both prepared for unexpected events such as a death or divorce.