Till Debt Do Us Part
Finance expert Dara Duguay discusses the money issues that can plague a relationship and how to address financial conflicts in a relationship.
One of the most difficult things for a married couple to deal with is their finances. Money problems have frequently been cited as one of the leading causes of marital stress and divorce. Even couples who stay together often argue about money. They fight over differences in ways to spend it, the need to save, how to invest it, who should pay what, how to divide up the responsibility for money tasks, and many more issues. Almost all marital decisions, in some way, are linked to money, from taking a new job to choosing what model of car to buy to deciding whether or not to have children. The amount of money that the couple earns is not often the problem; it is how they manage the money they do have. People who spend money unwisely will do so no matter what their income.
A Taboo Subject
A major problem is that many still feel uncomfortable talking about money so it is rarely discussed. Usually the subject is brought up only when a problem emerges, and then it becomes not a discussion but an argument. By waiting until the simmering problem explodes into a crisis, it becomes difficult to approach the situation calmly and with a rational mind. This tendency to avoid discussion is why money tends to inflame so many passions and result in so many relationship crises.
However couples find that when they can resolve their financial difficulties and conflicts, their marriage or relationship usually improves. This is not to say that a lack of money problems guarantees a happy marriage, but it definitely results in less strain on the relationship. Working as a team should be what relationships are all about. Having a financial direction that is proceeding along the same path, not in opposite directions or intersecting only occasionally should be the ultimate goal.
Money Philosophies
A challenge that many couples face is how to merge different money philosophies. For example, savers often end up married to spenders. Even if two partners have a similar money philosophy, one usually will end up as more of a saver and the other as more of a spender. Every couple needs someone who will set limits. Keep in mind that there may be subtle or extreme differences in these roles. For example, if two spenders marry, one may be a more conservative spender while the other may be the “super spender.” If two savers marry, one may be the extreme tightwad while the other does not mind spending money as long as their retirement accounts have been funded for the month.
However, the coupling of a saver with a spender usually results in the most extreme differences in approaches to money out of all the pairings. But this balancing out effect can also have a positive influence on couple’s lives. For example, if two savers marry, their lives may miss out on opportunities since they are averse to spending money. They may never visit a foreign country or go to the opera. Conversely, if two spenders marry, their tendency to splurge may lead them to bankruptcy court.
The following are some common polarizations that couples may adopt in their attitudes about money:
• Saver vs. Spender (Do you prefer to put extra money in the bank or in
the cash register?)
• Ostrich vs. Agonizer (Do you pretend nothing is wrong or do you lose sleep over money problems?)
• Gambler vs. Security Guard (Do you prefer high-risk investments or do
you put your money in safe government bonds?)
• Plotter vs. Romantic (Do you plan your financial moves in detail or just dream about that house you have always wanted?)
• Joint Accounts vs. Separate (Do you have the philosophy that “what’s mine is yours” or “what’s mine is mine”?)
Which category do your parents fall into? What about you own relationships? Do you see a pattern emerging? Usually your financial attitudes will remain the same from one relationship to the next but their degree of intensity will vary depending on your partner.
Money and Dishonesty
Some partners purposely hide purchases or assets from the other. In fact, a 2005 Redbook/ lawyers.com survey found that nearly one-third of adults who are in a committed relationship say they have been dishonest with their partner about their spending habits. Despite their lack of candor on this issue, 24% of those polled said that honesty about finances was more important than honesty about fidelity.
When the data is separated by gender, women are more likely to be the ones with less candor (33% for women and 26% for men). In fact, one in four women said they lied to their partner about the money they spent on items like clothing or shoes. Many women may feel they can safely “bend” the truth since they have had success in hiding the purchases through their husbands’ inattention to their wardrobe details.
Additionally, the poll found that 18 percent of adults admitted to having entirely separate bank accounts. Without knowledge of each other’s finances, it can be easy to maintain a cash stash that their partner does not know about. These nest eggs are sometimes considered “mad money” to be used as the individual saw fit or as a “safety net” if that person needed to get away or separate from their partner.
Keeping money matters secret can cause problems, especially if one partner’s actions involve unwise money moves. If the couple is married, one partner’s decisions will inevitably affect the other
All of these issues are not easy ones to resolve but they are crucial. The following checklist for couples will help to make sure you address these and other important questions.
Ask yourself, have we...
Discussed our financial attitudes and values
Investigated each other’s income and employment patterns
Discussed each other’s credit history
Read through each other’s health, automobile, and life insurance plans
Developed separate time lines for what we hope to accomplish in the next year, three years, longer
Put together a budget we both believe in
Agreed to distribution of payment responsibilities
Made decisions about joint or separate accounts
Without addressing these issues, couples will continue to face financial difficulties.
Finally, when embroiled in a divorce, it’s important to be realistic, and, as much as possible, to keep the lines of communications open with your about-to-be-ex. Here is some additional wisdom:
• Always put your children’s best interests first. No matter what the damage is to your bank account, it is a lot easier to rebuild your finances than your children’s respect for you.
• Don’t let “lay lawyers,” even experienced family and friends, advise you. That’s your attorney’s job. Get a good one, and stick by his or her advice.
• Don’t use money as a weapon.
• Divide up and conquer. Determine what’s worth a fight and let the rest go. Try to keep your financial and emotional lives separate.
• Watch those lawyer fees. Don’t end paying for your attorney’s zippy red Porche by taking 20 hours to negotiate ownership of the cappuccino maker. Is it worth it?
• Review beneficiary designations. Be systematic about considering the need to remove the name of your ex-spouse (or about-to-be-ex-spouse) from documents that in the event of your death might have financial implications, such as retirement plans, insurance policies, and power of attorney or living will forms. While you’re at it, sit down and review your will and estate plan for possible revision.
• Make sure you will have continued health insurance coverage after the divorce. If your health insurance was covered by your spouse’s policy, try to negotiate continuing coverage or the expense of obtaining new health insurance possibly as part of any child support and/or spousal payments. Begin to look into what you will do to afford the difference if a limit is set for this coverage.
• Negotiate child support. Each state has its own guidelines for determining child support. It also may be useful to consider prefunding of such agreed-upon expenses as college and graduate school tuitions, down payments for a first house, and weddings.
• Remember, your financial needs and preferences come first now. Just because as a couple you invested in a certain way does not mean that this strategy is right for you as a single person. And, conversely, if a particular investment yielded good results, don’t reject it just because it was part of your former life.
Dara Duguay is the former director of the Citigroup Office of Financial Education and the author of several self-help financial books. Her most recent is “Please Send Money: A Financial Survival Guide for Young Adults on Their Own.” You may reach Dara at www.daradollarsmart.com. To purchase Please Send Money: A Financial Survivial Guide for Young Adults on Their Own, click here.
