“Till death do us part” has now been replaced with “till debt do us part.” Therapists, divorce lawyers and financial professionals often cite money issues as a main contributor to the demise of a marriage. But it doesn’t have to be the case.
While everyone’s situation is different, there are some common financial issues that can derail a relationship.
1. Opposing values
If one partner wants to acquire a lot of possessions or live a certain lifestyle—expensive cars, the latest fashions, luxurious vacations and regular visits to the top restaurants—and the other partner prefers a more toned-down existence, then there may be areas of conflict. It doesn’t matter how much net worth you have—materialism can decrease happiness.
Researchers at Brigham Young University and William Patterson University found in a study that in one in five of 1,734 couples, both partners admitted a strong love of materialistic things. While these couples had financial means, money was often a bigger source of conflict for them. Not surprisingly, these couples were rated at the bottom of the survey’s happiness scale.
2. Not seeing eye-to-eye about money
This differs from values, as it’s more of a day-to-day allocation of funds. According to experts, foolishly spending money is the number-one financial cause for divorce. Of course, “foolish” is a matter of opinion.
Some spouses may want to save to meet goals such as paying for college, buying a second home or investing in a business. While others believe that spending money on hobbies such as gambling, restoring cars or remodeling homes is a good way to relax or to increase income. The take-away is to decide what amount of money you, as a couple, are comfortable allocating toward discretionary spending.
3. Maintaining traditional relationship roles
Gone are the days when women turned the earnings and financial planning responsibilities over to their partners. Many women earn more than their husbands; some wives—or husbands—choose to delay an income to care for their children.
The bottom line: Someone in the household is usually more predisposed to managing financial matters—and if no one is, consider working with a Certified Financial Planner. There are also many online tools you can use to help keep track of your finances.
4. Having different money philosophies
Often in a marriage, one is a spender and the other is a saver. It’s not a deal breaker, but these differences can cause tension in a relationship. It is not uncommon to see financial opposites gravitate toward each other.
Recognizing this and consulting a neutral third party can help alleviate tensions. Perhaps it means allocating a certain amount for the spender to have each month and an amount that the saver feels comfortable with, as well as a common fund that the couple contributes to that meets mutual goals.
5. Neglecting to plan
As John Lennon said, “Life is what happens to you while you’re busy making other plans.” Things happen—and sometimes you look back and wonder where the years went.
Marriage, kids, houses, businesses, caring for loved ones, health issues—no one is immune from life’s challenges. Which means having a plan as a couple—from the day you say “I do” is key. If you have significant assets, consider a prenup from the start. If you forgo a prenup, consult with a financial planner to develop a roadmap for moving forward.
Money is a difficult subject for most people. Combining funds, philosophies, and spending and savings habits can add to the pressure. Whether you’ve been married for decades—or are simply contemplating marriage—consider professional advice about how to make a financial plan that you both can agree upon. Talk to us today about how to develop a personalized financial plan that meets your mutual goals.
We’ve all heard of the celebrity divorces—and payouts. Remember Tiger Woods’ massive divorce settlement from Elin Nordegren that was reportedly between $200 to $500 million dollars? Years ago, Amy Irving negotiated her prenup with director Steven Spielberg and also walked away with a substantial sum.
Over many years of experience, we’ve found that prenuptials have been a positive planning vehicle to help create a happy and healthy marriage.
A Prenup Makes All the Difference
You don’t have to be a celebrity, athlete or a business mogul to benefit from the financial protections of a prenup. They’re recommended for everyone.
If you’re like most people, you’ve worked hard to save for retirement, invest wisely and perhaps own a property or two. When you think about it collectively, your assets can be worth quite a bit. And you also may not want to take on your spouse’s existing debts or other financial issues if your marriage dissolves. This is where a prenup can help protect your assets.
Now, if you live in any of the nine community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin), if you should divorce, you will be required to divide equally all the assets that you acquired during the marriage. In non-community property states, a judge will decide how to divide the property equitably.
Protecting Your Finances
A prenuptial agreement, where properly negotiated, can protect you:
If you have greater assets than your spouse. A prenuptial agreement can protect your savings and investments in case of divorce. Many people may have accumulated retirement or education funds, or life insurance policies before marriage. They may also independently own property or have an inheritance that they wish to keep intact. A prenup can help give you peace of mind that these funds stay where you have intended.
If you are less affluent than your spouse. Prenups are not just for the wealthy. If you happen to have a smaller portfolio than your potential spouse, then you will want to ensure that you are financially protected in case of divorce. The same applies if one spouse plans to stay at home and raise any children. This time out of the workforce impacts the spouse’s earning ability and Social Security contributions for several years. A prenup can compensate the stay-at-home spouse for lost earnings.
If you are remarrying. If you have children from a previous marriage, you may have child support payments, college funding, a home, business or other obligations that you wish to keep within your “first” family. You may also want to include your new spouse and any children in your wishes. Like a will, a prenup can help ensure that you are able to provide for your families in the manner you intend.
If your potential spouse has a lot of debt. Marriage merges many financial obligations. So if you do not want to be responsible for your spouse’s student loans, credit card or car loan debt if your marriage should end, then a prenuptial agreement can help protect your individual assets.
If you are a business owner. Your business may be a significant asset. Without a prenuptial agreement, if your marriage ends, your spouse may end up owning a part of the business. If you have business partners, they may not be too pleased to have the ex as part of the deal. A prenup can ensure that your spouse stays out of the business equation.
What a Prenuptial Agreement Can’t Do
While prenuptial agreements are very useful for financial planning, they cannot be used to resolve general divorce issues such as:
Determining child support and custodial arrangements.
Determining who has the right to live or sell the marital home.
Helping You Navigate the Financial Waters
Getting married—or remarried—is an exciting, happy time. We want to help take the financial stress out of the equation. Some may not see a prenup as the most romantic step toward their future union, however, it can be a useful tool to protect everyone.
Contact us to learn more about how we can advise you with a range of financial planning situations and help you plan for a new life together.