Sadly, many marriages today end in divorce, with tiffs over money most often to blame. But as you join your life to another, there are smart ways to make your financial lives run well and free of discord.
A study by Jeffrey Dew, a Utah State University professor, found that couples who argued about money once a week were twice as likely to get a divorce as those who had such a disagreement less than once a month. Understanding the relationship a spouse has with money is a good step in creating a financial plan that works for both partners and can help prevent financial spats from becoming a regular occurrence.
Before getting married, a couple should discuss their financial history, including any debts, bankruptcies and loans. It only make matters worse if, after six months of marriage, your then-spouse discovers you have $8,000 in credit card debt that you were too embarrassed to bring up before. By being transparent with financial history, a couple is able to begin their new journey on the right foot.
Most people fall into one of two camps, spenders and savers. The problem, professors at the University of Pennsylvania, University of Michigan and Northwestern University discovered, is that financial opposites attract. They found that savers and spenders commonly fall in love with one another, even though these two characteristics on face value don’t mix. Recognizing each person’s financial style can help understand where a spouse in coming from, which is vital to maintaining a healthy relationship.
Here’s a good idea to smooth over the disparity: Designate one person to be in charge of paying the bills, or divide things up and have each spouse be responsible for certain money-related activities.
A newly married couple has to figure out what will work best for them. But this should be done early on to avoid any confusion and, more importantly, late payments. Creating a budget together can help alleviate frictions. A set plan removes a lot of the surprises and lays out ahead of time how the couple deals with various issues.
If both partners have the same understanding about how much to set aside for retirement, a future vacation or a new house, arguments are less likely to occur. If you do not reach your joint financial goals, you can’t blame the other person.
The value of Professor Dew’s study is to prove statistically that financial disputes are the strongest omens of divorce. According to the National Survey of Family Growth, as much as half of women’s first marriages end in divorce over 20 years. To avoid becoming part of that statistic, be open with your spouse or fiancée about money and create a plan for how to deal with finances.
Meeting with a third party, like a financial planner, can help relieve the tension that money conversations can cause. Here, a professional recommends how to best set up a budget, pay down debt and plan for the future.
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Joseph “Big Joe” Clark, CFP, is the managing partner of the Financial Enhancement Group LLC, an SEC Registered Investment Advisory firm in Indiana. He teaches financial planning at Purdue University and is the host of Consider This with Big Joe Clark, found on WQME and iTunes. He is a Registered Principal offering Securities and Registered Investment Advisory Services through World Equity Group, Inc, member FINRA/SIPC. Big Joe can be reached at [email protected], or (765) 640-1524. Follow him on Twitter at @Big Joe_Clark and on Facebook at http://www.facebook.com/FinancialEnhancementGroup.
Securities offered through and by World Equity Group Inc. Member FINRA/SIPC. Advisory services can be offered by the Financial Enhancement Group (FEG) or World Equity Group. FEG and World Equity Group are separately owned and operated.
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