Jacqueline Newman, Esq., managing partner of Berkman Bottger Newman & Schein, LLP, a divorce law firm, New York City, and author of The New Rules of Divorce: Twelve Secrets to Protecting Your Wealth, Health, and Happiness. BerkBot.com
Sooner or later, money becomes a point of contention in every marriage. It’s inevitable that two people, no matter how loving, will sometimes differ about how to use this all-important resource.
Divorce attorney Jacqueline Newman has seen what happens when marriages are spoiled by poor financial practices and attitudes. Not only can money mistakes undo a partnership, they can make divorce considerably more unpleasant for one or both spouses.
Here’s some of what she has learned from divorcing couples. You can strengthen your own marriage by adopting these smart money practices and avoiding the worst pitfalls. Even better: It could keep you out of divorce court or make a divorce less painful should that misfortune ever befall you.
Lesson #1: Talk about it. The most basic financial mistake couples make is failing to confront the topic of money head on. For some people, money is harder to talk about than sex, but it’s critical that you and your partner get on the same page about finances. Otherwise, you’ll be at odds with each other, operating in the dark and building the kind of resentment that undoes marriages.
The best time to open the money discussion is before you’re even married. Perhaps you even want to consider a prenuptial agreement. People often are disturbed by the idea of creating a prenup, saying that it feels like they’re already planning their divorce. But the benefit is that having a prenup forces a frank conversation about money that otherwise might never occur. Example: An extremely wealthy man refused to discuss money with his spouse-to-be. It was only after much painful discussion that he revealed his attitudes about money were directly linked to his troubled relationship with his father, who had used money to discredit him, resulting in a deep sense of shame around finances. Once that was out in the open, the couple was able to talk about money without discomfort or resentment.
Whether you’re getting married next month or have been married for 20 years, make it a point to have the “money talk.” Here’s some of what you’ll want to discuss.
Family influence. How was money handled in the households in which you and your partner were raised? Did both parents work? Was there a sense of shared assets, or did the money seem to “belong” to one partner? Were your parents savers? Did they discuss money openly? Did they see money as a form of status or as a way to avoid scarcity? Whatever the answers are, the next question is, “And is that okay with you?” In other words, are you and your partner happy to have inherited these attitudes toward money, or would you like to do things differently?
What money means. For some people, having money means they’ll get to enjoy lots of good experiences. For others, it means never having to worry about food and shelter. Others think it means better opportunities for their children. Still others view their net worth as an indication of their self-worth. Does money mean respect? Does it mean world travel?
Each partner’s approach to money. Ask each other, “If you earned a paycheck of $100, what would you do with the money?” Some people would spend $90 and save $10, while others would do the complete opposite. If you’re in the first camp and your partner is in the second, you have some things to discuss.
Future plans. Where do you see yourself in five, 10 or 30 years? What financial steps will you take to get there? Do you intend to retire rich? If so, are you prepared to live lean and sock away a big percentage of each paycheck for your golden years? Are you planning to pay for your kids’ college educations? Specific goals require specific financial plans, which usually come with tough choices.
Reminder: Don’t stop talking about money after the marriage is underway. Do frequent check-ins, annual at the very least. Ask, “How happy are you with the way we’re handling money? How have your goals changed? Are you thinking about money differently these days than you used to?” Most of these things will change over the course of a marriage. It would be bizarre for a couple in their 50s to have the same attitudes they did during their childless 20s. The goal is to get on the same page and stay on it, adjusting as needed.
Lesson #2: Make a plan. Once you’ve got all this out in the open, it’s time to assess how closely you and your partner are aligned. Where there’s a lack of alignment, you’ll need to figure out some creative solutions. If you’re both highly practical and focused on saving, there shouldn’t be a problem. Nor, for that matter, is it a problem if you both love to spend freely and see no reason to save. But if one of you views money as freedom and yearns to live in the moment while the other hates unnecessary spending, you’ve got some compromising to do.
There’s no one right way to handle money in a marriage. In some cases, having separate accounts and splitting the bills works…while in others, that would be disastrous. What does matter is that you and your partner develop an equitable plan and stick to it—negotiate the percentages to be saved or spent…create a budget, and hold each other accountable, adjusting it as needed.
Some couples have found it helpful for each partner to have a separate “slush fund.” Spending out of those accounts is entirely beyond judgment. Think it’s a waste of money to buy designer shoes? Too bad, if that’s what your partner chooses to spend his/her slush money on. You’re free to spend yours on whatever brings you joy…or to put it into your retirement savings if that’s what you think best.
Even if one partner dislikes handling money, it’s never a good idea to wear blinders. Check the accounts regularly. Meet with a financial planner. You don’t need to become a banker, but you should understand what you have.
Lesson #3: Avoid bad practices. Successful marriages are based on transparency and respect. Avoid these traps…
“Mine” mentality. Sometimes when only one partner earns an income or when one partner’s income is significantly larger than the other’s, there’s a perception that the money belongs to the high earner (some even talk condescendingly of granting an “allowance” to the low-earning partner). Reality: Legally, income earned during the marriage usually is a marital asset, and you can either acknowledge that now or find out the bitter truth in divorce court when half the money you thought was “yours” goes to the other partner. Of course, both partners should be contributing to the marriage, but it can kill a relationship when one partner dismisses another’s nonfinancial contributions as trivial.
Failing to see household money as an equally shared marital asset can cut the other way, too. Sometimes a spouse scrapes and sacrifices, putting nearly his entire paycheck away in his own account, figuring that if the marriage goes kaput, he will come out okay despite his partner’s profligate spending. Reality: If the marriage does go kaput, that money is split equitably and his sacrifices were in vain.
Hiding money. Whatever your intentions, you undermine the relationship when you try to hide assets. In the end, almost all money can be found. Very smart people frequently underestimate just how difficult it is to hide money…and if a divorce court learns that you’ve tried, that spells trouble. Courts can penalize a party for being dishonest and hiding money. The person doing the hiding may need to pay the legal fees and expert fees of the person who spent the time and money trying to find what was hidden. And in some cases, a court might award more than 50% of the found money to the person who found it.
Financial abuse. Sometimes people use money as a weapon within a marriage. They withhold it, use it as leverage or make insane demands such as asking for receipts for petty purchases. Not only is financial abuse demeaning and cruel, but if proven in court, it can significantly affect the judgment in a divorce.