As the summer winds down I’ve found this blog harder and harder to write. After a lengthy delay, here’s item 5 of my Top 10.
Couples and money can mix perfectly like peanut butter and jelly, or not at all like oil and water. Being married is hard. Anyone who’s married or divorced knows this. Statistics show this too with 43% of marriages ending in divorce according to Forbes. There are a lot of reasons to split, but 38% cite financial problems as a contributing factor. Having done this for a while, I’ve seen all kinds of strange things and heard of even worse horror stories when it comes to couples and money: hidden credit cards, gambling problems, second families. There’s a classic Dateline episode that delves into a case of a husband murdering his wife to avoid having to tell her they were going to lose the house. Usually this boils down to one party is in the dark about their finances, completely relying on their spouse to handle things.
Don’t be in the dark! Be open and honest when it comes to family finances. Set spending and savings goals together. Make sure you are saving each month toward common goals such as vacations, gifts, new tires for the car… Whatever we need in life that isn’t included in our budget (bills, food, taxes, etc…) needs to have dedicated savings. If not, you’ll run up your credit card. Have an idea of what your income is and how much saving and spending is occurring. I know a guy who went out to run some “errands” and came back with a new car, trading in the one they had just paid off. This not only impacted their goal of buying a house but prevented it. His wife was not happy, and that was the final straw for their marriage. There were many smaller things leading up to this which is aggregate should have ended it sooner, but they didn't. They weren’t on the same page. A friend from long ago had a wife who was a degenerate gambler and accumulated mountains of debt. It’s hard for me to understand how my old buddy didn’t recognize it earlier, but they too are now divorced. Knowing what your spouse is doing or setting boundaries is crucial.
You both need to save for retirement as well. Have you thought about how much you’ll actually need in retirement savings? As a rule of thumb, you can multiply your planned annual expenses by 20 if you plan to retire at 65. So, if you’re spending $100k per year you need $2,000,000 in present day dollars. Without going into all the math, that’s hard to do unless you start saving early. $2 million today is $7.6 Million 45 years from now at a 3% average inflation rate. To accumulate $7.6Million starting at age 20 and retiring at age 65 you need to save just under $20k per year AND have it grow at an 8% annual rate of return. If you and your spouse or significant other are not on the same page with this, you will have a very rude awakening. Funny story, when my wife and I were getting serious after a few months into dating, I laid down the law about saving for retirement. Back then she was contributing just enough to get the match at her company. There was no alternative, she needed to contribute, and I knew she could afford to contribute the maximum amount. Anything else was a non-starter. I needed to make compromises too. She forced me to get rid of the recliner couch and chairs in my living room to make it not so much of a bachelor pad. I also had to get rid of my numerous beer signs and hand-me-down art from over the years, a small price to pay! Quid pro quo can get you a long way. I probably got the good end of that deal by trading tacky décor for financial security.
People go so far as not sharing bathrooms or even bedrooms to keep the marriage strong. I’m not sure about that, but one thing I encourage couples to think about is having separate personal bank accounts and credit cards. Also have one joint “house” account where a certain amount needs to be deposited by each party each month. This way you get the best of both worlds: monthly bills, repairs, vacations, and the like are taken care of by both parties. If one person wants to have drinks with friends or buy something frivolous, it’s on them. One thing this also does is it validates each spouse. They feel like they are contributing financially to the whole but maintaining some independence. It’s not I, mine, or hers, it’s we and ours. This method works really well for my wife and me. Now, to do all this involves trust. The guy who is a degenerate gambler or the guy who bought a new car out of the blue probably can’t be trusted.
If you do find yourself arguing about money frequently, step back and ask yourselves why. Is it simply because you aren’t making enough? That’s one thing. More likely is that you haven’t gotten on the same page with your savings and goals. Get a clear head and review those things. Ask questions about your financial situation. Learn each other’s spending styles. Identify and work through differences. Make sure you aren’t in the dark or have the attitude of “They’ll handle it”. Maybe more than anything, make sure you have the tough conversations before getting serious with someone. Maybe it will prevent a future divorce or worse, a murder!
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