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Money Management Center

Your Marriage: Financial Do’s and Dont's

According to a survey by the American Institute of Certified Public Accountants, money is the top source of friction among couples in the United States. Couples fight about money more than anything else, and the survey suggests that money tension intensifies throughout a couple’s relationship until it peaks in their 50s and 60s.

The upside is that if couples can get their money problems settled from the get-go, they can increase their chances of a longer, happier, more prosperous partnership. Here are some financial issues to get out of the way early on.

1. Learn to Communicate

One of the top reasons for divorce is lack of communication. To most people, money involves a lot more emotion than the simple math of adding up dollars and cents, which means that couples need to really understand their partners’ relationship to money and money values in order to stop fighting and start working together. Most people’s relationship with money is a complicated one with deep emotional roots. Talking about money before things get too tense is a good way to get to know each other’s money personality and tackle disagreements before they get too serious – or lead to serious money problems that aren’t easily repaired. To learn how to save on everyday expenses, check these 50 free resources to help manage your money.

2. Strive for Equality

If there’s anywhere where a lack of parity can become apparent, it’s with money. That doesn’t mean couples need to earn, spend and save the same amount, but it does mean there should be some balance when it comes to merging and managing partners’ finances.A 2008 survey by SmartMoney magazine found that 64% of couples put all their money in joint accounts when they got married, while 14% kept everything separate and 18% had both. This can work well for some couples, but many experts recommend that new couples avoid rushing into completely merging their finances so that they can practice handling money as a couple while still maintaining some autonomy. This should also involve dividing up financial tasks and ensuring that each person feels they’re carrying their fair share of financial responsibility.

3. Set Spending Limits

Maybe one person in the relationship is a lavish spender while the other worries about keeping a healthy savings account. Or maybe one partner just doesn’t agree on what constitutes a necessity. According to a survey by the American Institute of Certified Public Accountants, 58% of couples who fight about money do so because they disagree on spending, specifically on what constitutes spending on needs versus wants. Spending is a very personal thing, but when couples join finances it’s important that they set some spending ground rules. This includes making a budget and setting up spending limits and savings goals. The key is that this plan needs to find a middle ground that both partners can live with and are motivated to stick to.

4. Make Plans

Personal finance involves a lot of big (and often very expensive) decisions. What house should you buy? What school will your kids attend? When will each of you retire? A 2009 study by Fidelity Investments found that most couples (80%) nearing retirement disagree on that last point (which might explain why old couples argue more – there’s more to fight about).The best way to avoid problems here is to start discussing—and saving—for big goals early on. This will leave you more prepared to pay for big financial changes, and to address them without animosity. This should also involve sitting down with an advisor who can help ensure that your plans and projections are realistic and that you’re on track to achieve them.

5. Talk Risk

Perhaps you trade stocks and occasionally suffer losses that would cause your spouse to lose sleep. Like spending and saving, risk tolerance is very personal. Beyond investing, couples might also struggle over whether one should start a business, switch careers or go back to school, all of which have huge financial implications. However, no matter how much appetite you have for risk, if your spouse is a risk-free investor, you may have to dial things back or find some other middle ground. The key is to discuss the worst-case scenario in every case and try to come up with one that both partners can live with. Come to think of it, carefully examining the worst-case scenario of taking a big financial risk is a good idea for anyone.

6. Get Honest

Couples often fight over money – and over the deceitful behavior that can arise around it. But while many new couples don’t like to talk about prenuptial agreements, it’s worth considering – or at least going through the motions. Legally, the prenup process requires that both spouses disclose all their assets and get to know as much as possible about each other’s finances. Smart move. When you marry, you create a financial entity much like a business, and when businesses merge, they go to great lengths to avoid leaving any financial skeletons in the closet. When you get married–or even if you’ve been together for years–it’s important to know how much your partner earns, how much they spend and how much debt they’re carrying, and to share the same information about yourself. After all, the financial decisions you make will affect both of you, and the more you know the better you’ll be able to communicate and work together to keep things on track.

How Divorce Affects Finances – And How You Can Protect Yourself

How Divorce Affects Finances – And How You Can Protect Yourself

Though you may be in wedded bliss, the facts are that nearly half of marriages end in divorce. Divorce is an issue that affects many people in the U.S., and aside from the obvious emotional toll it takes on a family, it can also lead to large financial issues for the couple involved. We’ll be looking at how divorce affects debt, what you can do, and finally look at some of the startling figures of how divorce can affect your finances.

Dealing with Credit Card Debt

We’ve already said that divorce is a big issue for many couples, and the age-old concept of splitting everything right down the middle also applies to credit card debt.

Regardless of what spouse physically racked up all the credit card debt, if both parties’ names are on the credit card agreement, both are equally responsible for paying the bill — even following a divorce. Unfortunately, the animosity that so often accompanies divorce prompts one spouse to decide not to pay their share of the debt. The only way to enforce payments is to take the former spouse to court. It costs a lot of money to do that for both parties, so avoid further litigation if at all possible, and be sure to close any accounts you may have held jointly once you get your outstanding balance paid off.

To protect your credit score from taking a hit, it pays to get the account statements mailed to both new addresses to monitor the payment status as you look to clean up the debts that were outstanding when divorce proceedings were initiated. Worst case, it may make sense to pay the debt and move on, not damaging your credit score as you move on with your life.

The good news is that you are not financially responsible for any credit card accounts that are solely in your spouse’s name, unless a court decides it is your responsibility for some reason. Of course, your attorney would be looking into this situation and the hope is that it doesn’t ever get too complicated and more costly than it should. If your credit does get hurt during a divorce, there are ways to build it back up; find out in How To Quickly Repair Your Credit.

Till Debt Do Us Part

Cleaning up non credit card debt can be tricky as well, but the bottom line is that you need to get all debts erased prior to getting a divorce finalized. If you do not, you will likely find yourself back in court if one spouse decides to keep debts lingering on.

The best thing to do is have some paperwork in place clearly stating who is responsible for paying off which outstanding debts. You can use a financial planner to help both spouses determine who owes what rather than forking over hundreds of dollars to an attorney to discuss money issues. Unfortunately, this may be easier said than done as both spouses are probably not likely to want to be doing anything together when things get bad and both sides will likely turn to an attorney to handle it all.

A financial planner can be of assistance as well. Regardless, cleaning up debt is very important prior to finalizing a divorce. Don’t let emotions get in the way when it comes to avoiding a continuing financial nightmare.

If kids are involved, think deeply about how the financial situation can impact their lives as well; sure to use all means necessary to make any break as amicable as possible, money or no money. Part of making yourself financially stable is having an emergency fund; learn more in Why You Need An Emergency Fund – And How To Build One.

Does Divorce Mean Financial Ruin?

Debt is a huge part of divorce, and is something that all parties need to be aware of when things are going rocky in a marriage. Even though it may seem crass, it’s not a bad thing to have each spouse take responsibility for different debts (at least in writing), so that things are easier down the road.

The Bottom Line

The key to smart money management is to make plans, stay on top of where you are and be honest about both. That goes for single people as well as couples. Money management can be hard to merge, but it’s worth making the effort to avoid fighting and the potential financial fallout that can occur when you can’t resolve your differences.