As we all know, a wedding is a happy and joyous occasion that signifies the beginning of a couple’s new life together. At this special time, they rarely consider the possibility of disagreeing on anything. But the reality is, almost 50% of first marriages end in divorce in the U.S., and the divorce rate is even higher for second and third marriages. While a divorce can be blamed on almost anything, fighting over money is one of the most common reasons.
Now, I am not trying to be negative, just realistic. Lack of communication about money is a common problem. According to a recent poll authorized by the National Endowment for Financial Education and Forbes Woman, 33 percent admitted to lying about joint finances and 35 percent acknowledge being deceived. According to the survey, those who committed financial deception, either hid cash from their partner, didn’t disclose minor purchases, hid a bill or invoice, or lied about other expenses, debt or money earned. Not surprisingly, more than 2 out of 3 said their relationship was negatively affected, 2 out of 5 said they lost trust in their partner, and 16% said this deception ultimately led to their divorce.
The truth is that people view money VERY differently. They manage it differently, spend it, save it, and invest it differently; they also view debt and investment risk differently. Because of this it’s important to have open communication with each other, especially regarding your personal finances. The most common financial feuds between married couples today include: spending everything you make, versus saving something from every paycheck, differing views on where to invest your money, and opposite philosophies on how much debt a couple should maintain. It’s hard to imagine two people becoming one, with these financial differences dividing them.
Talk to each other. Find out what the other wants and work together. He are some important things to discuss.
Goals: These are both short and long term goals. Such as, when do you want to buy your first home? When and how will you start stashing money away for your children’s college fund? How much money do you want to start saving for traveling or retirement? By bringing your financial hopes and goals to the table, you can reach a SHARED financial vision for the future.
Budget: Create a budget together. Knowing in advance how much money you can each spend and how much to apply to your agreed upon budget, will greatly decrease the risk of financial infidelity down the road.
Estate planning: Good estate planning documents are not only for the rich and famous, or the wealthy. Whether you’re single, widowed, or marrying for the first (or second) time, it’s important to create and update your will, living trust, insurance policies, power of attorney documents, beneficiary designations and any other financial accounts you may have. Also, getting married is one of the life events that allow you to change your health insurance election without waiting for the open enrollment period, so use this time wisely.
Retirement Planning: Whether you’re getting married earlier or later in life, retirement planning is something you should prepare for as early as possible. Evaluate your current financial situation, as well as the time you envision yourself and your spouse retiring, and discuss how much of your money should be put away and invested into a retirement account each month.
There is no one size fits all solution for how to handle money in a relationship. You have to find what works best for you and your partner. You must be able to discuss your financial goals, so you can worry less about financial infidelity. And if you can’t seem to get on the same financial page, bring in a 3rd party. A good financial advisor, counselor or other independent party may help you to bridge the gap, and build a better financial life together.
This information is for educational purposes and should not be considered specific financial, tax or legal advice. Always consult with a qualified advisor regarding your individual circumstances. Investment Advisory Services offered through Global Financial Private Capital, LLC, an SEC Registered Investment Adviser.
Brad Zucker, RFC® is the president of Safe Money Advisors, Inc., a Las Vegas-based independent financial advisory firm. He blogs on personal finance every Monday for the RJ. For more information visit www.SafeMoneyAdvisorsNV.com or connect with him via Facebook and LinkedIn.