I’ve been watching (well lurking on Facebook really) the status updates of a great guy I used to know as he gets remarried. Both he and his to-be-bride are coming to their new marriage after being single with kids for some time. I’m thrilled for them.
As I got more nosey, as I tend to do, I started reading her blog. Then I started following links to other people that she follows that have been divorced and are raising kids. I got nothing but good vibes for those people. It must be tough, so I wish them all well. I can’t even imagine going through that. We can barely handle our own kids between my wife and I.
What does this have to do with finance? Well, short of health issues, or natural or national disasters, there’s little else that can derail your financial plans than divorce. When a divorce happens, its like a company going out of business. You spin off some of the assets to make new plans, but each of the to companies that spin from it will be nowhere as powerful as they were before… At least immediately.
Before going any further, what can we learn from Chris Rock about finances and marriage?
“Married and miserable, or single and lonely” – Chris Rock.
With 40-50% of marriages ending in divorced, the prudent financial genius would go the single and lonely route and enjoy a lifetime of serial monogamy. Cool. But wait, there’s more:
From “The millionaire next door”: 95% of the millionaires are married and have been married to the same woman the entire time.
Sure, those statistics were taken a while ago, but it still holds true today. (This I remember from reading his updated book as well as several people I know in this camp who are still alive, married, and rich). Given this data, your chances of being a millionaire are greater if you can get married and then stay married. So its simple my single friends: If you’re not married, make sure that if you do get married, you stay married. Duh?
A guy I used to work with said it like this: “There is no way I’m giving up half of all I’ve earned and saved in retirement to my wife. If she wants it, she’s going to have to put up with me.” He’s a happily married Texas man.
And now the brief moment in this article you’ve been waiting for: Marriage Tips from the Finance Jerk. Well, its not going to happen. Instead, I’ll mention three things I like about our marriage in a rated G way:
1. We are aligned on so many things philosophically that just thinking of being united on that front with my wife makes me smile: We love animals, but hate the idea of owning pets. We hate wasteful spending and laugh at people who try to display wealth in silly manners. We are ridiculously dedicated to our children’s success and will spend all kinds of time on it at the expense of our own free time, pursuits, and ambitions. We also MUST have the kitchen cleaned every night. We hate waking up to dirty dishes so we always get it done before bedtime. We also could care less which way the toilet paper roll is hung… So there’s lots of things that we see eye to eye on that we came to the marriage with. These things help us out when there’s differences. One such difference: “What is the definition of clean?”
2. We talk every night. Usually, sometimes we can’t when I’m traveling, but we’ll have a debrief for 1/2 an hour every night before bed. We laugh at our kids, gossip about people we know, and pass serious judgement. We can be downright nasty and critical of people, but we keep it to ourselves. We also express sadness for our friends and family that go through hard times and then rejoice and express gratitude for the wonderful life we live together.
3. We always have projects. We each have things we’re trying to get done. All the time. There’s probably never a time when my wife and I don’t have projects we’re working on. Whether for church, work, my latest brilliant idea, or this week its halloween costumes. We’re both very motivational to each other and always encouraging. There’s a lot of support going on in this marriage.
Ok, enough soft stuff. Back to finance. If you’re a partner in a business, you want to know how that business is behaving in all aspects. That includes accounts payable and accounts receivables. Translating that to marriage: How do you handle your money? We do it in a way that seems painfully obvious: We just pool it all and share it. What surprises me is that many couples don’t do this. They have a hers and his account. (Or a his and his account or a hers and hers account (the Finance Jerk is not in the business of defining marriage)). That seems complicated. It also seems like you have to split up who pays what bills and out of what account it goes through. That can lead to blame and frustration if there wasn’t enough money in one account. It also doesn’t seem very united. We don’t like complications. We do have separate accounts, but they are for different functions. We share all of them and there is no his or her account. We keep it simple:
All accounts are jointly in both our name. My wife handles all the monthly bills except cell phone bill. She knows how much we bring in and how much goes out. I am hazily aware of it, but mostly focus on where we put money: Stocks, savings accounts, etc. I do all tax returns and talk it over with her before we submit. We are constantly updating each other on what is happening where. Yesterday we talked about the real estate tax bill we just got that is due in November. At any given time, any one of us could tell you roughly what the balance is in our bank accounts. We both are aware of trends and the cyclical nature of our finances. (Money gets tighter in October/November but we usually have more in May/June). In any business, its important that all shareholders are aware of the financial health of the company. That way if there are issues, they can work together to solve problems.
Combining accounts has been easy for us since we’ve been doing it ever since we were married. We were married our last semester of college and we didn’t have much money. (Actually, my wife had $8,000 and I had $300, but we had $0 in debt, and she was very trusting). It was easy to combine nothing. I imagine its probably harder to take that leap of faith and combine accounts when two people have been high earners for a long time. Similarly, when one party has lots of debt, it can be difficult to want to combine with that. So before you get married, make sure you understand how your finances will work and what the state is before you jump in. If you were uncomfortable with the debt load of a significant other then put them on a plan before you get married. Dangle rewards. “Honey, I love you, but I have to put you on a plan if this is going to work”. And then, stick with the plan.
Both members of the marriage (assuming there are only two people in a marriage, but I suppose that could be up for debate too) should take part in financial activities. Some of my friends do everything and their spouses do nothing. This is not wise. Even if the other party has never done it before, or doesn’t like it, its part of growing up. If I died I’m confident my wife would have no problem handling the finances. She’d have all passwords, and all accounts. It also helps curb spending and work towards common goals. Since my wife and I are working towards financial independence, then we know what has to get done and where we are on the road. Its great.
Lastly, be united in your financial goals. Talk over what you’re trying to get done. Be realistic. Retirement IS a problem that you will have to face sooner or later. (If you’re lucky). Here’s a simple thing to talk over: What is the definition of $10,000 in savings to you and your spouse? For some it might be: “A good start”. For others it might be: “Woah, lets go spend some of that and buy something frivolous”. For others it might even be: “Oh my gosh, all we have is $10,000 in savings? We need to clamp down NOW!” When you are united in your definitions it makes things easier. You don’t have to like the definition, but you have to agree. (It works better if you can agree).
Having been married for almost 12 years I know that my financial habits are much better than they were when I was single. This has a lot to do with getting older, but I think its more influenced by being married. Evil plans are more fun when you are working with someone on that plan. Its more fun to share in the rewards when you are with someone. I can see why 95% of the millionaires surveyed have been married to the same person for a long time. Marriage gives you more responsibility and more drive to succeed.