Money and Marriage: Tackle Trouble BEFORE It Begins

Money is a major sore spot in most rela­tion­ships. And to be mature about it, cou­ples have to plan ahead–before mar­riage and not dur­ing it because it might be too late then– and do their “money talk”. It is a hard and awk­ward topic to talk about I’m sure, but there is wis­dom in being mature about it and plan­ning ahead.

Ron Lieber writes the excel­lent “Your Money” col­umn for The New York Times. He shares a list of four money talks to have before mar­riage. Lieber writes:

Divorce tends to be emo­tion­ally gut-wrenching for the peo­ple who go through it (not to men­tion those around them). But most cou­ples don’t real­ize that divorce can also be among the most ruinous finan­cial moves any­one can make.

This arti­cle struck home for me. No, Kris and I are in no dan­ger of get­ting a divorce (I love my wife!), but we’re at that stage in life where the peo­ple around us are pass­ing through rocky stages of their mar­riage. Some are even get­ting divorced.

On Mon­day I spoke with a friend — let’s call him Mike — whose mar­riage is floun­der­ing. Mike and his wife are wrestling with a vari­ety of issues. The acute cri­sis was caused by infi­delity, but the chronic cri­sis — the ongo­ing prob­lem — involves a con­flict over money.

Mike and Kathy

Mike and Kathy didn’t talk about money before they got mar­ried. They were young, both had jobs, and both spent most of what they made. After they mar­ried, they joined finances, as most peo­ple do.

Things were fine for a while. But then Mike noticed that Kathy seemed to have a prob­lem. She was a shopa­holic, a com­pul­sive spender. Plus, their lifestyle expanded so that they were liv­ing paycheck-to-paycheck instead of hav­ing a bit of a surplus.

Time passed. Mike and Kathy bought a home. They had two chil­dren. Finances con­tin­ued to be a sore spot — they fought about them often. They never seemed to have enough money to get ahead. It burned Mike up to open the bed­room closet and see Kathy’s wardrobe: dozens of expen­sive items, many still with the tags. Once, he opened the trunk of the car to dis­cover more expen­sive items that Kathy hadn’t even both­ered to carry into the house.

Slowly but surely, Mike and Kathy fell into debt. They got into trou­ble on their mort­gage. Mike had always han­dled the couple’s finances, but to “teach Kathy a les­son”, he gave her the check­book and asked her to pay the bills. It didn’t help. Indeed, their finan­cial cri­sis accel­er­ated. Their debt soared. Their home went into fore­clo­sure. Cred­i­tors began to call. Ear­lier this year, they actu­ally lost their home.

Things came to a head in Sep­tem­ber. Other cracks in the mar­riage forced Kathy to move out, leav­ing Mike to care for his two sons. “But you know what?” he told me on Mon­day. “Finan­cially, this has been a real eye-opener. With Kathy gone, I’ve been doing the accounts again. I expected us to lose money, like we do every month. But we had a $1500 sur­plus last month. $1500!”

Mike says maybe he shouldn’t have tried to teach Kathy a les­son. It back­fired on him.

Mike and Kathy may or may not get a divorce. But one thing’s cer­tain: Until they address their finan­cial issues, they’re going to con­tinue to have prob­lems. But the real time to tackle these issues was before they tied the knot, not ten years into the marriage.

In Ron Lieber’s recent arti­cle, he lists four finan­cial issues that ought to be dis­cussed before marriage:

Ances­try. What is your money blue­print like? What did your par­ents teach you about money? How your fam­ily mod­els money plays an enor­mous role in your own rela­tion­ship with the stuff.

Credit. Even though it’s not roman­tic, some experts rec­om­mend that prospec­tive part­ners pull their credit reports (and scores) together and dis­cuss the results. On an ear­lier episode of The Per­sonal Finance Hour, Andy shared that he asked his girl­friend to pull her credit score on their third date! They also signed a prenup­tial agreement.

Con­trol. Before you get mar­ried, decide who is respon­si­ble for which por­tion of the house­hold accounts. Decide the fam­ily finan­cial struc­ture. Know what your bud­get will be like, and how much each parter is allowed to spend freely.

Afflu­ence. Finally (and to my mind, most impor­tantly), dis­cuss your finan­cial goals. How wealthy do you, as a cou­ple, want to be? What are you will­ing to sac­ri­fice to get there? For my upcom­ing book (Your Money: The Miss­ing Man­ual), I inter­viewed my accoun­tant. When they were first mar­ried, he and his wife lived like pau­pers for five years so that they could pay off all of their stu­dent loans and set up a solid finan­cial base for the future. They worked together toward a shared finan­cial goal.

Obvi­ously, dis­agree­ments over money don’t always have to end in divorce. I spoke to another friend last week whose hus­band has always been some­thing of a spend­thrift. They don’t make a lot of money, but he cer­tainly knows how to spend plenty of it. His bad money habits had caused cracks to form in the mar­riage. But with some guid­ance from a church pas­tor, he’s changed his ways. My friend is opti­mistic about their future — finan­cial and otherwise.