July 6, 2015
by Jennifer Ryan Woods
Money issues are so troublesome that people who say they’re experiencing stress in their relationship cite finances as the number one reason — easily beating out the second place contender: annoying habits, according to a study by SunTrust. Money issues are also responsible for 22% of all divorces, making it the third leading cause, according to the Institute for Divorce Financial Analysis.
This may seem like a grim prognosis for married couples, but it doesn’t have to be. There are various steps that experts say couples can take to avoid letting money matters get the best of their marriage. So whether you’re about to say “I do” or money problems have you thinking maybe “I don’t anymore” the following tips can help prevent money from destroying your relationship.
1. Don’t set yourself up for disaster
“Of all the couples that I see, the number one mistake they make is spending too much on the wedding,” says legal expert Ann-Margaret Carrozza, who specializes in personal finance.
The average cost of a wedding is more than $26,000, and if you live in a metropolitan area like New York City it’s almost three times that. “Most couples starting out can’t afford to pay cash for that so they’re going into debt to pay for this one day celebration,” she says adding “for many young couples that’s on top of student loan and credit card debt. So they’re literally drowning in debt out of the gate.”
While this doesn’t mean couples need to forgoing wedding festivities, those with limited budgets should do something smaller or find other ways to make the wedding more affordable and save the big party for the fifth or tenth anniversary when they’re in a better financial position.
2. Discuss your demons
Experts agree that fully disclosing your financial situation with your significant other before tying the knot is a must, regardless of how uncomfortable it may be. This is the time to mention outstanding debts, loans, income sources, investments or other financial assets or obligations. (If you’re already married and still withholding this info, now is the time to bring it up).
If you’re in a second or third marriage and you have alimony or child support payments or even if you expect to provide financial support to aging parents or adult children in the future, that is something you need to address as early as possible.
3. Understand your partner’s money mindset
“A lot of the fights between spouses that seem as though they’re about money aren’t about [money] at all. It’s actually a clash of temperaments,” says Matt Bell, associate editor at Soundmindinvesting.com and author of the book Money and Marriage.
“Temperament is a huge potential source of conflict,” he says adding, one person may be upset that their spouse is spending too much, but the issue may not be just that they can’t afford it but may be something deeper, such as a real fear of not being able to pay their bills some day.
Michelle Perry Higgins, principal of California Financial Advisors and author of various financial books says it’s also important to have an understating of how your spouse views money and how they were raised around money. “Were their parent’s frugal or big spenders? Did you live on a budget? Did your parents talk about money or was it a taboo subject? What is your spouse’s greatest fear with their finances? All of these answers will play into a marriage and how that partner treats money today.”
If you’re unsure how to broach this subject with your spouse suggest taking an online “money personality” quiz. For example, Money Harmony offers a free quiz that that determines whether you’re a hoarder, spender, money monk, avoider, or amasser. These types of quizzes are a fun way to get the conversation started and add some levity to what could be a tense topic.
4. Set your eyes on the (same) prize
Life happens and things change, so it’s not unusual for people’s financial expectations and priorities to shift as time goes by. The problem is when couples forget to check in with each other to make sure they’re still in synch.
“It’s a good reality check for a couple to sit down once a year, no matter where they are on the financial spectrum, and discuss what they are working toward,” Carrozza says, whether it’s a vacation home, paying off debt, or saving more for retirement.
She adds, having goals aligned is especially important for couples with only one income-generating spouse: Often the non-working spouse feels guilty about not contributing financially or the working spouse may feel resentful that the money they earn isn’t being spent prudently. Carrozza says that making sure both partners have the same goal in mind is essential. She adds that it can also be helpful if the spouse that’s not working does something on the side to generate some money, even if it’s just a small amount here and there. It can be anything from selling items on eBay, having a garage sale or taking online surveys. “It doesn’t matter the amount of money, once that spouse starts to [earn some on their own] they will feel more powerful.”
5. Don’t ignore the “B word”
There’s no sexy way to say it: you need to have a household budget. It’s the most effective way to keep track of your money, however only around 32% of people have one, according to a Gallup poll.
Budgeting may seem tedious, but having one can yield significant benefits, not least of which is preventing the marital turmoil that arises when one or both spouses are in the dark about where their money is going.
The good news is that technology has made budgeting a lot easier with the proliferation of online tools and apps that track your accounts and spending for you. One of the most popular programs, which many financial advisors applaud, is Mint — a program that let’s you create a budget and automatically track your accounts and transactions so you can see how you’re progressing. Mint also categorizes your purchases to give you a better idea of how you’re spending your money. There are a lot of other great programs as well (in addition to numerous websites that review them) so it’s worth looking into which program works best for you.
6. Stop Keeping Secrets
Keeping secrets from your spouse can put you on the fast-track to marital mayhem. Unfortunately it’s not uncommon, especially when it comes to keeping secrets about money. Roughly six million consumers in the U.S. (about 7% of the country’s population) have concealed financial accounts such as checking accounts, savings accounts or credit cards from their spouses, partners or significant others they live with, according to a poll by CreditCards.com. Almost 20% have secretly spent $500 or more without telling their partner.
“So many couples are hiding money or debt or charges and then the spouse finds out and its war in their marriage,” Perry Higgins says. In a survey conducted by Moneysupermarket.com, 1 in 10 people said their secret credit card purchases led to a break-up or divorce.
While no one should be micromanaged or expected to disclose every purchase, hiding accounts or lying about big purchases can be toxic to the relationship and can lead to bigger emotional issues down the line such as guilt by the person keeping the secrets and questions of trust when the partner who was deceived inevitably finds out.
7. Give each other some breathing room
Conferring with your spouse about all of your purchases can feel very restricting – especially when you find yourself having to defend a purchase that your partner doesn’t endorse. That’s why various experts suggests having separate budgets for each spouse to spend on discretionary items of their choosing.
Perry Higgins says “I recommend a line item on the families budget title “fun money”. These are the funds that can be used any way they choose and partners don’t need to report back to one another each month as to what they used those funds for.”
Bell uses a variation of this strategy in his family – he and his wife have separate clothing budgets that they can spend however they want. “There is a freedom there,” he says as long as each spouse remembers that they’re accountable for staying within their budget.
8. Come up with a system – like CPUs
When it comes to spending, it’s important for couples to have some ground rules in place to determine, for instance, what purchases need to be discussed ahead of time or what the reasonable spending limit is on clothing, kids toys, food or other household items.
In my family we use CPUs, which stands for “cost per use.” It’s based on whether the amount of use an item will get justifies its cost (it’s gotten the thumbs up from every financial advisor I’ve asked about it). CPUs work best with bigger ticket items. For example, it would be tough to justify the CPU on a $500 pair of shoes that will be worn five times — since it basically means it would cost $100 each time they were worn. A $500 briefcase would be easier to justify since it would be used every day, coming out to pennies on the dollar for each use. We don’t use CPUs as an exact science, but it has allowed us to create a baseline for spending that we can both reasonably follow. While this may not work of everyone, it is important for spouses to have some sort of mutually agreed upon system to ensure they’re both on the same page when it comes to spending.
9. Remember the golden rule
Treat your spouse as you would want him or her to treat you. This may seem simple and obvious, but it’s something that a lot of couples forget to do, especially the longer they’re married.
Experts say one of the biggest problems couples face when it comes to money is how they argue about it. Everyone argues, Bell says but, “It’s much more important with a financial disagreement how you have it.” He adds, it’s okay to complain about something that your partner is doing but it’s not okay to use words that are contemptuous or to use negative labels such as “irresponsible” to describe their behavior.
10. Call for reinforcements
If fights about money have hijacked your marriage and you’re coming close to pulling the plug, consider enlisting the help of a third party who can help you get back on track.
For some couples this might be a financial planner (consider one that charges by the hour so you don’t have to make a long-term financial commitment) or if you’re religious, enlist the help of a church ministry. You could also make an appointment with a couple’s therapist. There is a burgeoning field called “financial therapy” that is dedicated specifically to helping couples navigate financial turmoil.