by HCTG Staff Writer Patrick Totty | Illustrations by Mike Tse
When Rebecca and David met, it was pretty much love at first sight. After about a year, they began discussing marriage, and Rebecca decided to tell David about a little financial problem she had. “When I’d moved to California, a car breakdown left me with a Visa debt that I could only pay the interest on.” David’s response to this revelation only cemented Rebecca’s certainty that he was the one: “He said, ‘Let’s get this out of the way so we can start saving for our future,’ and he paid off my debt.”
Rebecca, a Bay Area resident, says David’s “we” attitude is something that’s allowed their 23-year marriage to thrive. “Most people I know who’ve been divorced were people who didn’t merge, or at least openly discuss, their finances. I’m not saying that’s what caused the divorces, but I think it was indicative of not sharing, of holding back.”
Having been married before, Rebecca based her opinion at least partly on her own experience. In her first marriage, her husband had insisted on keeping their incomes separate, and although he earned more than she did, he expected her to pay half of all household expenses. This left him with much more disposable income, which he spent on clothes, bars and treating friends to dinner. It left her feeling not only resentful, but as if they were leading separate lives. So, for Rebecca, David’s suggestion that they merge finances and consult with each other on major purchases was a novel idea and a big relief. “It made a lot of sense,” she realized. “Our marriage would be a true team effort.”
Does Rebecca’s hard-won insight into money and marriage apply to everybody? In many cases, yes, say financial planners who work with engaged and married couples. The problem is that, unlike Rebecca and David, the majority of couples seldom have an open and honest talk about money early on in their relationship, and many never get around to it at all.
A bigger taboo than sex?
“We’ll talk about sex, religion and many other dicey things, but when it comes to money, we’re almost completely silent,” says Barbara Bachelder, a Marin County-based certified financial planner (CFP). “The typical agreement among engaged or married couples seems to be, ‘You’ll handle it or I’ll handle it, but let’s never discuss it.’” The reason why, she says, is that in our culture most of us have been raised not to reveal our salaries or net worth. How much we make or owe is one of our deepest secrets.
Even being in love can be an obstacle to discussing money. “Most couples are in a ‘love conquers all’ frame of mind right before they get married, so they’re not inclined to talk about money,” says Jovita Honor, a San Jose CFP. Caught up in matrimonial giddiness, they put the wedding gown, those adorable but pricey favors and their gotta-have-it South Sea honeymoon on their credit cards, and float to the altar in a state of blissful denial. That euphoric bubble usually bursts, though, once the wedding bills come due. “Couples quickly realize that because they overspent on their wedding, the money for important things like having children or buying a house just isn’t there,” Honor adds. “Suddenly, money has become a major issue, and the relationship is off to a shakey start.”
You don’t need something as dramatic as wedding day splurges or a fiancé‘s past bankruptcy to put yourselves in a precarious financial position. Often it’s the little things that can do you in. Long Beach CFP Aaron Newland frequently deals with a money leakage phenomenon he calls “the trickles.” There are trickles everywhere for the unwary: Target, Best Buy, movies, eating out, ATMs-they all add up. “When couples learn just how much they’re ‘trickling away,’ it often inspires a serious we’d-better-sit-down-and-talk reaction.”
If you think you’re too young to need to discuss money with your partner, remember, the future is just around the corner. In order to make it through kids, houses, retirement and into your golden years together with a minimum of financial worry, you ought to have a plan. Trent Bryson, a CFP in Long Beach often works with younger couples. He says professionals who come to him want to know what they should be doing with their incomes early in their careers. Aside from touting the miracle of compound interest (you invest a small amount monthly over 40 years and retire with substantial wealth), Bryson works at getting young clients to overcome a belief in their own invincibility. “Twenty- and thirty-somethings seldom view themselves as candidates for accidents, long-term disease or death,” he explains. “But if you want to safeguard your spouse and your children financially, you become a lot more receptive to the idea of making wills and buying insurance.”
Meeting with a planner
If you decide to consult a planner, the process is pretty straightforward. She’ll ask you how many kids you’d like to have, where you want them to attend school, where you want to live, and when and in what style you want to retire. She’ll draw up a plan showing how to reach those goals and the various compromises you may need to make, such as postponing retirement, deferring a vacation home purchase or sending the kids to public schools. Her objective will be to get you and your partner to agree on what you two can live with and work toward.
Don’t be surprised if one of you is much more willing to take the lead in discussing financial matters. It’s a fairly common phenomenon, the result of each partner’s past family or personal experiences. Another reason for one partner’s reluctance may be fear of exposing a deep debt or a bad credit score. It’s human nature to want to avoid mentioning these things, but, says Newland, they’ll show up sooner or later. “If you talk about the skeletons in the financial closet honestly before you get married, you can start doing something about them.”
If you don’t, secrecy can kill a relationship. Bryson recalls a 25-year-old who wanted to keep his earnings secret from his wife because he made more than she did. Bryson sent him packing. “If you start off on that foot, you won’t be secretive in just that arena; it will affect other areas of your life.” Also, hiding wealth can backfire. It not only causes resentment, it can lead to divorce, which will probably trigger community property divisions despite your best efforts to keep monies separate and hidden. As Bryson notes wryly, “If you’re going to be that pessimistic from the beginning, you’re headed for divorce and divorces are terribly expensive-period.”
Once you have a plan, you should check in regularly with each other and your planner to see how you’re doing, ask follow-up questions and perhaps do some tweaking. An example of how a plan can evolve is the monthly clothing allowance Rebecca and David agreed to early in their marriage-before their earning power took off. “We each had a set amount we could spend,” says Rebecca, “and we stuck to our limits.” As they prospered, however, they found that only big-ticket expenditures required a serious sit-down consultation, and they no longer needed such a strict budget. “We’d built up so much trust over the years, along with our habit of checking in with each other, that we didn’t have to monitor ourselves so closely anymore.”
Exceptions that work…IF
Does every couple need a detailed agreement to avoid hurtful money issues in their marriage? Not necessarily. Linda, a Southern California school teacher who’s married to a contractor, says she and her husband, John, have kept their finances separate since they wed 20 years ago. For them, money has never been a bone of contention despite the lack of a formal agreement. “The closest we came to spelling something out was when I got pregnant soon after our wedding,” recalls Linda. “He said, ‘I’ll buy the house because you’re quitting work, and you pay for the kids’ college because at some point you’re going back to work.’”
Two things have helped them maintain a smooth financial relationship, says Linda. “First, even though we keep separate accounts and credit cards, our philosophies about them are the same: no living beyond our means and no carrying credit card debt. The second is simple generosity. John makes more than I do but he’s very generous. For instance, he pays for the groceries and never skimps on buying good food.” That may seem like a small thing, but it’s indicative of an attitude that can keep a marriage flourishing. “If both partners are generous with each other and make the other’s needs their priority, it should work out well,” Linda predicts.
In the end, says Newland, “Each of you has your own ideas about money. But if you want your marriage to succeed, you have to look out for your loved one. And that means being as open as possible about the last taboo—money.”
Planning a Successful Financial Union:
List your goals.
Do you want to own a home? Have one or more children? Do you plan to send them to private orpublic schools? College? Do you intend to retire? If so, when and with how much money in your piggy bank?
Talk frankly about money values.
Sit down and discuss your family’s attitude toward money. Did you grow up poor? Affluent? How did your parents handle money? This can be a touchy conversation, but it can also be liberating and create a habit of communication.
Clean up debt before you exchange vows.
A partner’s bad credit can affect yours.
Figure out what each partner’s role will be.
The person who’s more detail-oriented might do the budgeting, account maintenance and check writing. The one who’s more interested in investments can track your portfolio, do research and make recommendations.
Use a bookkeeping program like Quicken or MS Money to keep you on track
Their planning features help you think rationally about money and can often clarify financial issues.
Seek professional advice.
Objective outside help can ease the stress surrounding money issues.
Manage your finances as you would a business.
Take only reasonable risks and divide money-related tasks according to aptitude.
Lay all your money cards on the table.
Create wills and trusts!
Make sure you put in writing what and where your assets are and how you want them distributed.
Talk monthly about where you are financially.
Even if you’d rather walk over hot coals, consider this a necessary chore. It’s part of the work of keeping your marriage on an even keel.