Posts Tagged ‘money’

Love may move mountains, but money can crumble the strongest marriage. A good way to head off problems is to discuss financial issues before the ceremony.

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.

Sure, you could bet big and lose on a single stock or money manager. Or your small business could go bankrupt, taking your life savings with it. But divorce and the costs that often come with it — from legal bills to the sudden need for an additional residence — affect far more people.

The risk that any marriage will end in divorce is about 45 percent, according to David Popenoe, a professor of sociology emeritus at Rutgers University. The chances fall to about 40 percent for first marriages and decline further for college-educated couples, people from intact families and couples who share the same religion.

Given the various financial complications, I’ve long wanted to devote a series of columns to divorce and money. This week, I’ll start with a topic that could save some marriages if more people made it a priority. It’s crucial to air and resolve financial disagreements beforehand.

“It’s almost impossible to be hooked up to somebody who has the same balance of spender and saver as you, or expansiveness versus conservativeness or financial circumstances,” says Gregory A. Kuhlman, a New York City psychologist who runs marriage success training programs with his wife, Patricia Schell Kuhlman.

He adds that the mix gets even more volatile with second marriages, when couples may have children, ingrained financial habits and savings or other assets that necessitate the discussion of a prenuptial agreement. “Success in marriage is only partly attributable to compatibility. It’s about how you manage those differences and whether you have a style for doing so that is successful.”

What follows is a list of four financial issues that ought to be near the top of the discussion list before getting married. Please add to the list in the comments of the online version of this article.

ANCESTRY

When Lisa J. B. Peterson started her Boston-based financial planning firm, Lantern Financial, she knew she wanted to focus her practice on young professionals. She quickly realized that many of them could use premarital financial counseling and built a program called Harmoney around their needs.

One of the first things she asks clients about is what she refers to as their financial ancestry. “It’s looking back at your own personal past,” she says. “How did your parents deal with money, how does that impact how you deal with it, and how might that impact the couple’s relationship?”

Because so many of our money behaviors are learned, she asks couples to share their earliest money memories — whether their father hid money from their mother or how either parent fretted over the funds available. This can be a particularly intense discussion for people whose parents were divorced, and the stories are sometimes accompanied by tears. “Money is so emotional, and people forget that,” Ms. Peterson says. “You think that it’s just numbers.”

CREDIT

While it’s about the least romantic subject imaginable, your credit history holds a chunk of your permanent financial record. It follows naturally from the ancestry conversation, and Lantern Financial pulls credit reports and scores for its clients.

Molly Milinazzo and Scott Donovan, an engaged couple who live in the Dorchester section of Boston and are both 24 years old, were relieved to discover that their scores were within about 15 points of one another when they went through the Harmoney program in May. “A lot of people end up surprised, and it’s best to keep those kinds of surprises at bay,” Ms. Milinazzo says.

Full disclosure on the credit front is useful for two reasons. First, a credit report is, in part, a catalog of past mistakes and overall habits — loan payments you missed or department store credit cards you didn’t really need. That in itself is a good starting point for a discussion about what you’ve learned (or still need to learn) about handling money.

There’s an immediate practical side to this, too. If there are errors or low credit scores that a couple can improve, there may still be time to make the fixes so that the couple can get the best rates on a loan for their first home a year or two later.

CONTROL

Figuring out who will pay the bills each month may not seem to be an important conversation or assignment. But it gets tricky when both people want to take it on. “People understand that in a relationship, money is control,” says Jeff Kostis, a financial planner in Vernon Hills, Ill., who walks engaged couples and newlyweds through a checklist of questions. “If you’re not paying the bills, you don’t know where the money is going, and you feel like ‘He doesn’t want me to go out with my friends’ or ‘She doesn’t want me to play in the fantasy football pool.’ ”

For two people who have both been on their own for a while and don’t want to give up doing the monthly financial chores their own way, Mr. Kostis suggests, at a minimum, regular household meetings complete with Quicken or other spreadsheets so that the person writing the checks can keep the other one up to speed. With more stubborn couples, he might suggest handing the controls back and forth at the beginning of each year.

Mr. Kuhlman, who explains the counseling approach he and his wife take with clients at stayhitched.com, says it shouldn’t be surprising that control issues come up constantly when talking about money. “It’s concrete, you can see it,” he says. “It’s not ephemeral or less measurable, like affection.”

A few things that he suggests couples discuss early on: If one person is making most or all of the money, does that person get to make most or all of the financial decisions? If you’re the car aficionado or have researched all of the local school options for the children, do you get to make the decisions about those things? “These are the kinds of things that don’t come out when you’re dating,” he says.

AFFLUENCE

Here’s another question that tends not to come up during courtship: Just how rich do we want to be one day? Mr. Kuhlman refers to this more politely as the “desired level of affluence.” “Are our career paths going to be something that pulls us together? Or, more often, are they things that will tend to pull us apart, where we’ll really have to be proactive to make sure it’s under control?” he says.

Mr. Kostis might put it a bit more bluntly, say to a spouse of an aspiring investment banker or corporate lawyer: Are you O.K. with acting essentially as a single parent, with your partner working 80 hours a week until the age of 80? “Not that there is a right or wrong answer,” he says. “It’s just about understanding, going into the marriage, what that would really mean.”

He adds that people in the financial advice business often joke that they spend half their time talking about money and the other half acting as marriage counselor. “But it’s the same communication style,” he says. “You’re giving people permission to be honest without having someone jump down their throat for giving the answer that they really want to give.”

By RON LIEBER

Source: www.nytimes.com

Published October 23, 2009.

Money can be the number one source of frustration in relationships.

Introduction

Money can be the number one source of frustration in relationships. These frustrations ring true for couples regardless of the length of their courtship or the number of years they have been married. This Tip Sheet offers tips to help couples handle the financial strain that often accompanies a long-term relationship.

For many couples, ample money can represent fun, good health, a new car, or owning a home. However, lack of money can mean frustration, anxiety, credit card debt, foreclosure, and even depression.

While money means different things to different people, there is no denying that we all need it! And for everyone, especially couples, the challenge is to manage it consistently.

Easier Said than Done

Research over the years provides evidence supporting the financial benefits of marriage. Three primary reasons why a healthy marriage contributes to financial success are:

1. A healthy marriage provides for healthy checks and balances

2. A healthy marriage allows for the pooling of resources

3. A healthy marriage provides security for long-term investment

There is little argument surrounding the benefit of checks and balances in government and other systems. In relationships, however, a couple doesn’t always agree on how their own financial priority should be balanced or checked by their mate. This management of finances is where the strain on the relationship comes into play.

So how do two individuals pool their resources together for the long haul and make it to the finish line? Success at the finish line is not determined by how you start but is more influenced by how you both keep your eyes on the prize. Here is a simple model that can help determine if your course of action is on track:

1. The Eye on the Prize Model
2. The Prize- Want, Wish, Need $$$ Cash on hand (NOT credit)
3. WHO: We, Him, Her Decision: Now, Later, Not at All

KEY

• The Prize represents the activity or item desired.

• The $$$ represents whether ample cash is on hand now.

• And Who shows the decision maker(s) and who the prize benefits. A little advice: Unless it’s We, it might be best that you wait!

• A Decision will be made to proceed Now, Later or Not at All. Choosing Later will require brainstorming for how and when to reach the prize.

Let’s test the model with a real life situation. A young couple has become frustrated with having to go to a coin operated laundry every week to wash and dry their clothes so they decide that they want to buy their own washer and dryer set. A new washer and dryer would cost them $975. Currently, going to the laundry mat is costing them $25 per week, plus an additional $20 on dry cleaning. They believe laundry fees could be eliminated along with the majority of the dry cleaning if they had their own washer and dryer set. They only have $350 in savings; however, the energy bill is included in their monthly rent payment, so they know they won’t have to pay more on utilities should they decide to buy the washer and dryer. Let’s see what they decided using the model:

1. the prize washer & dryer (want) Price$975 $$$ $350
2. Who-We Decision Later (will save $ and revisit in 3mos)

Some factors that helped drive the decision they made together:

• They determined that the prize is a Want, not a Need

• The prize saves them money each month, but they don’t have all the cash on hand at the moment

• They made the decision together and the prize benefits both of them

Talking About Financial Strain

Talking about financial strain with your spouse without the aid of a communication tool can lead to some undesired results. Many couples have had success in using “I feel” statements. This method slows a conversation down and allows you to share how you feel about a particular matter. The benefit of this approach is that what is said is an honest feeling. There is no right or wrong feelings so the natural tendency to rebut or question what your partner has just said is eliminated. An example of an “I feel” statement might be: “When you go out to lunch every day and spend money I feel frustrated because it has an impact on our family budget.” Another example could be: “When you keep me in the dark about our finances I feel helpless, as though I am not doing my part.”

Here are some useful tips that may help you:

• Set a specific time each week or every other week to discuss finances. Conduct the meeting as if you were business partners. In many ways, you are. Do your part to keep emotions out of it (take a break from the discussion if it is getting too heated) and make decisions based solely on the facts at hand.

• Make all financial decisions together. Put all the cards on the table and agree on which strategy to use. If your first strategy doesn’t pan out, admit it and apply a new strategy.

• Be honest and realistic in distinguishing between wants and real needs. Every family can identify areas where money could be saved. The key is making those decisions together so someone’s feelings aren’t hurt.

• Refrain from pointing the finger and looking for blame. The relationship suffers when one person attacks the other. Remember a healthy relationship is a “We” thing.

• Take a long-view approach to your financial stability. Plan for your retirement years. Implementing long-view strategies may require doing without some short-term comforts. There is peace of mind, however, in knowing that you are adequately planning for your future together.

Dealing with Tough Financial Times

There may be times in your marriage when one partner will not be able to contribute towards the family income for medical reasons, an unexpected layoff, a sudden and unexpected death of a loved one, or for other reasons beyond anyone’s control. A period such as this will put your marriage vows to the test.

Any couple who has had to endure one or more of these types of challenges knows the highs and lows of being on-board this financial and emotional rollercoaster. But, enduring periods such as these will make the relationship even stronger. With each major trial it will elevate your relationship to new heights and your commitment to each other will grow.

During times when there is not ample income to match monthly expenses, here are some additional tips to help keep the financial strain from over-burdening your relationship:

• Make your relationship top priority

Despite the difficult circumstances keep moving forward one day at a time. Continue to do the little things that bring a smile to his/her face. Tell and show your partner how much you love him/her daily.

• Communicate honestly with creditors regarding your temporary circumstances

Creditors often understand if you communicate with them honestly. In the case of utilities, service cannot be interrupted if you are in communication with them and paying something consistently.

• Prioritize your accounts

Give top priority to the accounts associated with the things you need the most: shelter (mortgage payment/rent payment), utilities, groceries, etc.

• Make some difficult lifestyle adjustments

You may have to make some decisions that will require a difficult decision on your part, such as selling a car in order to eliminate the monthly payment, or giving up cable television, cell phones or gym memberships.

• Seek assistance from various sources

Numerous nonprofit agencies are available to help families during times of need. There are energy assistance programs, food and clothing banks, etc. whose mission is to help families who have fallen upon difficult times. You can also check for non-profits that can help with credit counseling and other financial services in your area.

Conclusion

Financial issues have been cited as the number one cause of divorce in first time marriages. But, if you take the time to use the Eye on the Prize model when thinking about purchases, you can be sure that a financial decision will be made thoughtfully and together. If a topic is particularly difficult, practice using “I Feel” statements to get you started and headed towards making a decision together. Finally, use the tips presented above to help you reap the benefits of a financially secure future together regardless of your circumstances.

If you liked this tip sheet, you may also be interested in other NHMRC tip sheets, fact sheets and resources, which can be found here: http://www.healthymarriageinfo.org/about/resources.cfm

The NHMRC would like to thank Greg Thiel, MA, CFLE for his contribution to this Tip Sheet. Greg is the author of “Preventative Maintenance for Your Marriage” and a Certified Family Life Educator from the National Council on Family Relations.

Source: www.TwoOfUs.org