A Marriage Money Meltdown Story
Someone we know is going through an ugly divorce. The final straw was infidelity. What has come to light through the divorce proceedings is another kind of infidelity; a financial one. One spouse spent much of the couple’s savings and racked up a mountain of credit card debt, as well a spent the children’s college funds, while the other was saving and cutting back, and though they were in good financial shape. Not surprising, the spouse who cheated was also the spouse who was financially dishonest and this caused the marriage money meltdown.
Of course, the spouse who was cheated on sexually and financially is hurt, angered and stunned. Not only will they not spend the rest of their life with the person they expected, they are not on the path retirement security they thought they were.
Mums the Word
Money is a topic about which no one wants to talk. Parents don’t teach their kids about money because they fear they have nothing to teach. Aging parents and grown children avoid the topic later in life in an apparent effort to avoid death. Couples don’t discuss money before entering into relationships or marriage, seemingly to avoid heavily charged topics such as politics and religion. Spouses usually don’t talk about money because they assume the other spouse is in control or they’re afraid to face reality.
In this all too common situation, one party of the former marriage learned their future wasn’t going to be what was expected at the age of 45 and now must make a hurried effort to fix things.
Situations such as these can be easily avoided. Below are our two recommendations to keep the financial aspect of a relationship open and honest. Not only will this ensure both parties in a relationship are clear about their financial situation, it has been proven that families who talk about money tend to do better financially.
Before “I Do”
It is imperative to know what you and your prospective spouse are getting into when preparing for marriage. This is an important step in marriage preparation, as the minute a couple says, “I do” they become financially responsible and liable; they become one. If one or both parties have financial problems, the other takes ownership of them. Do you know if your future partner has $35,000 in credit card debt or $150,000 in student loans? If one party is doing well financially, the other benefits financially. Has your knight in shining armor been saving her pennies rather than buying shoes?
Long before entering into marriage, schedule and have a meeting to put it all out on the table. Have statements for all your accounts, including investment and retirement accounts to share with each other. Bring copies of your credit reports from each of the credit reporting agencies to share with each other. Credit reports are a must. It is hard to hide accounts and balances on a credit report, whereas it is pretty easy without it. “Ooops! I must have forgotten to show you my $17,000 Macy’s card bill. Silly me!”
Have a discussion about where each of you currently is with your finances and discuss your individual and mutual financial goals, as a couple. Getting on the same page financially is important. You don’t want to find out later that one of you is a saver and the other is an out of control spender. Discuss how you will manage your finance as a couple and include the manner and frequency in which you will meet as a married couple to discuss your finances together.
Family Financial Pow Wow
Often one spouse takes charge of managing the couple’s money, but that doesn’t absolve the other of financial responsibility and accountability. We understand that finance bores a lot of people, but being bored an hour or two a month or a quarter beats realizing you’re broke at 50.
Not every couple is the same. Each should choose the manner and frequency in which they meet. Meeting monthly or quarterly at the dinner table is common and what we suggest.
As we mentioned before, it is important for each family member, include kids in the conversation when they are old enough to understand money (9 or 10). This is a great way to introduce the kids to money as well as talk about college savings.
For this regularly meeting, make sure all account statements are available, either in hard copy or online. Go over how much was saved, how much was spent and how much your investments increased or decreased. Go over how your money was spent and on what.
Discuss whether both spouses are in agreement with how the money was spent and managed. This is a good time to air grievances, so as to avoid future problems and pitfalls.
At least annually, go over each other’s credit reports from each of the three credit rating agencies. This practice essentially proofs your work from throughout the year. If all your discussion lead to decreased debt and increased investments and savings, both credit scores should improve. If credit scores have decreased, it’s an indication that something is amiss. Additionally, this annual practice helps to ensure there are no errors on each other’s credit reports and neither has been taken advantage of by credit card fraud or identity theft.
The key to protecting yourself financially as an individual and as a couple is communication. If the person that inspired this story followed this advice, they may not be in the situation they are today.
Not only does this advice protect individuals from deception, it also protects each other in the event that one spouse passes away. As common as the story about how infidelity destroys a marriage that leaves on party unprepared financially, it is just as common to hear that the spouse who managed the couple’s money passed and the surviving spouse is at a loss with how to take over. This is an unfair way to leave your spouse behind.
The best we can all do is to learn from other’s mistakes and protect ourselves. If you haven’t done so or don’t do so regularly, start talking about your money with your spouse. It’s an important topic for every relationship.