Atlanta Financial Blog
Marriage-Killing Money Issues
September 3, 2019
Divorce can be one of the most painful transitions an individual or family can experience. And once the litigation is done, family members often continue to suffer. Adults often experience a decline in their physical and emotional well being, with a heightened rate of stress-induced illnesses, depression and a loss of identity and social connections¹. Children often suffer in less obvious ways, with educational and adjustment problems in early childhood, and emotional problems related to the divorce increasing in young adulthood². Many couples fight hard for their marriage and family, but simply aren’t able to overcome their differences. What are the top causes they report for ending their marriage? Most of us know infidelity tops nearly every list as the most common reason, but problems related to money and financial stress is nearly always listed in the top five reasons reported. In fact, individuals who report arguing about money once a week have a 30% higher chance of divorcing. But, is the root cause of these divorces not having enough money? If that were the case, getting a divorce definitely seems like an illogical solution, since each party will end up with half (or less) of what they were already arguing about to begin with. So what is really going on when couples cite “money” as the cause of their divorce? And if you are married, and find finances adding strain to your marriage, what can you do to avoid joining the ranks of those who divorce?
The answer depends on which of the following causes of financial stress you see playing out in your relationship with your partner:
“There’s just not enough” – This may seem like a straightforward problem to solve – if there isn’t enough money or income, one or both partners could/should simply work together to increase income or cut spending, right? The couples who struggle with this issue, however, often fall victim to the “blame game.” Instead of working together to solve the problem, one partner (or both) may place blame on the other for not earning enough, not “doing their share” for the family finances, or for unrealistic spending habits or expectations. Finding a way to communicate directly without blame about the stresses and fears one or both may be feeling about the family finances is the place to start. Recognizing the different messages each partner received about money growing up can help too. Did your family fight about money? What did your parents teach you about money? Or did they avoid talking about it altogether, so you have never seen couples work through financial strains in a healthy way? If you’re replaying an old script and want to find a way to write a new one, this is often where a professional marriage counselor can help. Once the emotions de-escalate, a financial advisor can then help you construct a plan to get back on track.
“We just can’t agree” – If you are struggling to agree on how to spend your money today, start by each of you creating your own “spending list.” Put dollar amounts and rank all the possibilities in three groups: must do/have, would be nice to do/have, and least important/can wait. Then share and discuss your lists. Compare the top priority items for each of you, and then total your income and funds available. Once everything is down on paper in black and white, you will likely find out you are much closer aligned than you expected or feared. The items to cut may jump out to both of you. You will likely still need to compromise, but you each should at least feel heard and be more likely to engage in the needed give and take.
“We don’t know where we are going” – Even when by every objective measure there seems like there should be enough money, many couples still experience stress about what to do with the money they have. Should the unexpected inheritance go into savings or toward a second home? Should they give more to charity? Pay for an Ivy League education for their children or save more for their own retirement? Travel more in retirement or start college savings plans for their grandchildren? The choices can seem endless. When couples don’t agree about what money should do for them, having “more” can simply make the problem worse, as one partner feels financial freedom to depart even further from the path his or her partner is advocating. Have you and your partner discussed all the different things you could do with your money and agreed on priorities? Start by remembering “more” doesn’t necessarily increase or “buy” happiness – a concept covered in a previous article³. Creating a long-term vision and game plan can be even harder than managing short-term spending. Without professional guidance, it often just isn’t clear what is really feasible and what trade-offs might be needed. This is where we most often are engaged to assist. For example, I recently worked with a couple to help them understand that the retirement he dreamed of and the second home she wanted were both possible. So he can now set aside his fear that they won’t be OK in retirement and enjoy the hunt for the second home. But sometimes the answer is that the couple needs to make some tough tradeoffs. Start by understanding all of your financial options and the long-term impact each course of action. With guidance, you can come together with a plan both of you can get behind.
“Who should do what?” – Sometimes money troubles aren’t about cash flow being tight or not having a common vision. Sometimes it’s about communication and roles. Does one of you handle all family finances and the other feels “in the dark” about what is going on? Or have you divided up the financial duties in a way that seems fair and speaks to each of your individual strengths? Is one of you better with details and making sure bills get paid on time? Is the other one more willing and able to look at the big picture? Do both of you detest time spent on finances and just need to take turns with the most dreaded duties? Or should you “outsource” some or all of your financial duties to keep things on track? Having a financial advisor provide an objective analysis of what is working and what isn’t, and then offer solid solutions can de-escalate tensions. But it is critical that both of you understand and participate in the analysis and planning for your future. When one partner is handling all the planning on his or her own, even with the help of an advisor, a power struggle and resentment can ensue. Protect your financial future by participating fully.
If your marriage is facing financial stress for some of these reasons, start by understanding the underlying issue(s). Seek the help of outside professionals (qualified therapists and/or financial advisors) to help you and your partner see your situation objectively. Engage a financial advisor to understand where you are and arrive at a common vision you can both support. While our DivorceFIT™ process is designed to guide our clients through the process of divorce when it is inevitable, we take even greater satisfaction in helping couples work through periods of financial stress and emerge stronger as a couple for the challenges. If we can help you or someone you care about conquer financial fears and frustrations in your marriage, reach out to us today.
³ Check out “CAN Money Buy Happiness?”
The Setting Every Community Up for Retirement Enhancement (“SECURE”) Act was signed into law on December 20, 2019. With all of the discussion in the news around the political uncertainty, impeachment, and the looming trade war, one of the largest changes to retirement savings laws in recent years was passed with very little fanfare. However, some of the changes will be significant. I have tried to highlight what may impact the majority of our clients and readers.
The Act has a lot of positives such as simplifying rules and making 401k plans potentially available to more workers, pushing back the RMD age, and allowing contributions to IRAs past age 70. The negative impact I see is the elimination of the stretch IRA which is a clear move by the government to raise tax revenues by forcing money out of inherited IRAs sooner. I will discuss in more detail below, but this should be a time to review beneficiaries and discuss whether any change in your legacy planning should be made in response to the new laws. What do you need to pay attention to?
A few months ago, I saw a sale sign in front of my neighbor Gina’s house. She’s lived on my street even longer than I have, so I was surprised that she was selling her home. I bumped into her a week later at the supermarket and asked her where she was planning to move. She told me (with some regret) that she was downsizing to a less expensive house. The alimony payments she’d been getting from her ex-husband had ended last year, and she hadn’t prepared for the loss of that income. She soon realized she could no longer afford to live in her home.
I’d like to believe that everyone understands the value in a year-end review of their personal finances. Statistics that I’ve seen indicate that over half of people who make resolutions indicate a change to household finances and saving money is a priority in the new year1. What is a bit of surprise to me is that so many put off (or neglect all together) actually reviewing their finances before year’s end. My conclusion: one of the biggest deterrents is the time it takes to get things organized.
When it comes to being successful with money, strong organization will empower you more than anything else you can do to take control of your finances moving forward. With my personal and professional understanding of the challenges of this process, I’ve put together an 8-step checklist to get your finances organized, take inventory of where you stand, and ultimately get you ready to close the books on 2019.