This article is part of our 52 week journey through Bill’s latest book, The Graduate’s Guide to Life and Money. Each week, a full excerpt from his book will be presented from beginning to end. To get your copy of his book, visit www.TheGraduatesGuide.com.
When do you start talking about money with the person you want to marry? Well, some guys try to bring up the topic (“Hey baby, check out my sports car”) before their first date. Funny how that never really seems to work out. If you really want to crash a romantic evening, just start talking about money. Any topic will do. How much you have, how much you don’t have, how much the movies keep going up in price. Early in the relationship you really don’t want to talk about money at all. However, once things get serious, it is actually one of the most important things to discuss, next to children.’
Do you know what the number one cause of divorce is in this country? Well, yes, two married people not getting along. But what causes them to not get along? The number one reason is money! That’s right, money is more a cause for divorce than sex or infidelity. Another terrible statistic is that almost half of all marriages end in divorce. That means most marriages probably have some sort of problem related to money.
The first thing you should do is figure out if you are a saver or a spender. The next thing to do is figure out if your spouse (or spouse to be) is a saver or a spender. Don’t worry about who is what yet. This isn’t like matching people according to what Chinese year they were born where a Saver should avoid the Spender and the Spender should avoid the Dragon. In many cases, opposites do attract. The good news is that it is okay to be different than your spouse. In fact, if you were both the same, there would be no point in having two of you.
Let me share a little story with you about balance. You see, my wife and I are a good balance for each other. She’s not a big spender, but early in our marriage she would have spent a lot more if it weren’t for me being the “checkbook police” as she put it. On the other hand, I would have been content living off of rice and water for two straight years so we would have been completely out of debt in no time (we had a lot of debt) and had established an emergency fund. Sure my way was more “mathematically” sound, but how boring is that? Who wants to spend the first two years of their marriage with no social outlet, no fun, and lousy food? That’s what graduate school is for!
Sometimes both people in the relationship are spenders. This is usually bad for a while, but almost always, one of the two becomes a saver. The relationship and the spending cannot last if both partners spend without regard for their financial well-being. Don’t always assume it is the husband that becomes the saver. In a little while we will talk about men and women and how they view finances.
It is also possible to have two savers in the relationship. Ironically, this sounds good at the outset, but unless they both get great pleasure from staring at their ever-increasing monthly account statements, this save-save thing can’t last either. If nothing else, the savers will begin to use their money for good causes. Some people don’t see giving money to charity as spending, but the point is they are using their money. For the savers, they may have found a way to use it that is both responsible and fulfilling. In most scenarios, however, one spouse begins to realize they have all of this money and they want to begin using it. The other spouse may become so obsessed with getting to the next level, whether it’s the next $1,000 or the next $100,000, they lose sight of the big picture. Saving to the point of destroying a marriage is just as bad as spending to the point of destroying a marriage.
If both of you are savers currently, you should talk about your goals. What will you do with your money? Is one of you saving to reach a certain goal, only to spend more once that goal is reached? Just because you are both savers now does not mean you will both continue to be savers. It is important to agree on your goals now, so when you do reach that point, whatever it may be, you will not argue as much about what to do with your money. If one spouse says, “I thought we were saving this money so we can travel around the world,” and the other spouse says, “I don’t want to spend it now, we’ve worked too hard to save it,” one of you could end up sleeping on the couch.
Learn to Talk About Your Money
Before you tie the knot, you should know a little bit about each other’s money habits. You also need to be able to agree, or agree to compromise, on many of your goals. Just because you are dreaming of the white picket fence and the family car doesn’t mean your spouse shares the same ideals. Perhaps he or she prefers the idea of living in the city and renting an apart or driving around in the newest sports car with all the accessories. The only way for your dreams to really become a reality is if you share them in the beginning and find some common ground.
You need to find out what each of you will be bringing to the table. If one spouse has $20,000 in debt while the other one has worked hard to save $20,000 in cash, there could be some resentment. After all, no matter how you look at it, any money used to pay off debt once you are married, is money that could have been used towards mutual goals instead, such as paying for your child’s education, or making a down payment on a house. When you combine the net worth of the two individuals in this example it comes out to zero. That might be nice to the person who had the debt, but it’s the equivalence of wiping out everything the other spouse had worked so hard to save for several years.
Once you learn what each person brings to the table, you will need to decide how to handle the debts and the savings. Decide now what percentage or dollar amount you want to try and save every month and how quickly you want to get out of debt. You should also decide how much you are willing to sacrifice to achieve those goals. Also, will you each contribute equally to the debt or will you have separate accounts and divide things up according to who brought in what debt, or who makes the most money, etc.
If you want to destroy your marriage as soon as possible, set up two separate accounts and keep everything separate. While it is possible to do this and have a successful marriage (i.e. you do not get a divorce), it is much more likely you will have a struggling, business-like, or failed marriage. Of course, before you are married, it makes sense to keep things separate. One way is to pay for things based on your salaries. For instance, if Bob makes $60,000 and Mary makes $40,000, then Bob pays for 60% of everything and Mary pays for 40%. This way they are each paying a proportional share of everything based on their income. If Bob thinks this is completely unfair, maybe Bob is not ready to be married yet and split things 50-50.
Call me a romantic, but I don’t think a marriage should be run like a business. If a couple wants to have two separate accounts with each person being responsible for certain items (such as the mortgage or the car payment or the groceries), then I am not really sure why the two are married. They could have just been roommates. Sometimes, when a married couple starts to have problems, that’s when they decide to start separating their accounts. That is the first step towards a divorce. May I suggest that you first seek counseling before going from a combined system to having two separate ones? It could save you in the long run.
With that said, I must add that there is nothing wrong with each person having their own spending account. In fact, it is recommended that each person maintain a small amount of their own individuality through a discretionary account they can use on whatever they want, without having to answer to their spouse. In a sense, we are talking about an allowance. Each spouse would get an allowance of a certain amount of money every month. They can spend it all at once, or save it to buy something larger, such as a plasma television or a motorcycle. With the exception of certain costs such as transportation or lunches, both spouses should receive the same amount of allowance, even if one spouse does not work or the other makes much more money than the other. After all, in most relationships one spouse works harder outside of the home, while the other one works harder in the home. Both are contributing to a successful marriage.
Bill Pratt is a former credit card executive turned student-advocate. He is the author of Extra Credit: The 7 Things Every College Student Needs to Know About Credit Debt & Ca$h and The Graduate’s Guide to Life and Money. Bill speaks at colleges to educate and entertain students about real-life issues in money, leadership, and success. His goal is to help students succeed personally and financially so they can improve the lives of those around them. You can learn more at www.ExtraCreditBook.com or www.TheGraduatesGuide.com.