It has been said that the leading cause of divorce is money. What we have found after helping thousands of married couples is the true issue comes down to communication. Before you get married, have the money talk. If you are already married and did not have the talk before you got married, have the money talk right away. We have found that this is such a huge part of a successful marriage that Jeff Motske, our President and CEO, wrote a book about it called “The Couples’ Guide to Financial Compatibility”. If you’d like a much more in-depth couples’ guide, you can find the book on Amazon or a Trilogy financial advisor, but one specific question we get a lot is “Should we combine assets?” Most advisors will tell you that you should absolutely combine your assets when married, but there is resistance at times, so the following are some ideas to help with the money talk when not combining assets. Keep in mind that communication is the key.
Every couple should start with a cash flow conversation. We call it cash flow and not budgeting for a couple of reasons. One, budgeting just sounds hard and not fun at all. Two, cash flow can pertain to any level of income. Typically the higher earning clients we have do not budget, but the best clients know where their cash is going regardless of how much they make. Make sure to know what items are set in stone and which are not. Decide on a dollar amount where you have to discuss a purchase with your partner before you buy it. For some couples, that number could be $100 and others it could be $10,000, but you should know what the number is for the two of you.
Another part of the conversation that needs to be prioritized is the balance sheet. You should know where each other’s assets, debts, investments, insurances etc. are located. If anything were to happen, the other should at least know who to call. In the wake of an unexpected loss, you are not going to want to have to search through mail, email, or other avenues to find financial statements.
Whether you share your assets or not, making sure that each partner has their own “slush fund” can be very helpful. It allows for a little individuality in your life. Also, it is very hard to buy a gift for someone when you are sharing all the credit cards with them. The slush fund can help here.
Regardless of whether your assets are combined or separate, every couple should build a financial plan together. Discuss your goals and aspirations as a team, because you want to make sure you’re working toward the same goals. We have heard from several clients that it is not fun to be retired and have to wait for your spouse to come home from work. It is important to build an estate plan together, so you know each other’s’ wishes. Also, you want to make sure and plan for the what-if’s in life together. An unexpected loss of income, long term care need, loss of job, etc. can happen to anyone at any time. Make sure that you are prepared together because those things may physically happen to one of you, but being married, you will both be impacted financially and otherwise.
When not combining assets, typically at least one of the partners believes the other is hiding something. In order to stave off that resentful feeling of distrust, there must be a level of disclosure and transparency in your finances. You do not necessarily have to share ownership of an account to share what’s happening within that account. There are many apps and websites out there which can assist in sharing that information, and if it helps your marriage survive for the long haul, sharing that information was well worth it.