Yes, Money can Mess up Marriages!

marriage and moneyThis morning as I was returning from my early morning gym routine, I listened to NPR’s Chris Arnold’s report on “How to Keep Money From Messing Up Your Marriage.”  He provided another story of a seemingly successful couple who were on the verge of divorce over money.  The husband was making more than his working wife and since they were splitting expenses down the middle, she always felt broke, frustrated and had developed overwhelming resentment. Quelle Surprise! It’s true- money can mess up marriages of all ages, income and assets.

Certainly, money isn’t the only source of marital conflict.  There can be disagreements about children, chores, communication and work.  But, money is certainly the most difficult to resolve. It’s often very difficult for couples to talk about money issues and resolve them.  Money can represent more than dollars and cents.  It can be used to express feelings and relationships.  It can be given to express love, power and respect. And, it can be withheld to humiliate, punish or control.

First, let’s look at five biggest blunders couples make with money based on a CNBC article a year ago:

  1. Believing that “love conquers all.” It takes hard work, communication and commitment to successfully manage money as a couple. Here’s a quiz you and your spouse can take and discuss:

Couples who enjoy a good relationship with money often have shared values, an appreciation of their partner’s perspective and an ability to find common ground.

  1. Practicing money silence. Often this silence is passed down from generation to generation, leading to miscommunication, misunderstandings and hurt feelings.  It is often the reason marriages end up in divorce and children become financially unprepared adults.
  2. Avoiding financial conflict. One recent survey showed that 80% of spouses admitted to hiding some financial purchases from partners-presumably to avoid a fight over the item. Not a good idea.  When you don’t openly discuss money you miss an opportunity to understand your partner’s viewpoint and resolve a problem in its early stages.
  3. Waiting to be financially rescued. Don’t blindly put your financial future in someone else’s hands.  If they die, become disabled or leave, you may have real problems.  Take adult responsibility for your money even if it is not your strong suit.
  4. Meeting with your financial advisor alone. While it may be more time efficient to delegate certain tasks, this is an important one to perform jointly.  It’s a great opportunity to talk about money together in the midst of your informed, caring, objective wealth manager, to understand and resolve financial differences and to make decisions about your future as a team.  In addition, if something happens to one of you, the other is not in the dark.

The commitment to work together for financial harmony should start early.  Couples considering marriage and newlyweds need to do the following:

  1. Give Yourself a Financial Checkup. Only about half of couples today know their partner’s credit score before marriage.  You need to know each other’s spending habits and preferences.  Understand your partner’s debt situation, if any, and work together on getting it paid down.
  2. Start to Develop Sound Savings Habits. Consider putting at least 10% of your combined income into savings each month before you are married.  Calculate what your share of the wedding costs will be and how you will fund and attain that goal together.
  3. Create a Budget. Put everything “on the table” including yours bills, obligations, income etc.  Group your expenses into needs, wants and wishes.  Make sure to budget for the wedding and honeymoon. And, agree on an amount of “fun money” each of you can spend each week or month without talking to the other first.
  4. Split up the Task of Finances. Once married, both should be part of the process.  One might pay the bills (pretty easy these days online), one might recap the finances monthly, one might be responsible for income taxes, one for insurance, etc.  You are accountable to each other.
  5. Decide how best to manage your money. Combine your funds into a joint account, use separate accounts, or keep separate accounts that link into a new joint account.
  6. Once married, update beneficiaries, withholdings and other paperwork. This applies to 401(k) s, life insurance, W-4s at work, etc.
  7. Have a Financial Date at least once a month. Talking about money should be a healthy, ongoing conversation.  Talk about your combined progress toward meeting your financial goals, future financial decisions and corrections, if needed, to your plan.

Unfortunately, love does not conquer all.  Our experience at DWM working with couples of all ages, incomes and assets over decades has shown us that hard work, commitment, regular communication, understanding of a partner’s perspective and an ability to find common ground is what is required to keep money from messing up your marriage.   Money can’t buy you happiness.  Yet, working and talking together about money goes a long way.



Women and Money

woman-and-calculatorWe hear so much about a ‘gender gap’ in incomes between women and men. Patricia Arquette received a standing ovation during her Academy Award acceptance speech for her rallying cry for wage equality. But when it comes to women and money, it seems what we really have here is a ‘confidence gap.’ We are all perhaps influenced by the many stereotypes about a female’s approach to money. Women are sometimes characterized conversely as bargain-shoppers or shopping addicts. Maybe this comes from the idea that men are the hunters and women the gatherers, a “Men are from Mars and Women Are from Venus” explanation for different behaviors by the sexes in regards to personal finance. In a Real Simple article by Geraldine Sealey, one quoted survey found that “90% of women identify themselves as the chief bill-payer and shopper for the household”, yet 60% think their investing and financial planning skills are below average. This might be where we need to boost equality!

Many women are identified as anxious and conservative about investing and more concerned with frugality and saving. In a survey, 83% of men are interested in investing while 79 % of women are more interested in saving. Consumer spending is arguably driven by the chief household purchaser. So, in that context, a woman is highly influential in budgeting for the real costs of the goods and services needed for her family – she may be the gatherer, researching purchase decisions carefully and bargain-hunting. Women are the caretakers, generally, and achieving their financial goals may be tailored to consider the needs of others – like children or parents. The other side of that coin is the aggressive and confident hunter. Men tend to be more interested in achieving goals through investing or entrepreneurship, and so focus on macro goals of higher salaries, retirement planning and investment portfolio growth. Again, these are perhaps outdated stereotypes and certainly many women are savvy investors and confident entrepreneurs and many men are care-takers and thorough purchasers. However, as financial planners, we do see some of these issues played out with our clients. Men tend to be more confident that they understand the issues of different investment vehicles, stocks and bonds and retirement planning. Women are sometimes intimidated by Wall Street jargon and tend to be overly risk-averse and cautious with investing.

Women face some unique challenges as well. 80% of American women will find themselves as the sole keepers of their personal financial situation at some point in their lives. However, most women feel that they are financially insecure, in spite of the fact that they have more education, control more wealth, and are more involved in making financial decisions than ever before. Women’s careers are often interrupted by family needs, both for childcare and eldercare. This can limit their potential for income growth and prevent them from saving adequately for retirement. In fact, many women who leave the family finances up to their husbands may become widows who are in need of financial guidance and someone who they can trust to advise them. For these reasons, it is important for women to take charge of their own financial future.

So how do we close this gap and give women the same confidence in their personal financial situations as men? One very important way is education. At DWM, one of our most critical tasks when working with clients is to help them understand all aspects of their financial plan. Our weekly educational blog last week focused on financial literacy for our kids. Education on successful financial management is a good goal for all of us, adults and kids! There are many great resources to help with this such as seminars, books, and many internet sites. One example is the Women’s Institute for a Secure Retirement (WISER) that specifically addresses women’s issues. We also recommend the National Association of Personal Financial Advisors (NAPFA), to which we belong. NAPFA offers many informative webinars on their website on all financial basics, like Money 101, Investments: The Basics and Women and Money. Let’s close the gap!

Can Money Buy Happiness?

happy moneyThe holidays bring an opportunity to examine many inherent aspects of our lives and assess the quality of our existence. It can be a profound and rather daunting ritual as we prepare for New Year’s resolutions and year-end evaluations. One question that comes to mind is how connected is our happiness to our financial circumstances? Can money buy happiness?

It turns out that how you spend your money is more important than how much you have. “Happy Money: The Science of Happier Spending”, by Elizabeth Dunn and Michael Norton outlines some core principles for spending that shows how to “buy” more happiness in your life. These authors and professors suggest that there are spending strategies and habits that can contribute to your overall happiness. Here is a breakdown:

• Buy experiences

Our human instinct is to acquire possessions and material goods for our comfort and convenience. People tend to believe that the purchase of a tangible item that lasts will bring more value than an experience that is fleeting. However, studies show that experiences might be worth more than you think. Experiences tend to bring a greater sense of connection to others and provide life-long memories that increase in value over time. You will always remember a wonderful birthday dinner at a special restaurant, a fishing trip to Costa Rica, or a family trip to Disney World, and talk about it for years to come.

• Make “luxuries” a treat

The truth is that everything is more enjoyable when consumed on a limited basis and that you CAN have too much of a good thing. The pitfalls of overindulgence are a good thing to remember during the holidays! This concept is also behind many corporate marketing strategies of limiting certain items to occasional offerings, making them more desirable.

• Buy some time

Make time for the things and people you love the most. Slowing down and not rushing allows you the ability to savor small pleasures. Taking that new job with longer hours or living in a bigger house that might require a longer commute may cause stress that makes you unhappy. A university of Zurich study estimated that you would need to earn 40% more to counteract a one-hour daily commute increase! Researchers at Princeton have determined that there is a certain income level of comfortable satisfaction, defined as around $75,000 in the U.S. They concluded that the “beneficial effects of money tapered off entirely after the $75,000 mark.”

• Break the Consumerism pattern

The authors suggest that saving up for something that you really want will increase the value you place on it and your happiness with it. Some studies also show that debt has a detrimental effect on happiness and that married couples in more debt had more marital conflict. As author Professor Elizabeth Dunn notes, “Savings are good for happiness” and incurring short-term debt has a negative impact. Have the money saved before you do something, not after.

• Don’t take things for granted

How many times have you watched a child have tremendous anticipation for and then excitement upon receiving a coveted gift? And then watched as the novelty and thrill of the new object quickly wears off? We tend to adapt to our purchases, so taking time to be grateful for what we have is shown to boost happiness. Studies show that employees tend to do a better job when they feel appreciated by their bosses, too.

• Spend on Others

Many studies have shown that people who spend money on others, or who practice “pro-social” spending behavior are generally happier. One study even suggested that people would be less resentful about paying taxes if they had more choice about how it was spent and felt more like it was a charitable contribution. A 2014 U.S Trust Study showed that 98.4% of high net-worth households make charitable donations and that 75% of these individuals volunteer their time. But what counts is not the dollar amount, but the perceived impact of the donation that increases your overall happiness. Studies show that people are happier when donating to charity, in time or in money, and in poor and rich countries alike.

As this year closes, take some time to give to others, spend time with those you love, show gratitude and don’t overspend. That is a financial plan that will make you happy!