Nearly 2.3 million couples will get married this year in the U.S. While we have all heard statistics on the alarming number of marriages that end in divorce, it may surprise you that studies suggest the leading cause of divorce in the U.S. is money. That's right – finances are most often cited as the number one reason for couples choosing to split-up.
Interestingly enough, it is not necessarily due to having too little of it.
According to the study published in the Family Relations Journal, "Examining the Relationship Between Financial Issues and Divorce," couples who argue about money early in their relationship have a far greater risk for divorce and this is true regardless of income or debt levels. Additionally, Money Magazine noted that 70 percent of couples spend more time arguing about the finances that any other issue in their marriage.
The studies highlight the importance of addressing financial planning before tying the knot. Rather than spend all of their time and efforts choosing the location, entertainment and flowers for an upcoming wedding, newly engaged couples should really consider getting a jump start on developing a financial blue-print for their marriage – it could be a game-changer.
Review your money personality
Before having an open conversation about finances, it may be a good idea to first understand each other's money personality. The fact is we all have attitudes toward money and spending that are in many cases, shaped by how we were raised. The challenge comes when two people bring very different money approaches to the table.
Are you a spender or a saver? Is your spouse driven by wants or needs? How do you both prioritize financial security and planning for the future? Often times, couples fail to examine how compatible their financial personalities are until later in the marriage. This can be particularly true when it comes to attitudes about debt and credit – a common point of contention. Understanding each other's financial perspectives on debt and overall financial planning can help improve communication between one another when it comes to money matters.
What are you bringing to the marriage?
From the level of income and savings to credit scores and debt, each member of a new financial partnership will bring different things to the marriage. Open and honest conversations about each other's financial position can be a good place to start.
What are your credit scores? What student loans, auto loans or other credit card debt exists? What money has been stashed away that can be used to earmark toward the purchase of a home? As difficult as it may be, fully disclosing any financial baggage to your future spouse before getting married is important as it may allow you to work together as a team to establish a plan to address it.
Additionally, significant differences in financial position can necessitate the need to speak to an attorney about the use of pre-nuptial planning.
Develop common financial priorities
Working together to examine future financial goals can be an effective way to get on the same page. Identifying common goals and prioritizing them may also help foster collaboration rather than conflict. Consider working together to create a future household budget that incorporates the achievement of the financial goals identified while also considering the priorities established. This will help ensure that funds are earmarked in a way that is consistent with the couple's goals.
Work as a team
While it is not uncommon for one spouse to take the lead when handling the finances in marriage, it is critical that each have a voice and are heard when it comes to financial matters. Establishing weekly "money dates" to review expenses and progress toward financial goals can be a great way to keep the lines of communication open while also preventing one spouse from being out of the loop when it comes to the household finances.
It is also important to decide if the finances will be pooled together or handled separately. While there are some professionals that suggest maintaining separate finances during marriage, others note that doing so can sometimes cause distrust and a lack of communication.
While spouses with significantly different money personalities and priorities may have no other choice but to maintain separate finances, couples that can sustain a financial partnership based upon the establishment of common financial goals may benefit from a combined approach.
Like all things in marriage, financial planning often requires compromise and understanding. While it is quite common for there to be differences in opinion, establishing common goals while maintaining open communication can help foster teamwork and trust within the relationship.
A proactive approach to discussing the finances prior to marriage may help couples get on the same page sooner rather than later. When necessary, speaking to a counselor may help address money conflicts. Also, consider speaking to your financial adviser to help develop a financial plan that is appropriate for you.
Kurt J. Rossi, MBA is a Certified Financial Planner Practitioner & Wealth Advisor. He can be reached for questions at 732-280-7550, kurt.rossi@Independentwm.com, www.Independentwm.com and www.bringyourfinancestolife.com LPL Financial Member FINRA/SIPC.