By Hanna Horvath
There are three big things couples fight about, according to divorce attorney Paul Rudder, and that’s kids, sex and money. But the biggest of these, by far, is money.
“Money affects a marriage,” he said. “Anything you do, there are consequences for the both of you.”
Rudder said the way couples handle money is an indicator of a successful relationship. The inability to deal with it properly can lead to divorce. He said most couples make the same financial mistakes — mistakes that can easily be avoided.
Money mistakes couples make
Managing money separately
While the choice to keep finances separate doesn’t lead to divorce on its own, it can often lead to dishonesty about spending habits, income or savings. A partner may also keep secret accounts if they find their partner’s spending habits unsavory and don’t want to give them access to their own money, or if their partner is in debt.
According to a Policygenius survey, one in five people keep and manage money separately from their partners. An even greater percentage (24%) don’t share any major financial accounts, including a checking, savings, credit card or mortgage account, while almost 30% of couples don’t even know each other’s salaries.
Among couples who don’t manage money together, 20% say they plan to leave their partner due to financial problems, while only 4% of couples who manage money together told us they plan to leave due to their partner’s money issues.
“‘What’s mine is mine and what’s yours is yours’ is not a way to have a loving relationship. You are on a path to destruction,” Rudder said. “If you agree to be together, there should be some sort of shared financial dream together.”
Misaligned financial values
It’s unlikely you will have perfect financial parity with your partner going into a marriage, said Rudder. But, he said, couples with similar spending habits and financial goals are better off than those who don’t.
Divorce attorney Jacqueline Newman said she often sees problems with couples who value money differently — for example, if one partner is a spender and the other is a saver. Differing views of how to handle money can create friction in the relationship.
“It becomes a big issue with a lot of angst and a lot of fighting,” she said. “One person feels entitled to the money and doesn’t want to curtail their life, and the other one feels the need to save.”
In some cases, unhappy partners will financially “cheat” by frivolously spending large amounts of money — often through gambling or giving money to someone else — without telling their partner. This form of infidelity can run both partners into debt and create lasting financial problems.
“It’s a horrible betrayal. It’s almost as bad as physical cheating,” Dennis Nolte, certified financial planner and vice president of Seacoast Investment Services, said. “It takes down the resources of a family or puts a dent in your savings or retirement fund.”
Financial infidelity is often the result of small money choices, made without the other partner’s knowledge, built up over time, said Peter Creedon, certified financial planner and CEO of Crystal Brook Advisors.
“Many times it is a lot of the little things that build up resentment rather than one event or mistake. But when it all comes to a head, it is explosive and emotional,” he said. “It’s like high blood pressure — untreated, it has major complications down the road or divorce.”
Divorce can create even more money problems
Divorce is expensive, costing an average of $17,100 and lasting an average of 9.5 months, according a survey from Martindale-Nolo Research. A prenuptial agreement may ease the financial burden, but divorce can include unforeseen costs.
“If you have two or three kids, that number could run into the six figures, easily,” said Nolte. “You have to factor in attorney fees, living expenses for two households if someone moves out, alimony, child support, life insurance — people have no idea what actually happens in a divorce.”
One of these unforeseen costs is court-ordered life insurance, which is typical in divorces with children or a large imbalance in income level.
If you have to take out alimony, the recipients, including your ex and children, will depend on that money to maintain their lifestyle, even after you pass away. You have to take out this life insurance policy to protect them from the potential loss of that alimony.
Getting it before your divorce can shorten the negotiation time and even get you a lower rate.
The root of all money problems
Each of these money mistakes boils down to one thing — a lack of communication. Experts agree that no matter how you manage your money, a lack of transparency can have a negative impact on your relationship.
A couple that doesn’t know where they stand financially, whether they manage their money together or not, “will ultimately fail,” said Brian Schmehil, a certified financial planner at The Mather Group.
“In a nutshell, if you do not communicate with one another and have a game plan, a lot of times you won’t be able to accomplish all of your financial goals and this will lead to resentment and distrust,” he said. “Those are two big catalysts for a potential divorce.”
Schmehil said you don’t have to merge all your finances together or be notified of every single expenditure to have a general understanding of your financial health. In fact, in some cases it may work better for one partner to be in charge of all the financial decisions and planning, as long as the other partner is aware of what’s going on and how it could affect the future.
At the very least, don’t wait until a financial crisis occurs to let your partner know what’s going on.
“Don’t wait,” said Byrke Sestok, certified financial planner at Rightirement Wealth Partners. “The worst thing you can do if you have a financial problem is to not share it with your spouse. Just share it.”
Developing a healthy financial relationship
No matter your financial situation, there are some easy moves you can make to improve the health of your finances and relationship. The first step is taking stock of your situation. If you are in debt or aren’t hitting your financial goals, it may be time to sit down and map out a plan with your partner. If you don’t know where to start, Newman recommends seeing a financial planner.
“It’s important couples communicate on what their expectations are,” she said. “You need to talk about how you want to deal with money and what it means to you.”
Creedon said when sitting down, first decide how the bills are getting paid and how much each partner is expected to contribute to the overall household fund. He then suggests looking forward to any big money goals — like debt repayment or retirement — and planning how to tackle them.
Staying transparent will remove any future resentment that may develop down the road. It also puts the finances in perspective for both parties, whether they are paying the bills or not. Nolte suggests re-evaluating your financial arrangement a couple times a year in case changes need to be made.
All this, he said, can prevent little issues from piling up.
“It’s natural to just keep going and sweeping things under the rug,” he said. “But it’s better for you, and your marriage, if you’re open and honest about money, like with any other part of your relationship.”