What Every Woman Should Know about Finances and Marriage
Contributed by Monica Mazzei, Family Law Partner at Sideman & Bancroft
There’s plenty of talk separately about relationships and personal finance, but very little practical knowledge on integrating the two. The headlines are grim. “Over 40% of marriages end in divorce.” “Money is the most common cause of arguments.” Clearly, there’s a need for more education! There are some fundamental “rules” that will help you avoid the financial pitfalls many couples fall victim to.
Rule #1: Talk about Finances with Your Partner Before You Get Married.
This may sound simple, but very few couples actually do this. It’s important to know the other person’s attitudes about money, what debt they may have and how it should be paid off during marriage, and what assets both people are bringing into the marriage. One pre-marriage counseling group had couples exchange credit reports during the first class… and many were shocked to learn about their fiancés credit card debt or the amount of their student loans. This tactic may have been extreme, but it forced couples to have this discussion before they got married. “Financial secrets” can be deadly to a marriage.
You also want to consider whether a pre-marital agreement is right for you. Many think that pre-marital agreements are only for the rich and famous, but that is not the case. A pre-marital agreement allows couples to decide how to treat assets, debts, and income during marriage, upon a divorce or upon the death of one another. A premarital agreement provides a couple with a customized financial road map, but perhaps more importantly, it forces couples to discuss their views about money and financial expectations before they get married. With the average age of couples marrying for the first time on the rise, and more and more women out-earning the men in their field, many women are coming into the marriage with assets (such as a home and retirement or investment accounts) and shouldn’t feel guilty about wanting to maintain those assets as their own.
Rule #2: Think of You and Your Spouse as Co-CFOs.
During marriage it’s important that you think of your family as a business and you and your spouse as Co-CFOs. Even if one person is better at handling the family finances, both people should be kept in the know about the finances and participate in major financial decisions. This can be easily accomplished by creating a family balance sheet, periodically updating it and taking the time to discuss it together. Couples who are effective communicators about money schedule weekly or monthly family meetings to discuss the status of the family finances. Some couples find it helpful to work with a financial planner and schedule annual or quarterly meetings to discuss the family finances and goals for the upcoming year. Hopefully, these tips will keep your marriage from falling within the 40% of those that end in divorce. However, if you find yourself starting the divorce process, having knowledge of the assets and debts (located on the family balance sheet) will make the process easier.
Rule #3: Keep One Foot in the Door.
Many women decide once they have children to focus on family and not work outside the home. Raising children is an important, tireless, and often under-appreciated job(!) – however, many women make the mistake of taking themselves out of the game completely only to find themselves in a position where they have to re-enter the workforce due to divorce, death of a spouse, or their spouse losing a job. Spousal support or alimony isn’t what it used to be. Women are more educated and have more career opportunities than they did twenty years ago. Generally, courts consider spousal support as rehabilitative, which means that typically the supported spouse will be expected to return to work and become self-supporting.
There are fairly easy things women can do to retain marketability when they no longer work outside the home such as volunteer work in their industry or field or keeping in touch with their business contacts – this can be as easy as sending out a holiday card or meeting a prior colleagues for lunch once a month.
Many people think that the number one cause of divorce is infidelity, but it’s actually money or finances. It’s amazing how much time and money are devoted to the “wedding day” and how little thought is given to a couple’s financial future. Thoughtful planning and educated decisions about money made before marriage provide a clear roadmap of a couple’s financial future. Although not very romantic, having open and frequent dialogues about money can alleviate the financial stress which is so often the cause of divorce.
Monica Mazzei is a Family Law Partner at Sideman & Bancroft in San Francisco, CA, where she specializes in dissolution actions involving complicated valuation and financial matters and complex community property and support issues.