The pre-nuptial money talk
- October 29, 2009
- 0 comments
- Posted in Family, Latest Posts
Opposites attract, including money opposites. More often than not, tightwads walk down the aisle with spendthrifts—so says some interesting research by a marketing professor at the University of Michigan http://webuser.bus.umich.edu/srick/Papers.htm . Maybe the tightwad loves the spendthrift’s sense of abandon and fun. Maybe the spendthrift hopes that the tightwad can provide stability. Whatever the chemistry, this mix leads to blowups in marriage, the researchers found. No surprise there.
I’d never stand in true love’s path, but before an exchange of rings I advise an exchange of credit reports, for brides and grooms of any age. Get a loaf of bread, a jug of wine, and your net worth statement and make an afternoon of it. What does each of you earn (the real money, not what you claimed when you were trying to impress)? Are there any other sources of income? Do you have savings and investments—how much and where? How have those investments done over the past three years? Are you putting money into a retirement account? Do you own real estate? How big are your debts—student loans, mortgages, credit cards? Lay out the credit cards in your wallet and your latest statement from each—embarrassed spenders sometimes try to hide big debts. What’s your personal credit score? Are you liable for child support and if so, for how long? Has either of you ever gone bankrupt or failed to pay income taxes? If there’s a small business, how’s it doing (look at the statements showing revenues and expenses for the past three years, and get a running explanation). Ask about business debts that your dearly beloved might be personally liable for. Full disclosure is in order, and maybe a second jug of wine.
Then talk about money management. In a two-paycheck marriage, who pays for what? One bank account or two? Merged money but with separate accounts for money you can spend as you like? How will you pay off the debts you come into the marriage with? What can you afford to spend on living expenses every month? How much of your income will you save each month, both inside and outside a retirement account. (A fixed amount of monthly savings leaves less for the spendthrift to play with.) Will you invest separately or together, and how do you feel about each other’s approach? Who will pay the bills or will you alternate?
Talk jobs. What are your prospects and goals? Does one of you want to return to school and how will it cost? After the marriage, will one spouse quit work? How about after a baby is born? How might you feel if the other changes his or her mind? (You can’t predict feelings but should discuss it anyway.) If you’ll work and have children, how will you handle child care?
Talk prenuptial agreement. You don’t need one, if you each come into the marriage with minimal assets and no expectation of a large inheritance. You’ll build your financial life together, as well as your emotional one. If the marriage falls apart, you’ll wind up with a roughly even split. That’s a fair result.
It’s another matter, however, when significant assets are at stake. Then, you have to think about whether you want to share those assets with your new spouse in case of divorce or death. That’s especially important if there are children from a prior marriage. If you do nothing, the spouse will get at least his or her legal share—typically, half the marital assets at divorce and one-third to one-half of your estate at death. A prenup changes that. You can agree to divvy the assets however you like, including not leaving anything to each other at all.
Talk priorities. What matters most to each of you. House? Children? Jobs? Savings? Reducing debt? Travel? Care of a parent? Fun? Each of you might draw a plan for the next five years and then compare plans. You might be surprised by how differently the other thinks.
Talk over what you’ve learned. What will you do about any differences that arose? Don’t paper them over—they’ll come back. This is the time to start handling them, with love. Some problems can be solved, such as agreeing on a schedule for repaying debts. Others, such as different investment styles, may have to be managed for life. But thanks to the money talk, there should be no surprises after you say “I do.” Already, you’re ahead.
Tags: marriage, marriage and money, pre-nuptial agreement
