Money and Divorce: Which Problem comes First? Do money problems cause divorce or does divorce cause money problems?

Why is money so often cited as a primary reason for divorce? Is it the actual cause of divorce, or does it become an issue when couples decide to split?

I wish I could state unequivocally which it is, but what I can do is speak to the causes behind why couples argue and often split over money issues.

Many couples come from different backgrounds in terms of how they view and value money. Where one person in a relationship might feel like money should be used to buy things today that they believe enhances their life experiences, the other person might feel like money should be primarily used for basic life needs, with the rest, saved for the future.

To this day I find it shocking that so many couples get married without discussing not only their current financial situation, but how they think and feel about the purpose money plays in their lives. Where do they stand on debt? How about the importance of saving and investing. What about having children; public or private school? Pay for college? Buy them a car at 16? Should your children work and if so at what age?

So often when couples come to me for financial planning, it is clear that one person cares more about spending money on furniture, cars, kids or vacations. The other wants to live more modestly and save and invest. Typically, I find one person deferring to the one with the stronger, more dominant personality, instead of that couple finding a happy medium between their divergent views over the use of the family income. When compromise isn’t reached, couples create a hotbed for future grudges and blame.

Many couples don’t share in money decisions, but assign the one person who is more suitable or interested in money to make financial plans. Again, this seems like it works, during good financial times, but when the economy suffers, and jobs are cut back or lost, money suddenly becomes a point of contention for the couple. It’s just too easy to blame the person who manages the family finances for the current state of affairs.

What often goes unspoken is the burden of responsibility felt by the one person assigned to handle the money. Sometimes this is the one who earns the most, whereas other times it is the stay at home spouse who runs the household. I am regularly astounded at the lack of knowledge the not-financially involved spouse has around finances. They can’t answer the following questions:  How much does your spouse earn? How much life insurance do you have on each other? How much of your income is your family saving for retirement?

Alternatively, some couples simply keep their money separate and don’t act like a team around the family finances. Although many claim this works just fine for them, how can a couple really be on board with their future current plans and future dreams when they are in the dark about each other’s money behavior. I tend to think that couples choose this as a default to doing the hard work necessary to compromise and come together around money issues.

People decide to divorce for so many reasons from infidelity to abuse and addiction issues, from growing apart to not growing at all. Occasionally financial issues are at the center of the marital difficulties, but often money has not been a problem to couples in the past.  But mark my words, regardless of the cause of the decision to divorce, once a couple moves forward with divorce, money becomes one the biggest areas of contention.

After all, what is divorce really, but a legal separation of all that was shared in marriage, be it real estate, savings and investments, and sadly, children. Suddenly couples who in their past relationship openly shared money regardless of who earned what, now it’s mine is mine and some of yours is mine, too.

All sorts of financial wreckage is possible, as the reality of taking one family and their income and assets and splitting it between two households.  Generally there is simply never enough money to go around, and often both people in the marriage are basically starting over financially.

I can’t state that money is one of the top causes of divorce, but I can say without a doubt that divorce causes all sorts of money problems and that any financial problems that were quietly hidden during a marriage, come flying into focus when divorce happens.

For me, the end of a marriage is so sad on its own. Two people who at some point in the past loved each other enough to want to spend the rest of their lives together, have come to a point where they can’t work out their differences; that alone is simply tragic. But I find it ironic that much of that is lost in the process of divorce, and the ever powerful money, becomes the argument.

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Marriage and Money- Yours, Mine and Ours?

Call me crazy, but when I got married almost 24 years ago in 1989, I just assumed that couples closed their individual checking accounts and opened up one joint checking account. This account would be used to deposit all salary and wages into, and to pay all household bills from. It never crossed my mind that there should be an account that’s just mine or just my husband’s, other than our retirement funds which can’t be comingled.  And that’s exactly what we did within about three months of marriage. Surprisingly, or maybe not, we’ve never had a problem with that arrangement.

As the years progressed and we had more money to save, jointly held savings accounts and investment accounts were created as well. Because this was the way my husband and I handled our money, I always assumed that all couples did similarly. Over the years of being a Financial Planner and asking people about how the money was handled in their marriage, I found out that there isn’t just one way, let alone one right way that couples manage the family money.

In fact, I had to start asking couples to share details with me about how wages and salaries were shared or kept separate, and how bills were divided up so that I would know where their future savings would come from.  What I found was that every couple does it differently and for different reasons, so what’s important is finding a way that works for your relationship.

When I ask couples who don’t simply combine their finances, why they don’t, the reasons are varied. Sometimes it’s secrecy and not wanting the other person to know what you’re doing with your money. Sometimes it’s a trust issue, especially if a saver is married to a spender, and doesn’t want them dipping into their separate funds. Many times, especially when individuals marry later in life, it’s simply that each person has gotten used to having their own accounts, and wants to maintain control over them.

Whatever you do in your relationship, I see some pitfalls in both setups. First let me speak to the concerns I have for couples who comingle everything, like I have done. Typically in this scenario, one person takes the lead on doing bills, managing debt, and adding to savings (This would be me!). The downfall of this setup is that many times that person feels the burden of having to make all the financial decisions. In the event something goes wrong, it’s just too easy for the uninvolved person to blame the one making the financial decisions. But even more important, is how easy it is for the one who doesn’t handle the money, to be totally clueless about:

  • Where is all the money located and how do I get to it?
  • How much are the monthly bills and how much money comes in monthly?
  • How much do we save for the future?
  • How much insurance coverage do we have and is it adequate?

This can be so detrimental in the face of a family crisis like a premature death or a disability of the person handling the family finances. I’ve been witness to a few too many widows (and I’m not being sexist here, but the statistics are still that women tend to outlive men, and men typically handle the finances) coming to my office absolutely distraught over the loss of their spouse. But equally scary and adding insult to injury is the fact that they also are now worried about if they have enough money. Knowing so little about their money, they have a hard time trusting a financial advisor that they might not have even met before.

There are ways to handle some of these challenges, and I try to do this in my marriage. Having regular meetings, minimum annually, to review the current financials and where everything can be found is helpful. If you use a financial advisor, having both people meet regularly with that advisor so they can form a relationship of trust, in the event they will one day be handling the money for the family. For the person in charge of the family’s finances, try to keep all money centrally located, versus spread across a dozen different places. Try to consolidate retirement funds and other savings vehicles.

Now let’s look at the pitfalls of couples who keep everything separate. The challenges include when one person greatly out earns the other in a two income household; do you still split the bills evenly? And how about when one person stays home and manages the home? Do you give them a spending allowance for groceries and personal items? How about planning for your retirement together? Doesn’t this need to be a group effort and a group decision? How does a couple who keeps their accounts separate pay for vacations and dinners out?

I’ve had so many experiences with couples who have separate accounts. When I ask how they split up the bills, I usually hear, “Well he pays the mortgage and utilities, but I pay for food and everything related to kids”. Then the arguments start over who carries more weight on the bills. The bottom line is our goal is to get away from arguing over money and get on the same page about planning for now and the future.

I’m curious how your family handles money and the good and the bad that come from your strategy. Be looking for questions on my Facebook page asking you to share what works for you in your relationship!