Like many other partnerships, when it comes to money and marriage, spouses frequently divide responsibilities between each other to maximize time and efficiency. Perhaps one spouse handles the grocery shopping and school pick-ups, while the other is responsible for paying the bills and managing household finances. Although this “divide and conquer” approach provides a solution for tackling a never-ending “to do” list, it also may create significant and long-lasting consequences when only one spouse handles the couple’s finances.
This article discusses reasons spouses should regularly discuss their finances, regardless who is actually paying the bills, and how to incorporate money discussions into the marriage.
What You Should Know About Money and Marriage
1. Preparing for the Unexpected
Few things in life are certain, a fact made abundantly clear by the COVID-19 pandemic. Sudden joblessness, illness, injury, or the death of a spouse may turn life as you know it upside down. The sudden loss of income may create an enormous financial burden for most families, who depend on their wages to meet their financial obligations.
In a situation where one spouse is incapacitated or deceased, the other spouse may be unable to access bank accounts and the funds contained in them. While a lack of access could result from not knowing where the money is kept, far more commonly, it results from the accounts kept in only one spouse’s name. Banks care about whose name is on the account, or whether there is paperwork on file granting access to someone if the account holder passes away or becomes incapacitated. In this scenario, the well spouse may need additional paperwork, or perhaps a court order to gain access to the account. This may be costly, both in time and money.
Spouses who communicate about finances, and ensure both people know about the accounts and may access funds, are able to minimize, and even eliminate, some of the harsh consequences that occur when life inevitably throws a curveball.
2. Reducing Conflict
Disagreements over finances continue to be a leading cause of divorce. Furthermore, a lack of transparency may foster resentment between spouses, and financial dishonesty destroys trust. As they say, trust is built in drops, and lost in buckets. Reaching agreements and setting clearly defined expectations on topics such as spending habits and tackling debt may put an end to potentially marriage-ending arguments over money.
3. Achieving Financial Goals
Whether planning for retirement, saving to buy a house, or putting money away for your child’s college tuition, communicating with your spouse about finances will help both of you. By discussing short-term and long-term financial goals, each of you will gain an accountability buddy who will keep you on track if spending and saving habits become inconsistent with your stated financial goals.
Unfortunately, not all marriages end happily ever after. Many end in divorce. California is a community property state, which means generally that each spouse is entitled to one-half of property acquired during the marriage, regardless who acquired it. The property, and debts acquired during the marriage, are the community estate.
Determining what comprises the community estate, and what each spouse is entitled to at divorce, is difficult for a spouse who takes a hands-off approach to finances during marriage. Because that spouse has no reference point, the knowledgeable spouse could be less than forthcoming when the time comes to disclose the location and values of assets (or the extent of any liabilities). Having an attorney will help you in these situations, but having a clear picture of the marital finances from the outset places your attorney in the best position to obtain an equal and fair division of property.
During a contentious divorce, mistrust takes hold and communication becomes strained. This makes it critical to have regular conversations about finances during marriage.
Talking about money may be uncomfortable, especially in the beginning. Try the following:
Reframe the Way You View the Subject
Admittedly, reviewing bank statements and exchanging budget ideas is not romantic. However, clear communication is the foundation of any good team, and marriage requires teamwork. Additionally, having a plan in place to deal with finances in cases where life takes an unexpected turn is no different than planning for any other emergency, like a fire or an earthquake. The purpose is to protect each other’s safety and well-being. When you treat money discussions as a way to care for the person you love, it becomes clear why it should be a priority.
Ensure Both Spouses Can Access Important Financial Information
Information related to all financial accounts, including passwords for online banking, should be shared and regularly updated. Keeping a spreadsheet that both spouses may access is a great way to accomplish this goal. Alternatively, there are several apps that will store all of your passwords and may be synced across multiple devices to ensure each partner has access. Finally, make sure the bank has any necessary paperwork on file for any accounts that are not joint, granting the other spouse access in the event of death or incapacity.
Carving out dedicated time to talk about finances allows spouses to provide each other with important updates and to make adjustments when needed or when circumstances change. Another benefit of scheduling financial conversations is that people become comfortable engaging in activities they have previously performed. The more regularly you have these conversations, the easier they become.
It is important to be honest, not only with your partner about finances, but also with yourself. Ask:
- What “money type” am I? Perhaps you are a saver, and feel most at ease knowing you have a reserve fund should an emergency arise. Or, perhaps you are more of a spender, enjoy the comforts that money can buy because, in the end, you cannot take your money with you to the grave.
- Determine how you view money in relation to your partner. Would you prefer to have a joint account for shared expenses, but otherwise keep finances separate, or do you embrace a “what’s mine is yours, and what’s yours in mine,” philosophy? Are you okay with your spouse making some unilateral purchases, but would like to have a discussion before making any purchases that exceed a certain amount? Or, do you feel most comfortable creating a budget together and only diverging from it if there is an agreement?
Either way, if you are not honest with yourself about how you view money, it will be impossible for you to be honest with your spouse (cue: conflict).
Ask an Expert
Retaining the services of a financial planner may be useful for a number of reasons. First, planners are knowledgeable, and are able to provide instruction on how best to achieve your financial goals. Second, they are neutral. In the event of a stalemate, a financial planner may keep the temperature down in a conversation by providing an objective opinion based on the facts. Third, a financial planner may act as your liaison. Other professionals, such as your CPA, need to know about the assets you own in order to do their job effectively, and a financial planner may be in the best position to provide them with needed information.
The bottom line is, when it comes to money and marriage, money matters. Talking about finances does not mean spouses cannot divvy up tasks, it means transforming an often feared and avoided topic of conversation into just another conversation, as a way of saying “I love you.”
Michelle Brunson is an associate with law firm McManis Faulkner in San Jose, California. www.mcmanislaw.com