Financially Ever After

Jeff D. Opdyke

• Publisher: HarperCollins e-books
• Year: 2009
• ISBN:
  9780061971037
• Topic: Crescita personale
• Subtopic: Finanza a livello personale

Your Guide to Managing the Real Dollars—and the Real Emotions—of Your Relationship

Too often with money, couples face two choices: fight and risk making the situation worse, or keep quiet and risk making the situation worse. Financially Ever After offers a third option: family financial fluency—the insight, knowledge, and vocabulary every couple needs to communicate effectively about money.

Jeff D. Opdyke, previously The Wall Street Journal 's syndicated "Love & Money" columnist, covers any and all financial issues that couples face, including budgeting, deciding on whether to have joint or individual accounts, dividing up family financial chores, confronting debt, making major purchases, as well as handling mortgages, employment, children, and even engagement rings. He offers dozens of real-life scenarios between couples, with scripts and suggestions for how to broach delicate money-related subjects with your significant other, whether he or she has a shaky credit history or is feeling left out of family financial decision-making.

The book also provides helpful tools to organize your financial life, such as a budgeting chart, a "scorecard" to track spending, and an "affordability calculator" to help you figure out how much buying a house will cost you.

A must-read for any couple starting out, Financially Ever After lays the groundwork for building a healthy and thriving financial life together.

Section Two

A Family Affair

Money Matters After Marriage

Welcome to the rest of your financial life.

Now that you’ve exchanged vows, everything you do, or don’t do, with money has direct implications on you and your family in a way that living together or spending and saving outside of marriage never can.

Until now, you really could act single, financially speaking, though you were sleeping in a double bed. Unless you opened a joint checking account or put both your names on the deed to a house, there were no legal obligations that bound you two together at the wallet. Now, there are many. Now, we’re talking till death or divorce do you part—and either instance imposes financial implications that affect you, your spouse and your heirs in ways that simply living together never would.

So, starting now, personal finance is truly a family affair.

That said, let’s begin with a sentence—a fact, actually—you should aim to remember:

Divorce destroys wealth; marriage creates wealth.

I don’t write that just to dish up motivational pablum in some Pollyanna hope that you never seek a divorce. Excellent reasons exist for divorce, regardless of the financial impacts. In some cases, a divorce will do more to help you build wealth than would staying in a destructive marriage. Broadly speaking, however, divorce destroys wealth and marriage creates it. So says an Ohio State University researcher who tracked for 15 years the wealth and marital status of thousands of people. Those results, published in 2006 in the Journal of Sociology, found that folks who marry—and who stay married—accumulate nearly twice as much personal wealth as those who remain single or who divorce. Those who divorce are generally in the worst shape. They lose, on average, about three-fourths of their wealth, defined as net worth, or total assets minus total liabilities. That’s a pretty good reason to work at your marriage when the inevitable gremlins pop up to test your relationship, regardless of whether those gremlins are financial or not.

Truth be told, while money is routinely demonized as the root of all evil, it’s not the root cause of most divorces—despite that oft-quoted hokum about money being the leading cause of divorce in America. That supposed truism has been repeated so many times, in so many places and for so many years that it has become accepted wisdom. It’s easy to see why, of course: Blaming a failed marriage on something as innocuous as money is socially acceptable and much easier to explain to friends and family than the real reasons that divorce happens. As such, you still read today in marriage magazines and reports from financial-service companies articles that toss out this commonly accepted data point.

Yet a researcher at California State University, Sacramento, found in a 2001 study that money is not a defining factor in divorce. He tracked married couples for years to find out what factors lead to the divorces that naturally occurred among his study group. In effect, he assessed couples throughout their marriage, rather than relying on them to self-report the results after the fact, when motivations are no longer as clear, the emotions have faded and it’s simply expeditious to lay blame elsewhere. The leading reasons he found are the ones you might suspect if you stop and think about it: sexual problems, abuse, lack of emotional support and general incompatibility top the list. Financial differences? Turns out money is basically useless as a reliable predictor of divorce. At best, financial woes accounted for about 5% of the reason any particular marriage failed, and more often it was about 1% of the problem, according to the research.

So, there’s the good news: Just because you fight about money doesn’t mean your marriage is doomed. It’s not.

Instead, fighting about money is simply a sign that you and your spouse don’t agree on some financial matter or that you both have passionate views about how some aspect of your finances is or, more likely, is not, working. Understanding what you need to be doing in your life financially, and learning to manage those fights is where you learn to survive financially as a couple, where you learn how to manage each other’s financial expectations and where you begin to grow together financially. You can choose to find common ground and rarely, if ever, fret over some particular matter again. Or, you can suppress the fights because you “don’t want to deal with this right now” and, instead, let the unresolved matters fester into much more explosive issues that you will be forced to deal with over and over again because you never spent the time working on a solution in the first place.

This second half of the book, then, aims to help you navigate the financial affairs you deal with as a married couple, when your daily life and your daily spending and saving habits become intimately intertwined. The purpose here is to help you build a stronger balance sheet for your family by improving the choices you each make about your day-to-day finances, and to help you find ways to more effectively communicate when differences inevitably arise.

Don’t take the communication part lightly. That’s where the breakdowns always occur and where the gulf is often so wide between husbands and wives. Five minus two is always three, and there’s no way either of you can argue that fact in your checkbook register. But you certainly can argue about the fact that one of you doesn’t do such a great job of remembering to subtract three from five in the checkbook, leaving the account overdrawn and subject to fees for bounced checks. The fight that this situation sparks won’t come because there’s some gray area in first-grade math. It will arise because there’s a forest of gray space when it comes to how different people manage a checkbook—and so many other aspects of their financial life.

If you ever hope to gain control over money, you have to understand both the dollar-and-cents of money and the emotions of money. Don’t feel like you’re the only one who doesn’t know this stuff. Few couples do. This isn’t information that schools teach, and it’s not information parents routinely dispense—often because they struggle with some of this as well. So you aren’t expected to necessarily know this going into a new marriage. It’s information, instead, that you piece together over the years through trial and error.

Combined, the raw dollars and the raw emotions are the two factors that determine the way money flows through your life. Learn how to manage both, and you’re on your way to financial happiness, however you define that.

CHAPTER 2

MONEY AND EMOTIONS

Hold up a dollar bill—or a ten or twenty for that matter—and what do you see?

The answer you’re not expecting is “yourself.”

Money is a mirror reflecting who we are. That’s fairly obvious on the outside. Look at all the people driving cars, living in houses and taking vacations they can’t afford. They’re using money to create a reflection of themselves that they want others to see. But money also reflects who we are inside: the fears, confidences, dreams and psychoses that define us. Someone who is inwardly paranoid about the future, about living in poverty or being subject to inferior healthcare when elderly, will tend to hoard money, often at the expense of living life. Though unhealthy, they can’t help their actions because their brain is telling them that, at some level, their survival depends upon their ability to save now because the lean times are just a heartbeat away. They’ll probably come across as a penny-pincher or a Scrooge to those around them, but those around them may not understand the depth of the worries.

Money is deeply powerful emotionally because it represents so much more than the ability to buy a Happy Meal on the way home from work. It is as much an emotional currency as it is a fundamental tool of commerce.

In the context of a relationship, it’s rarely the money itself that causes a problem. It is the emotional baggage that comes prepackaged with the dollars that stirs up the trouble. That’s where a couple’s real money issues begin. You can’t really understand where one another is coming from financially until you understand that there are emotions underlying the words you’re hearing and the actions you’re seeing. Begin to understand that, and you can begin to build a more robust financial life together.

To get to this point couples must master the toughest part of marriage: communication. The art of talking.

Life comes so fast that we, as couples, slip into a groove that can be tough to get out of. We learn to essentially grunt our answers at each other as we pass on the way out the door. We text message truncated questions and one-word replies during the day and feel like we’re communicating: Bills pd? one asks. Yup, comes the reply. And that’s the extent of the financial conversation for the week. That’s simply not enough.

We don’t sit and talk because that means missing out on the rest of our lives, the part of our jobs we bring home, the TV shows we want to watch, whatever. Talking just takes too much time.

I promise you, though, that if you get nothing else out of this book, your relationship and your finances will be well served if you learn to communicate with one another. Communication is at the core of everything the rest of this book is about. So that’s where we’re going to start this half of the book. But before we jump into the talking, we’re going to start with an English lesson on personal pronouns.

Me + You = We

Marriage is not an individual sport. When you say “I do,” you are joining a team, a fact that is hard for many people to accept early in marriage. They’re accustomed to the single life and they still try to live that way after the wedding.

Joining forces financially is disconcerting to many a couple because the difference between “your” money and “our” money is so much more than a single missing letter. Everyone has their own ways of managing financial accounts and spending and saving the money they earn. When you’re finally married and see these habits up close on a daily basis, you’re slapped by the reality of each other’s tendencies—or, as you’re likely to perceive them, oddities. You can talk about these habits during your engagement—and you certainly should, as Section One made clear—but not until you’re actually sharing the checkbook and credit cards everyday in a legally binding relationship do you fully begin to recognize, in some cases, just how fundamentally different you both are when it comes to money.

The question you must answer, then, is: How do we integrate each other’s money style into a new family financial plan?

The first step: Recognize that you and your spouse are now a “we.” You’re no longer a “me.”

That’s easy to tell yourself, far harder to put into practice. You’re accustomed to your own ways of thinking about money and handling the finances of your life, and by the time marriage arrives, you’ve been managing your money your way for a few years, maybe many years if you marry older. Change doesn’t come naturally because you’re not likely to perceive the need. If your way worked for you all these years, there’s no logical reason you’d return from the honeymoon and suddenly think, “hmmm, I wonder if my way is the right way for the family? Better ask my spouse.”

But here’s the reality you have to accept: That independent you that once existed and once managed money in a particular way is but a memory. Certainly, you don’t have to lose who you are just because you’re married, but you do have to recognize that, by definition, who you are now includes another person. In fact, who you are includes another person by law in certain situations, since shared credit or joint ownership of assets imposes certain unified responsibilities and benefits.

Thus, marriage changes how spouses, personally, have to manage money. It’s now a joint affair.

Consider this scenario, for instance:

Wife:

Confident in her ability to pick appropriate investments in her 401(k) plan and a brokerage account she opened after college. She saves 10% of her paycheck in investment accounts that she expects to grow into a formidable sum for retirement, and does a good job of picking mutual funds in her retirement plan and a few stocks in her brokerage account.

Husband:

Also saves 10% of his account. But has always been leery of the stock market, and is uncertain about all the options that are available. Since college he has allowed his money to accumulate in his checking account and, when the sum gets to a certain level, he moves the cash into a money-market savings account or a certificate of deposit.

In both cases, both husband and wife are doing the right thing—saving a meaningful chunk of their individual paychecks and investing the money for the future. And you can imagine that a basic, pre-marriage financial query such as “Are you saving for retirement?” would yield an answer acceptable to both: “Yes. I’m saving 10% of my paycheck.” Everyone is happy.

Why, then, is this happiness fleeting?

Because the husband agreed to accept responsibility for paying the bills and directing the investments, and the couple never really discussed what that meant. So, the husband applies his financial norms because those norms have worked for him all these years, and the wife just assumes that the money the family is saving is generally being invested according to her definition of appropriate, her norms.

Only, the couple’s norms don’t mesh. When the wife discovers that cash sitting in a savings account and CD are her husband’s version of appropriate, she’s going to have a series of questions that could easily sound accusatory. He’s going to respond with a series of answers that could easily sound defensive and that are based on his intolerance for the kind of risk she’s comfortable with (and, of course, because this is how he has managed money his entire adult life). The conversation could become quite heated, and it’s all because neither had a plan for integrating their individual personalities into their joint personal finances. Maybe such a problem never even crossed their minds—until it became a conflict.

Countless such scenarios exist. But no matter the situation, they all share a common trait: Lack of communication. Perhaps the real frustration you’ll find is that this communication breakdown exists in part because you can’t prepare for, nor even know every possibility that might arise. While you might have experienced some of your lover’s financial quirks during the courtship, you won’t know about one another’s most annoying money traits until you’re under the same roof for some time and forced to confront how you both get along with the finances.

So, you need to learn how to talk about money. It’s a skill you’ll need in every upcoming chapter, and, more important, it’s a skill you and your spouse will need for the rest of your lives. Might as well learn it now.

Money Talks: Communication Without Conflagration

I’ve been with my wife for a long time, since the mid–1980s in one fashion or another. And for most of those years we never talked about money in any serious way. I would occasionally tell her about some investment I was making, or how well some investment had fared. Or, I would tell her about a raise I got, or question her on when her bonus check would arrive, or I would tell her our cre...