Love, Marriage & Money: Understanding and Achieving Financial Compatibility Before-And-After-You Say 'I Do'
By Gail Liberman and Alan Lavine
Tying the Knot: Dollars and Sense
All right. You love each other. But is it really to your benefit to marry? Strange question about an institution that was founded on the basis of love. With marriage also comes a lot of legal and financial responsibilities that you need to consider, discuss, and resolve. This chapter nails down the financial and legal issues on marriage as well as some of the emotional ones. It compares marriage with living together, and tells how to pave the way for a successful union-at least from a financial perspective, regardless of which lifestyle you choose. It also seeks to dispel some of the financially related myths that have prevented many an in-love couple from tying the knot.
Marriage: Your Legal and Financial Obligations
To marry or not to marry is not only a matter of love. It also is a matter of-yuck-law and money. Before you determine whether to live together or tie the knot, you first need to know some fairly unromantic aspects of your union as governed by the laws of your state. Unfortunately, too many people don't. Believe it or not, fornication and cohabitation remain illegal in certain places, although such laws are not routinely enforced.
Going to the Chapel and We Are Gonna Get Married
You don't need to be married to be in love and spend money, that's for sure. Most people who do live together get hitched eventually. Evidently, they like it so much they want to make it legal. Either that or their parents and friends get on their cases and show them no mercy.
State laws have not posed a major obstacle against living together out of wedlock. It's been estimated that almost 4 million households have people shacking up compared with some 52 million homes with married couples. Our best guess is that about half of those shacking up will tie the knot.
Getting Married Is Healthier
With marriage comes financial and legal obligations, true. But it also can add some other qualities to an otherwise mundane existence-like romance and a certain stabilizing influence on the human soul.
Our psychologist friends can't emphasize enough the importance of commitments. Don't make it legal and you are asking for trouble. Marriage is a bond that leads to a deep level of love and trust.
Contrary to popular belief, most research indicates that living together first does not necessarily improve your chances of staying together permanently.
Living together does not necessarily make people happier either. There is increasing evidence that both women and men live longer and enjoy better health when married.
We're both happy we got married for many reasons.
Al: Marriage is great, particularly since research indicates that married men tend to live longer than single men and divorced men are twice as likely to die early from hypertension, four times as likely to die early from throat cancer, and seven times as likely to kick the bucket prematurely from pneumonia. If only Gail wouldn't shrink my pants!
Gail: So far, I agree with the research that indicates women who live out of wedlock tend to be more depressed than women who wed. Plus, I married a great-albeit messy-cook.
Sometimes the Pocketbook Tells the Tale
Apart from having your arm twisted on the subject of marriage by state laws, mental and physical health researchers, and our very own admitted bias in favor of the subject, money can and should be an influence. In fact, for many, it is the number one influence.
What do the family therapists have to say about it?
"Money is one thing, and love is another," stresses Florida psychologist Diann Dee Michael. "When we love somebody, it has to do with the movies and music. But marriage is actually a financial and social institution. It's not love. Love exists without marriage."
Michael warns that it's critical not to confuse the religious aspect of marriage with the civil part of it. "To have and to hold from this day forward has nothing to do with a civil marriage," Michael says. "In effect, those are emotional words, and we need to be more practical about other parts of our lives. It makes love grow to be honest about the difference."
Money seems to enter into the picture regardless of whether you marry or live together. In fact, sometimes it drives that decision.
We have a friend, for example, who is living with his fiance before their wedding. "It costs me nothing extra," he says. "Meanwhile, she'll be able to pay off her credit card bills before we get married. I've been married before, and I don't want to go into this marriage with any debt."
This man is not alone. In fact, many senior citizen couples also are forgoing marriage entirely to avoid having their assets tapped for a partner's nursing home or health care costs. In many states, nursing homes or medical institutions can claim a certain amount of assets of both spouses if a couple is married. Not so if the couple is unmarried.
You'll see a lot of seniors living out of wedlock for another good reason-they may be paying more taxes on Social Security if they're married than if they're not. (Other Social Security issues will be discussed later in this chapter.)
On the other hand, if you're not married, your live-in may be unable to decide your care if you become incapacitated and have failed to appoint that person in writing as your health medical care agent or proxy.
Also, if you're living together and not married, it's harder to legally claim some of the benefits typically available to married couples. As you recall from earlier chapters, these benefits typically include:
- You automatically inherit a share of money, property, and other valuable things when your spouse dies.
- You get to keep a certain amount of assets if you get divorced.
- You may get money to live on, or "alimony" if you get divorced.
- In states with "homestead" laws, you have the right to stay in the family home if you get divorced.
- Debt also may be a consideration in your decision to get married. If you're married, each spouse has no liability for debts brought into a marriage, but they both are responsible for debts they've cosigned together after they've married.
If you're considering bankruptcy, lawyers tell us you're better off married from the standpoint of debtors' relief. Often, a married person still is entitled to own property in joint names, which would be exempt from creditors' claims.
Seniors Living Together
As we mentioned earlier, seniors are one particular group that sees benefits to staying single. Yet another motivator for this trend is some are afraid they will lose Social Security benefits or pension benefits if they remarry. Not so-in many cases.
Here's the straight scoop direct from the Social Security Administration: Yes, you may lose Social Security benefits if you've divorced, are receiving benefits based on your ex-spouse's work record, and remarry while he or she is alive.
You also have to worry if you're younger than 60, and you remarry after your spouse dies. You could lose Social Security benefits based on your deceased spouse's work record. By contrast, if you're at least 60 years old when you remarry, you still can collect based on your deceased spouse's record. And once you become 62, you have the option to collect benefits based on the work record of your former spouse or your new spouse-whichever winds up being greater. These same rules apply if you're divorced and your ex dies-provided that you had been married at least 10 years.
Keep in mind that you still may be able to collect on a former spouse's record if your new marriage ends. Plus, if you're at least 62 you may be eligible based on your own work record.
No need to worry about your company pension. Your monthly checks keep coming when you remarry.
Military plans may suspend pension survivor benefits if surviving spouses marry before age 55. That's pretty crummy. At 55 you're still a young whipper-snapper.
The Bottom Line on Marriage
If you do decide to tie the knot, call the marriage license bureau or clerk of courts in your area to get the rules. State by state, laws differ. You might have to get a blood test or get some shots to protect you against certain diseases. After all, you don't want to get married and come down with yellow fever, right?
You might need witnesses for the ceremony, and be sure a copy of the marriage certificate is sent to the department that records marriages.
If you're a woman, you'll need to evaluate whether you want to assume your husband's name. Or, if you're a man, you might wish to consider assuming your wife's name. Yes, it has been done! More about how to change your name in Chapter 6.
Getting a Fair Shake When You Shack Up
If you're living together and hope to obtain some of the benefits married people are entitled to, it's probably more difficult than you think. Contrary to popular belief, only 13 states recognize "common-law marriages," which treat you as if you've had the ceremony if you show you intend to be treated as a married couple and you hold yourself out to the community as married.
If you're shacking up and don't live in the following states, think about moving. You may get a better deal if you live in states that do recognize common-law marriages. The states include: Alabama, Colorado, Idaho, Iowa, Kansas, Montana, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Texas, and Utah.
Meanwhile, though, if you have a common-law marriage in a state that recognizes them and you move, you'll be pleased to know that most states will consider you officially married.
State laws differ. So before you act, consult with an attorney in your area. You should also pick up a copy of the The Living Together Kit (Nolo Press, Berkeley, California). Here's what that book has to say. If you're living together out of wedlock, at least do the following:
- Have a will.
- Protect your assets by keeping separate accounts.
Other ways you may be impacted by your unmarried status are:
- If you're not married, you might not be able to adopt. In many states, you may not be entitled to unemployment benefits if you relocate because your partner has been transferred.
- If you can provide more than half of your partner's financial support, you may be able to claim him or her as a dependent on your taxes.
Live-in partners also have some credit protections under Equal Credit Opportunity laws and Fair Housing laws. You can't be discriminated against when you apply for a loan to buy a home.
Avoiding Money-Related Stress
We've already told you some of the emotional issues that money triggers in couples. There also may be circumstances beyond your control that can affect your financial situation and add to the stress in your relationship.
But would you believe the mere task of getting yourselves organized in your new marriage can be an additional source of tension? It sure is. You've got to get used to each others' sometimes unusual habits.
Gail: Honey, is there any reason there are half-empty coffee cups sitting around all over the house?
Al:How come there's petrified food in the refrigerator and all the drawers are stuffed with paper dating back to the Revolutionary War?
On the positive side, you can get rid of a lot of paperwork by consolidating some of your savings, credit cards, and investment accounts.
Apart from the obvious, though, it's important to put as much financial planning into your marriage as we hope you did into your wedding. Newlyweds today tend to be older than they used to be. Men typically marry at age 27, while women marry at 25, reports the U.S. Census Bureau. Because both spouses often are working, they may already own cars and homes, and have established financial identities. Unfortunately, too many of those identities are based upon running up debt. As a result, fear of running out of money has become a paramount national issue for many families-and one that can spearhead too many family arguments.
We Can Work It Out
Best to avoid these issues from the start. Each of you needs to evaluate your own financial mindset and determine what about it you want to discard or retain.
Get things straightened out immediately. Have a family meeting and discuss certain issues. Take these steps:
- Agree from the beginning that financial decisions be joint decisions. Set some short-term and long-term financial goals. You'll need cash to cover at least three months' income. Then there's a child's college education, weddings, and retirement to name a few.
- Is one of you seriously in debt? You might want to be sure to keep property separate-to shelter money from the other spouse's creditors. Also, if either of you apply for additional credit, get it based on the financially solvent spouse's income and credit history.
A Couple That Screams Together Can Dream Together
Are your financial objectives the same? Determine what each of you wants to do with your money longer term. In fact, psychologists say you should make "dreaming together" over a ten-year period a regular part of your relationship not just when it comes to money, but in most other areas of your life as well. Say, one of you hopes to save, but the other wants a new pool. Work out an immediate compromise. Neil Clark Warren, Pasadena, California, is a psychologist and author of the book The Triumphant Marriage, published by Focus on the Family. He suggests listing all obstacles you expect to encounter in reaching your goals, and then devising a way to deal with each of the challenges listed.
Then, he says, write down how you both will feel once this goal is accomplished. "Designing a dream for your future together is an exercise that every couple needs to engage in-and preferably every year," Warren says.
Here are some other areas to focus on:
- If your hands, like those of most newlyweds (and old married couples) today, are trained to reach straight for the credit cards rather than a passbook, make an early commitment to change. Try to invest any cash you receive as gifts. You'll be glad later on that you did.
- Figure out how much each of you owes on each card, and determine how you will eliminate those balances. Consolidate accounts. Too many cards could prevent you from getting a mortgage.
- It's equally important that you maintain your individual credit ratings by keeping at least one credit card active in each spouse's name.
- Make arrangements for any child support and repayment of loans.
- Jointly agree right away on where you will store deposit slips, canceled checks, and any important receipts or documentation needed for tax records. Take it from us, you'll eliminate many arguments if you both always know where these things are.
- Make an inventory of all your belongings early in your marriage-before you lose any of your receipts or records of wedding gifts. This not only will give you an idea of how much property insurance you'll need, but it will be easier to file a claim if necessary.
- Find the right financial help. Look for a professional with at least ten years of experience that comes highly recommended from friends, your lawyer, or accountant.
- Evaluate your insurance-homeowner's, medical, and life insurance-to determine if it is adequate, or whether it is even necessary. Eliminate duplication, and make certain beneficiaries are changed to reflect your new marriage.
- Insure engagement and wedding rings if they're worth a lot.
- Consider getting life and disability insurance.
- Once you've knocked down your debts, set aside regular savings. Pay yourself first each week and make major house and car purchase decisions only after being sure you can save 5 percent to 10 percent of your household income.
- Try to have at least three to six months' income in a bank account or money market fund. You may need the money if you lose your job or for other financial emergencies.
- Invest for the long term. You can have money electronically deducted from your checking account and put into a bank savings account or mutual fund.
- Review and update your will or trust documents. You need to talk to an attorney about revising your will. A family and children have to be protected. If you expect your net worth to be more than $625,000 (or $1.3 million if your family owns a business) in 1998, consider an estate tax plan. Otherwise, your family risks paying as much as 55 percent in estate taxes when you die.
- Be certain you establish which of you will take care of routine household money-related tasks such as paying bills. Perhaps, as we do in our marriage, for example, one of you can oversee the stock, bond, and mutual fund investments, while the other pays bills and handles real estate.
Identify Sore Spots Early On
If you can spot the sources of money-related tensions early on, you can prevent a lot of family headaches. The hard part is making a change in your personality that may or may not be related to your pocketbook. You may need to rethink your beliefs and actions so you can work together to solve problems.
Here are a few common troublesome areas worth nipping in the bud early on:
- The husband is the breadwinner and handles the family money. The wife may feel helpless, useless, or trapped-a role she doesn't exactly like. Or, the man might treat her as unimportant. Guess what happens? She gets angry. Plus, the man may resent her lack of contribution, and feel unfair pressure to perform. We need some equality here. Running the home is just as important as going to work. Agree in advance on how you will split up the household duties and respect each other's roles.
- The wife earns less than the husband. This not only can hurt a woman's self-esteem, but also result in her exclusion from family money decisions, for which her input is critical. We need a happy balance here. Both partners need to recognize the importance of her input.
- The husband earns less than the wife. That's tough on the man, who "learned" early on that the man needs to be the breadwinner. It also can be hard on the woman, forced to justify her "inferior" choice in a mate to herself and possibly to family and friends. Husbands: Put your ego aside. Pitch in and jointly decide the family financial game plan. Wives: Cast aside these cultural stereotypes and remember why you married this guy!
- You both spend too much. This is a prime cause of stress. Put away or cut up those credit cards. Set up a spending plan. Only spend so much on the things you enjoy. Don't go over the limit. Analyze where you might cut costs on routine expenses.
One of you has to work two jobs to make ends meet. This very tough situation means you both must put your thinking caps on to develop a better life. Analyze your skills to determine what higher-paying careers you might qualify for so you can set aside one of those time-consuming jobs.
Don't worry if your earnings are unequal. It's just a matter of both spouses placing value on the lower-earning spouse's other talents or contributions to the marriage. Finding that hard to do? Perhaps the higher-earning spouse might consider forking over some extra cash to the other.
Psychologist Michael warns that if women feel financially dependent in a relationship, they tend to be less vocal. "She becomes less willing to stand up for her own opinions." It's not quality of education or financial status either, Michael stresses. In fact, in marriage counseling, it's often a woman's fear of not being able to support herself that keeps her from leaving a relationship. The key, she says, is for both partners to avoid taking their roles for granted. When a marriage falls apart, it very often is because the woman doesn't feel worthwhile in the relationship.
For a man, by contrast, when a marriage disintegrates very often it's because he feels the woman stopped supporting him emotionally.
When men aren't successful, Michael warns, they tend to withdraw and stop communicating. "They use alcohol and activity to make them feel better. They become some kind of a holic, a workaholic, foodaholic, sexaholic, or baseballaholic. . . .
"That's one of the pivotal issues with regard to a break-up during hard times. Women walk out on men when they're not doing well. Also, men act differently if they're not doing well."
While men tend to withdraw, women are the opposite. They like to talk about their troubles-often, when a man doesn't want to be bothered and just wants to relax after a hard day's work. These differences, Michael notes, are major areas that women and men need to work on together. Men need to find ways to communicate what they are thinking and feeling without necessarily talking about their troubles. On the other hand, women need to button up when their men need to relax.
Sometimes, there are events you have no control over. Take unemployment. Scott South, of the State University of New York at Albany, claims that based on his econometric model, approximately 10,000 more divorces occur for every 1 percent rise in the unemployment rate.
To avoid being part of that increase, or anything else related to divorce statistics, it's important, financially, to prepare for these unexpected downturns. As a rule of thumb, it's a good idea to have an emergency fund to last you six months. This way you needn't make unreasonable financial demands on your partner to take care of you. Don't completely rely on your spouse for emotional support in down times either. You may need to look to friends, family, church or synagogue, and resources in the community.
It's important to remember that when you as a couple work on something and resolve it together-whether it be a disagreement, tough times, or a short-term or long-term plan-something unique happens. There's a deep sense of self-pride-couple pride, Michael says. The ending is a happy one, complete with the mutual understanding that neither of you could have reached without the other.
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