Friday, September 12, 2008

Married and money-mindful? Don't make these mistakes

After you become engaged, your life as a woman tends to evolve into a whirlwind of finding the perfect flavored wedding cake, stunning wedding dress, and color coordinating the table centerpieces to the brides' maid dresses to your bouquet to your wedding invitations to possibly the grooms men's boutonnieres ... oy! (Wow, did I just say that?) It can all get very overwhelming, and with all these little details leading up to the big day, many couples forget the most important detail to keep in mind ... the one that will stand as a pillar before and after your big day: your financial life as a twosome.

If you've had the financial talk, that's all fine and fabulous, but none of us ever want to think that all those twinkling white Christmas lights, glasses of expensive champagne and unending toasts made to the rest of your life could ever end in something ugly like, okay I'm just going to come out and say it: divorce.

I'm not a pessimist (at least, I think my glass is half full...), but from many stories I've read lately, it seems that women, and men to a lesser degree, tend to lose their financial selves once the walk down the aisle has been, well, walked. Usually it's women who tend to think that the stone on their finger casts in stone some promise that the man in their life will always look out for the family's financial well-being. In a perfect world this would be true, but the rates of divorce in the past decade or two have shown that relinquishing responsibility, for co-balancing the family checkbook or researching the best accounts for the family's savings among other things, could have dire financial repercussions on a woman if the marriage goes awry.

Unfortunately, there comes a point in some couples' lives when "the honeymoon" is officially over. Sigh. If you're not prepared to deal with the consequences of having forfeited your knowledge of where you are on the family money map, you could end up penniless and confused, with nary a credit score to your name (more on that in a second).

Pop quiz: Who's more likely, the husband or wife, to give up their career to raise the kids? Even though it's 2008, men still make more on average than women, so it's the wives that generally end up staying home with the brood of bambinos. And there's nothing wrong with that. I think it's a great thing if you have the freedom to swing it, but being up to your ears everyday in pacifiers, burp rags and reruns of Sesame Street doesn't mean you should acquiesce your responsibility of being on top of money matters.

I'm not sure when this became an "either/or" thing. Why do so many of us view it as an "I-take-care-of-the-kids, you-take-care-of-the-finances" deal? Is it because there's a belief that the person bringing home the money should also be the one in charge of it? If you're the stay-at-home mom or dad, you've earned a right in the say of that money too. After all, you work hard in a different way for the good of the family -- you just might not have a biweekly paycheck to prove it. But that doesn't mean your daily work, or you for that matter, should be a lesser voice in financial decisions.

I've heard it said that one of the biggest mistakes women can make in a marriage is walking away from their careers. I say to each his own. It's a personal decision that every woman has a right to make and that should not be judged. The feminist movement advocated giving women the option to have a career and family, not to make it the standard. So I wouldn't say leaving your career for the sake of the family is a mistake, per se, but I would say that giving your husband (or wife) full control and responsiblity of the family's finances is.

If you've noticed that you've lost track of the last time you really looked over the household bills or expenses, retirement balances or savings account totals, now is the perfect time regrab one of the reins and steer that horse together as a team, not just a second rider! Once a month, set aside some time with a cup of coffee and a notebook and list out all the accounts you two have set up (mutual funds, savings, checking, credit cards, etc.) and keep a running tally of how each account is holding up. It will give you a good, clean snapshot of where you stand as a couple and how much further away, say, your financial goals stand. Believe me, from the personal stories I've heard, it's better to be informed in this way than to realize the family savings have dwindled to near zero or that large portions of paychecks might not be getting deposited into the accounts you two agreed upon (i.e. hidden accounts). Not the most desirable info to find out, but it happens. Don't forget to also keep a running list of reoccuring bills, insurance policies and wills.

Oh and don't give up your credit card just yet! Be aware that if you cancel all your credit cards and add yourself onto his cards, it can be very, very hard to earn back all that good credit you accrued in the first place if the marriage ends in divorce. Why? An additional person on a credit card is looked upon as simply an "authorized user" by many companies, which means that after a period of time goes by and you want to apply for a credit or a loan by yourself, all those years as an "authorized user" will not have accumulated any credit history for you. In a way your credit status would be similar to a college student with a blank slate of borrowing history. Obviously this means that if you apply for a credit card or home loan, for example, without having held a credit account for more than six months in your name, than you'll be unable to have a credit score calculated for you, which means buh-bye to any credit line with a reasonable APR or spending limit.

I think the best solution to cover your credit in case of a disastrous event like divorce is to split the number of credit cards you two have, so on half the cards you're the primary account holder while on the other half you'd be the "authorized user." Same goes for him. That way you're still sharing your accounts, with no hidden agendas or "I-want-to-keep-this-part-of-my-life-separates" (you're married after all, doesn't that mean sharing everything?), while setting it up as an insurance policy of sorts on each of your credit scores.

And don't forget to keep saving for retirement, even if the breadwinner is saving for the two of you. If you are juggling a career and family, contributing to your company's 401(k) and/or a personal IRA should be a must on your to-do list. Saving on the side is especially important for the stay-at-home spouses who might work or run a small business from home and really have the ability to sock away savings in the case of an emergency. Look into contributing to a spousal IRA if you're unemployed or work sporadically.

Women statistically spend more than they save, so I know the temptation to take whatever extra cash you have and put it toward fickle purchases may seem okay in the short term, but if you don't put aside a little here and there for your future, it could have disastrous consequences, divorce aside. If something horrible happened and one of you had high hospital bills or disabilities that insurance would not cover in total (which is often the case), your retirement savings would be one of the first places you'd inevitably pull money out of to pay the bills, after your savings account and emergency fund are depleted. Saving as an individual, along with as a couple, gives you extra padding and ease of mind in case the unexpected occurs.

And if a divorce is on the imminent horizon (sigh), don't just ask for the house and think that will solve all your worries. According to insurance company Nationwide, "Studies show that women suffer more financially than men when a marriage ends." They cite that:
  • A quarter of all divorced women in America live at or below the poverty line
  • A woman’s standard of living decreases anywhere from 27 to 45% in the first year after a divorce while a man’s rises by an average of 10%.
So say you got said house in the divorce settlement. Would you be able to continue paying the mortgage on it with your single wage? If you gained sole custody of your children, would you have the time to work enough to make house payments while putting food on the table and also paying for childcare (since you won't be around as often)? These are all questions to consider when you've reached the end of the line.

Marriage is a fabulous thing, and I can say that from first-hand experience. Though it's only been about a year in for me, I'm happy with my decision and glad I married someone who although may be opposite of me in some ways (think Jane Fonda and Robert Redford in Barefoot in the Park), we still see eye to eye on the important issues such as career, family and money. Just remember to be open and honest with your joint accounts and expenses, and to work as a team on your financial matters and decisions rather than as a driver and passenger!

8 comments:

Abigail said...

Great points you make! When my mother was going through a divorce, her lawyer told her that, on average, it takes women 2 years to get back to the living standard they were at during the marriage. This is partially because men tend to earn more and because some women stop working or cut back. Re-entry can be a pain.

I thought this article by Liz Pulliam Weston has some great advice: http://articles.moneycentral.msn.com/CollegeAndFamily/LoveAndMoney/GetRealMarriageIsABusiness.aspx

Tim and I have been married for 5 months now. And just last night we had a big ole argument. He's a spender and I'm a saver. And I'm VERY strong willed. So we're still hashing out what is reasonable and what isn't. Things that I think are normal and wouldn't even give a second thought are a LOT of work to him. For example: He can't eat if he's not hungry, and so continually leaves the house and then gets hungry when out and about. So he buys food. Drives me crazy. But he can't even think about what he wants to eat until he's hungry. So long-term planning will have to be a slow process.

I'm very perfectionistic and he doesn't like to argue. So I know we'll have more arguments that defuse into long discussions. I have to ease up. He's come a long way in the 2 1/2 years. I can't expect him to be perfect.

Sigh, it's hard marrying a spender. Especially since, deep down,I have some spender tendencies myself. We'll get there... It's just a learning process. Right now, we're under a lot of stress as his future is up in the air. Hopefully, I'll de-clench a bit after this bit dies down.

Julianna Pullette said...

This post is so right. When I first got to college, I was shocked by the amount of women that are here to get the MRS degree. It's just so sad that young women are focused solely on getting a husband. With all the advances that women have made in the last century, I would have hoped that women had advanced a little further than this. Margaret Atwood would roll over in her grave.

Crystal said...

Abby: Yes, it's hard when two people with very different ideas on spending get married, but it's a fun, eye-opening journey for both of you to find your ways to the equilibrium where certain spending habits will work for both. Think of it as a course on Self-Awareness 101 :P. I'll check out that Weston article, and don't get too down about your argument! You've only been married 5 months and are obviously under a lot of stress about his future. Hang in there.

Julianna: I know some girls go to college to find a husband, but I have a feeling those marriages don't last for very long. Or there is infidelity, etc. involved, but the husband and wife look the other way. A union based solely on money never really works...

Judy Yublosky said...

Great thoughts...written in an interesting way!!! Thoroughly enjoyed this.

Abigail said...

Crystal,

Thanks for the kind words. We don't worry too much about our arguments. They're inevitably good things that lead to us really thinking things through. But, of course, it'd be good if we didn't have to fight to do it. Neither of us is good at confrontation, so it builds up to a boiling point. We're working on it.

I love Liz's stuff. She's great. Of course, I'm biased. She was a colleague of my mom's up at the Anchorage Daily News. Now, she's working for the LA Times, I think it is. She's the most-read PF writer on the Web.

I'm actually going to read/review her book Deal with Your Debt in a week or so. Then I'll give it away to a reader. I know Prime Time Money is giving away her most recent book this week.

Polly Poorhouse said...

When Mr. Poorhouse and I got married we decided we would buy only the best. We also decided that if he got something, I would get something.

Fifteen years later, we have a house full of crap and a life full of debt. We never fought about money. Maybe we should have.

Still, it was the unexpected events (business failure, job loss) that sent us over the brink. It can happen to anyone.

At least we still don't fight and we're digging out together. How romantic!

Budget Mama said...

It's a great post. As you know, I just left my husband. In our marriage, I tried to be the saver and he wanted to spend. I had control over the money and he didn't want to help or even look at the budget.

We didn't own a home, so there are no assets to fight over when we do divorce. I honestly, I plan to live below my means--downgrading the car etc... I would not live in such an expensive apartment if it weren't for the fact that this zip code is getting my son tons of free therapy, that is unheard of after 3 in the Autism community.

I definitely learned a lot of lessons and I know I won't make the mistakes we made financially in the beginning of our marriage.

Towards the end, we started racking up therapy bills beyond our control, so now we are just digging our way out of that.

Joshua said...

Thank you for the post. Not an easy topic. It's a good idea to put that emergency fund in a High Yield Savings Account as opposed to the basic one you might find at your local bank. A HYSA typically offers 3.0% APY and higher, whereas the local one may not even clear 1.0%. Check out the one I work with, ShoreBank. Their's is a competitive 3.5% APY. It's all online, easy to hook up to your checking account, has no monthly fees and only a $1 minimum balance. Go to http://shorebankdirect.sbk.com for more information.

Blog Widget by LinkWithin