In honor of Valentine’s Day, let’s see if a couple with significant financial differences was able to avoid divorce. As a reminder, “financial issues” is one of the top 3 causes of divorce in the US (along with “basic incompatibility” and “infidelity.”)
Susanna and Jason are both 53 and have been married 27 years; they have a 16 year old daughter. Susanna and Jason told me they constantly were locked into arguments about money. Their daughter sometimes was caught in the crossfire. (Note: details bear no resemblance to current or past clients).
Susanna reported she had a happy childhood, although the family was financially stretched. The kitchen was stocked from paycheck to paycheck and she grew up wearing hand-me-downs from cousins – but the atmosphere at home was good. Susanna scrimped and saved money throughout her teenage years but she still feels guilty if she splurges on anything. Susanna financed college with loans and her own savings (something that was easier to do 30+ years ago). Susanna equates hard work with money.
Jason grew up in more comfortable circumstances. He always had a generous allowance, traveled frequently with his family, ate out often and was given a new car when he turned 16. His parents paid for college and law school, leaving him debt-free. However, home life wasn’t harmonious since his parents used money and gifts to vie for Jason’s affection. The parents quarreled often about this and other financial issues. Fights intensified over the years and his parents divorced after Jason graduated from college. Jason equates money with conflict between his parents.
Like any couple, Susanna and Jason have emotional baggage they carried into their relationship. Although they’re financially comfortable, the atmosphere at home is acrimonious. Marriage counseling hasn’t helped them thus far.
When I met Susanna and Jason, they requested concrete – but prudent –financial steps to reduce conflict at home. Their goal was to avoid a costly knock-down fight and divorce. (Both were aware of the financial cost of divorce — Jason’s mother did not fare well, financially, after his parents divorced).
Here’s a brief list of some of the financial planning areas that helped Susanna and Jason reduce financial conflict at home:
1. Susanna worried about retirement and was convinced she and Jason needed to work into their late 60s. Jason wanted to retire sooner and travel more but Susanna said they couldn’t afford it. After reviewing financial goals, reallocating assets and putting together a Social Security strategy to maximize benefits, I convinced even skeptical Susanna they potentially could retire as early as age 63. We regularly will retest this and other plan assumptions. Meanwhile, Susanna hasn’t given up the idea of working past age 63 but they no longer argue about retirement dates.
2. I recommended Susanna and Jason set up separate accounts linked to their salaries to control their personal spending and retain a degree of independence. They retained their joint checking account and automatically transfer pool funds each month to cover combined expenses (household expenses, insurance, etc). This structure has reduced squabbling about seemingly trivial expenses that used to explode into major confrontations.
3. Susanna is risk averse and asked me to structure and manage her IRA accordingly. I also restructured Jason’s IRA and their joint investments to reflect their relative appetites for risk. When combined, these various approaches nonetheless combine to form a target portfolio that can carry them into retirement.
4. Susanna and Jason couldn’t agree about how much they should fund their daughter’s college expenses. After financial planning analysis, they tentatively agreed to a compromise: fund 60% of college expenses and leave open the option of assuming their daughter’s loans after graduation – pending their financial situation at that time.
It would be naïve to suggest financial planning alone can prevent divorce due to financial differences. In this instance, however, Susanna and Jason responded better to concrete financial steps provided by an objective 3rd party than to marriage therapy alone. They said that working with a fee-only planner facilitated compromise on a number of subjects they could not have resolved otherwise.
Susanna and Jason still struggle with money and other issues but they’re doing better — and they remain married.