Treat your marriage like a business

Since marital status is so powerfully associated with financial status, people would be smart to view marriage as a business arrangement in addition to a romantic one.

|
Stephen M. Katz/The Virginian-Pilot/AP/File
Wedding cake toppers collected by Sue Wilson in Norfolk, Va.

My artist husband likes to say that if I were in charge of our spending, we’d be sitting on milk crates instead of furniture and that if he were in charge, we’d have no retirement accounts.

The fact that we have both nice furniture and retirement funds is a testament to compromise — and the wealth-building power of marriage.

Married people are significantly wealthier than single people in every age group, and the gap tends to widen as people approach retirement age. Married couples age 55 to 64 had a median net worth, excluding home equity, of $108,607 in 2011, the latest available Census Bureau figures show. By contrast, single men in the same age bracket were worth a median $14,226 and single women $11,481.

Income and education also contribute heavily to wealth — and to the likelihood that people will marry. But a 15-year study of 9,000 people found that even after controlling for those and other factors, marriage itself contributed to a 4 percent annual increase in net worth. The same study found that wealth typically began to drop four years before a divorce, which ultimately reduced people’s wealth by 77 percent.

Since marital status is so powerfully associated with financial status, people would be smart to view marriage as a business arrangement in addition to a romantic one. Taking a few pages from the business world has certainly made our 19-year marriage stronger as well as wealthier.

Here’s what works for us:

Conduct due diligence

Before a “merger of equals,” companies can spend millions of dollars and countless hours scrutinizing each other’s financial details, performance and prospects. You don’t need to hire a fleet of lawyers and accountants, but knowing what each person owns and owes before marriage can prevent unpleasant surprises later.

Create your own financial statements

You need two: a balance sheet showing your net worth as a couple — your assets minus your debts — and a cash flow statement, which shows your current incomes and expenses. Use these documents to judge your financial health, spot potential problems, such as spending more than you make, and track your wealth-building progress.

Draft your business plan

Successful businesses have to set priorities and decide where to concentrate their resources. So do couples, who have to figure out how to save for the future (with retirement, emergency and college funds, for example), pay off the past (mortgages, student loans, credit card debts) and live their lives in the present (paying the bills and having some fun). You’re likely to have more goals than money to achieve them, so you’ll need to decide together which are the most important and how to divvy up your income among them.

Appoint a chief financial officer

Chances are one of you is better at the day-to-day financial details, such as paying bills and monitoring financial accounts. Having one person take responsibility for these chores helps make sure they get done. The CFO also may be the person who researches large purchases, does the tax returns, shops for insurance and rebalances the investment accounts. The CFO does not, however, make financial decisions unilaterally. In the business world, the CFO is responsible to the board of directors. In a marriage, the partners are responsible to each other and should be making the big decisions together.

Commit to full disclosure

Publicly traded companies have to keep their shareholders informed with quarterly financial statements, audited annual reports and announcements of major events. Couples don’t have to keep to a federally mandated schedule, but regular meetings to review the finances are a good idea. Disclosure is key if you’re going to make sound financial decisions together. Unfortunately, a recent Harris poll for NerdWallet found that 1 in 5 Americans in a relationship with a partner who’s saving for retirement have no idea how much their partner has saved.

A similar proportion of those saving for retirement haven’t disclosed the amounts to their partners. That’s bad enough, but what’s worse than lack of disclosure is deliberate dishonesty. Hiding debts, concealing purchases and having secret accounts all undermine intimacy and trust. That doesn’t mean you can’t have separate accounts or “no questions asked” spending money to reduce conflict. But you shouldn’t conceal or lie about your financial situation to avoid a fight. That’s a red flag that there’s something you two should be discussing.

Liz Weston is a certified financial planner and columnist at NerdWallet, a personal finance website, and author of “Your Credit Score.” Email: lweston@nerdwallet.com. Twitter:@lizweston.

This article was written by NerdWallet and was originally published by The Associated Press.

The article Liz Weston: Treat Your Marriage Like a Business originally appeared onNerdWallet.

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

QR Code to Treat your marriage like a business
Read this article in
https://www.csmonitor.com/Business/Saving-Money/2016/1002/Treat-your-marriage-like-a-business
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe