Love Marriage and Money (Part I)

This isn’t very romantic stuff, but it is important stuff. Who you marry is likely to be the single most important, irreversible decision you will ever make. Not surprisingly then, this decision will also be the most important financial decision you will ever make in your life. Don’t kid yourself, you and your intended are forming a financial partnership, for better or worse, for richer or poorer, till death do you part. In most instances getting married (and staying married) is a wise financial decision.

If you don’t believe me, listen to Solomon.

Ecclesiastes Chapter 4

[9] Two are better than one; because they have a good reward for their labour.
[10] For if they fall, the one will lift up his fellow: but woe to him that is alone when he falleth; for he hath not another to help him up.
[11] Again, if two lie together, then they have heat: but how can one be warm alone?
[12] And if one prevail against him, two shall withstand him; and a threefold cord is not quickly broken.

I have seen these sorts of figures in many sources. I particularly recommend The Millionaire Next Door, but these particular numbers come from a MSN column written by Liz Weston. “The median net worth of married-couple households in the latest Census Bureau wealth study, conducted in 2002, was $101,975. For single men, median wealth was $23,700. For single women, $20,217.” When all other factors are held constant (income and education), just the fact that a couple is married led to an increase in net wealth of 4% per year when compared to single folks. Likewise, it has been repeatedly shown that divorce destroys wealth at a frightening rate. Again from Liz Weston, “Wealth declines typically started four years before a divorce was final, and the breakup ultimately reduced the typical person's net worth by 77% of that of the average single person.”

Before you tie the knot, count the cost. I know that is not what your hormones are telling you, but take some time to discuss these issues before your wedding day. Learn to communicate about money before you get married. It has been recommended that both bride and groom order a credit report complete with their score, then sit down at the table and examine each other’s financial history. In this conversation, bride and groom should also list all their debts including car payments, credit card debt, and student loans. I hate to be the bearer of bad news, but in most states you are not only marrying each other, but you are marrying each other’s debt.

In the story of a divorce told in an article by Lisa Scherzer, the wife discovers that prior to their divorce her husband had been racking up significant amounts of debt. Her attorney, Sheera Gefen-Greenberg noted, “Even though he's primarily liable for those debts, the wife, in a divorce, may still have to foot the bill at the end of the day.” The author goes on to observe, “In New York, any debt accrued during the marriage is legally considered marital debt subject to distribution between the parties in a divorce.”

I believe this is more important today than it was when I got married over 35 years ago. I like to tell people my wife married me for my money. I owned a 67 Chevrolet. It might have been worth $450. I also had $900 in the bank. I did not have any debts, no credit history, and I did not even know that such a thing as a credit score existed. Today, the average age for a first marriage is pushing 28. That is long enough to develop a credit history. Six years for a college graduate or ten years for a high school graduate is sufficient time to develop some bad habits and rack up some significant debt.

In marriage, as in the beginning of any business venture, the partners need to determine their assets, liabilities, and goals. Discuss where you want to be in 10, 20, or even 40 years. Do you want to start a family? That will cost you about $250,000 per child if you wish to raise them as traditional middle class Americans. Do you want to retire sometime before you die? Better start soon. Laura Rowley even suggests discussing hypothetical questions, like what would you like to do with an unexpected $10,000 inheritance?

When you say, “I do,” you are making a decision that has serious financial implications. If you study Consumer Reports total cost of ownership and frequency of maintenance data, if you read test reports from Road and Track magazine, if you research fair price numbers before buying a new car, why would you do any less before making the most important decision of your life?