Can Money Mismanagement Kill Your Marriage?


Money: The root of good and evil

Money is infamous for becoming a sore point in a relationship -- and with good reason. Money means more to us than just dollars and cents. It can signify security, freedom, love, spontaneity. Investing that money -- for our retirement, children's future or other goals -- turns an already-fraught conversation into a high-stakes set of decisions.

"It's so emotionally loaded, representing power, security, control, self-esteem," says Olivia Mellan, author of "Money Harmony." "You're not just fighting about the money; you're fighting about what the money means."

How do you manage money as a couple without sacrificing your love or your portfolio? Whether you're newlyweds ready to buy a first home or long-married partners who have amassed enough assets to need an investment strategy, the path to a mutually agreeable money management and investment plan incorporates several important elements.

Begin with sharing goals, understanding each other's perspective, swearing off secrets, and preparing yourselves for the inevitable change in course when the markets or your jobs don't go your way, and you need to re-evaluate your strategy.

Get on the same page

To lay the groundwork for a common money management plan, sit down with your partner and look over all your financial statements together. Make sure you agree on the numbers when it comes to your family income, expenses and net worth.

Surprisingly, research suggests that men tend to overestimate their wealth, while women underestimate it, says Jay Zagorsky, an economist at Ohio State University. According to a study on this, "half of all couples provide family income values that differ by more than 10% and net worth values that differ by more than 30%."

"Before sitting down and doing these specific numbers, have each person sit down and write on a piece of paper his or her best guess," and then compare the paperwork, Zagorsky says. "If people actually talk about it ahead of time, they can head off many arguments."

Be sure to include real estate, significant personal property and financial assets in your discussion. And when you review your household budget, look at the figures for what you actually spend each month -- not what you wish you could spend. These numbers provide the context for your money management and investment decisions.

Understand your partner's perspective

Now that you agree on the specific figures, you can dig deeper. Talk with your partner about what emotions are triggered by money. Maybe a high-risk bet on an undervalued stock brings you excitement, but it brings your partner anxiety.

"We all (have) personal meanings for money: status, security, respect, love, intimacy," says Jeffrey Dew, an assistant professor at Utah State University. "When spouses' meanings of money conflict, that's when there are problems."

Couples can become polarized around money into saver-versus-spender and risk-taker-versus-risk-avoider conflicts, often along gender lines, Mellan says.

To bridge differences, Mellan teaches couples empathetic communication, so they don't blame or attack each other. Each person takes a turn speaking while the other listens, with a focus on "I" statements. Then, they share appreciations of the other's style. Once the couple decides on how each person wants to reach a compromise, they should reward themselves for progress.

"At the end of the day, it all comes back to value conflict," says David Bach, author of "Smart Couples Finish Rich." "What do you really value individually, and what do you value as a couple?"

Develop shared goals

If you've discovered you and your spouse are financial opposites, don't despair. This scenario is quite common, Bach says. Indeed, research indicates men are more likely to make riskier investments and trade frequently, while women are typically buy-and-hold investors.

Talk about the goals and plans you can agree on -- whether it's a desire to buy a home, to pay for your child's college education or to retire with a certain lifestyle. These goals inform whether you will be comfortable with more risky money management and investment choices or whether you need to stick with conservative fixed-income investments.

"The couple needs to start thinking about what their dreams are for their marriage," says Gail Liberman, co-author of "Love, Marriage and Money" with husband Alan Lavine. "This actually can be a very intimate achievement."

It helps to meet regularly -- monthly or quarterly -- to discuss your household finances and progress toward money management and investment goals. "A lot of times, people don't talk about it before marriage, and they don't talk about it during marriage until a crisis comes up," says Jonathan Rich, author of "The Couple's Guide to Love and Money."

Swear off secrets

As tempting as it may be for a saver to keep an emergency fund hidden from his or her spouse, these kinds of secrets can be toxic to a marriage, Mellan says. "You know you have a problem if you start having secrets from one another, can't communicate safely, or most of your communications are negative rather than positive," she says.

Whether it's a secret investment in your brother's real estate venture or bags from a shopping spree that you hide from your spouse, you're starting down separate paths when you should be on the same road together. "People start hiding money because they don't want to be accountable," Rich says.

Figure out why you're keeping secrets, and work out your differences openly. You may need to compromise if one partner simply can't live with ambitious savings goals or swings in the stock market. On especially entrenched issues, you might consider a few sessions with a marriage therapist who specializes in money issues.

Prepare for inevitable setbacks

Having a unified money management and investment plan is just the first step. Everyone who's followed the market's gyrations should understand that you must periodically revisit your plan.

Be prepared for changes in your personal circumstances or the market that may force you to tweak your plan or perhaps revise it wholesale. Maybe a layoff forces you to pare your monthly 401(k) contributions, or a windfall bonus allows you to expand your portfolio or savings.

"If we have hard economic times, just like in business, you have to make adjustments. You may have to cut back," says Gordon Tudor, a financial planner in San Diego.

As long as you're on the same page and understand each other's perspective, you can work out a money management and investment plan -- together.