How to Talk With Your Spouse About Money
Divorce destroys relationships, fortunes and, yes, even businesses. Last year the highly publicized split of Frank and Jamie McCourt nearly bankrupted the Los Angeles Dodgers baseball team. In the end, Frank agreed to give up the Dodgers and fork over $131 million in cash and $50 million in property to his ex-wife. (The legal teams walked away with about $20 million for their work.)
Frank, and everyone else -- especially business owners -- should consider a prenuptial agreement to protect their assets.
Some folks resent prenups; they think signing one is akin to planning for a divorce. This is nonsense. Nobody goes into a marriage planning for a divorce. Instead, think of a prenup as "marriage insurance," or even a form of business insurance.
Whether or not you use a prenup, the most important thing to do is have an honest discussion about finances before you tie the knot. In his personal finance column for The New York Times, Ron Lieber recommends that couples discuss four financial issues before marriage:
Ancestry. How your family handled its finances when you were growing up plays a huge role in your own relationship with money.
Credit. Partners in a committed relationship ought to pull their credit reports and credit scores together and discuss the results.
Control. Before you get married, decide on the family financial structure--joint finances or separate--and who's responsible for playing household bookkeeper.
Affluence. Discuss your goals. How wealthy do you, as a couple, hope to be? What are you willing to sacrifice to get there?
Of course, the best insurance against divorce, and possibly losing your business, is a strong marriage. Above all, this means maintaining constant communication, working together as a financial team, not as opponents. You'll always have some goals that don't align with those of your partner. That's fine, but be sure you're meeting your shared goals first before pursuing personal passions. In order to foster a sense of teamwork:
Regularly review accounts. Schedule set times--every week, every month--to go over the household accounts. Look at upcoming income and expenses, and deal with any unexpected budget items.
Don't be controlling. When you discuss money with your partner, take "you" and "I" out of the conversation. Use "we" and "us" instead. If you unilaterally tell your wife she can't spend money on her motorcycle hobby, she'll resent it. Work together to find common ground.
Be supportive. If your spouse asks you to call him out when he spends too much, do it. If he wants advice, give it. But don't lecture and don't act superior. Help each other to improve.
Play to your strengths. Some people hate thinking about retirement savings. Others don't like the nitty-gritty stuff like clipping coupons or shopping at sales. That's fine; let each partner handle the stuff he or she cares about.
Last tip: It's rare that partners agree completely. The key is to find as much common ground as possible and to compromise on the rest. It's true not just for finances, but for everything in a relationship.
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