How to Keep Finance from Ruining Your Romance
by , CFP®, President, Charles Schwab Foundation; Senior Vice President, Schwab Community Services, Charles Schwab & Co., Inc.
July 7, 2010
I'm 35, have an established, well-paying career, and am engaged to a man who earns considerably less than I do. Neither of us has children. I treasure my financial independence, but also want to build an equitable relationship. I'd like to have a prenup, but am afraid of offending him. Help!
Today it's not uncommon for a woman to make more money than her husband. According to recent information from the U.S. Bureau of Labor Statistics, one-third of working women earn more than their spouses. But statistics don't solve personal issues, so while there might be a certain comfort in the numbers, it's up to you and your fiancé to figure out just what the difference in your incomes means to you now—and what it might mean down the road.
I agree that a prenuptial agreement could be a good idea for the two of you. The key, I think, is to put it in the right context. Make it clear from the get-go that your goal isn’t in any way to prepare yourself for a divorce—but to build a strong foundation for a lasting relationship. In fact, I often believe that the most important thing about writing a prenuptial agreement isn't necessarily the legal document itself, but rather that the process is a way to create a mutual understanding. So the first thing is for the two of you to have a heart-to-heart conversation about your current economic situation, your desire for financial independence, and your common financial goals.
Discuss the emotional issues
No matter how modern we think we are, traditional attitudes toward money and male/female roles can rear up in a situation like yours. Money is often equated with power and self worth. Talk honestly with your fiancé about his feelings. Is he uncomfortable or threatened by you being the primary breadwinner? Does he expect the situation to change in the future? Can he handle it if you always make more money? Then take your own emotional temperature. Will you someday resent the fact that you're bearing more of the financial responsibility?
With these feelings clearly exposed, take a look at other aspects of your attitudes about money. For instance, is one of you a saver and the other a spender? How do you each handle credit and debt? Is financial control an issue? While you might agree in theory that what you each earn isn't important, differences in how you handle money could become a problem if not addressed—and understood—now.
Look at your current financial position
You don't say if you have accumulated assets either in a brokerage or savings account or in real estate. If either of you already has assets, you could agree to keep those separate and put any future savings toward your household. A good exercise for common understanding is to create individual net worth statements. Total up your individual assets (what you own) and your liabilities (what you owe). This way you'll both see exactly where you stand and can discuss what you want to keep separate, what you may want to combine, and how you'll handle any debts.
Create a practical plan for everyday money matters
Next I recommend talking about some of the more practical aspects of how you want to handle daily finances, no matter where the money comes from. Things to consider include:
- Expenses: Which will you share (e.g., mortgage, utilities, groceries) and which will you keep separate (e.g., clothes, personal entertainment)? Agree on what percentage of your individual incomes you’ll contribute to the common pool that's fair to each of you. Decide who will be responsible for the actual bill paying.
- Separate or joint accounts: Some couples prefer to pool everything in a joint account. Others keep separate accounts for personal expenses and a joint account for shared expenses. Be sure you agree and have equal autonomy.
- Saving: What are your individual and shared savings goals? What percentage of your incomes will you save each year? How will you divide your savings among your goals?
- Investing: Once you have some savings, how will you invest and who will be primarily responsible for investing? One way to maintain financial independence is to have separate investment accounts.
To my mind, there's no question that the conversations leading to a prenup can be a positive start to a marriage. But perhaps even more important are the open and ongoing dialogues about your financial goals, your dreams for the future and how you'll work together to reach them. Conversations about money may not seem very romantic, but they can go a long way toward keeping your romance alive.
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