On the face of it, Amy and Jared have it all: The monster home in the suburbs. A wine cellar stocked to the rafters. Vacations to far flung locales each summer. Who wouldn't envy them?
But behind closed doors, Amy and Jared's relationship is falling apart only two years after their wedding. Amy, who grew up in a financially secure household, is a saver and an investor. She not only uses terms like "annuity" and "zero-based budgeting," she knows what they mean. Jared's idea of long-term planning? Deciding what to do next Saturday night.
Amazingly, their starkly different money personalities barely registered with each other before they tied the knot. Amy loved that Jared was so fun, vibrant, and exciting. And if he threw around a bit of money? Well, that was his business, not hers. For his part, Amy's steady, quiet personality made Jared feel happy and safe.
Combining their incomes changed everything. Now Amy and Jared fight about money nearly every week. Jared thinks Amy needs to lighten up and spend her cash; she makes enough of it working as a contract lawyer. Meanwhile, Amy's sure Jared is going to sink them into a stack of bills they'll never be able to afford.
After one particularly brutal argument, they decide they need to get some help and hire a financial planner who specializes in family finance dynamics. The decision saves their marriage.
"Our attitudes about money are so incredibly different, but having an impartial third person there to help us figure out why we feel the way we do makes a huge difference," says Amy.
When the couple begins talking about how they grew up, Jared reveals that his working-class background has an impact on how anxious he feels about having money. If it's in his wallet, he feels a compulsion to spend it—because who knows if he'll ever have money again? Meanwhile, Amy's grandfather, who had lived through the Great Depression as a child, taught her to save, save, and save some more. She feels real fear that her money will dry up.
With the planner's guidance, what could have turned into a marriage-ending crisis actually ends up bringing the couple together. The brilliant solution? Jared would pay all the bills and feed his thrill for spending money at the same time. Amy would set aside most of her money to build up the couple's savings. Now the couple's finances are back in shape and they're much happier.
"Now that we understand why each of us spends and saves, we are able to support each other. We feel like we know where our money is taking us—together," Amy says.
DO YOU FIND YOURSELF ARGUING WITH YOUR SPOUSE or partner over what he or she spends? Is your partner frustrated that you've forgotten what paper money looks like and routinely give the credit cards a workout? Or maybe your disagreements are of the more passive-aggressive variety. You spend a load on flashy items out of spite. In response he becomes tightfisted with his funds.
But even if your own story is slightly less extreme, and you bicker about the bills rather than waging all-out war—guess what? You're normal. Few couples, married or common-law, are on the exact same financial spreadsheet. And because we all have different approaches to spending and saving, money easily becomes a relationship flashpoint.
Sometimes the money chasm that divides us is alarmingly deep. In this chapter we're going to take a look at why money has a way of tearing couples apart, and we'll give you practical and effective ways to bridge the gap. These tools are not only going to get you paying the bills on time, they will actually mend parts of your relationship you never even knew were broken.
We're also going to show you ways to protect yourself financially before your wedding, during your marriage, and, yes, if you and your spouse ever call it quits. Fingers crossed, divorce papers won't ever come your way, but as any financially savvy woman knows, it pays to be prepared.
So why exactly do otherwise compatible and loving couples find themselves arguing over assets? There are a few reasons. First, financial friction is often not so much about clashing money styles as it is about what is left unsaid. You assumed he would pay this month's bills. He expected you to want to spend your holiday bonus to pay down the mortgage. And don't forget, when it comes to relationships, money is never just money. It's tied up in how we view ourselves and how our parents raised us.
Here's the second reason: how you handle money together acts as a window into how other areas of your lives connect. And the problem is, sometimes we don't connect—or communicate—at all.
"You're not allowed to talk about politics, sex, or religion. Money is so taboo, it's not even on the list," says Amanda Mills, founder of Loose Change Inc. She says it's that inability to talk about money that can lead to heartbreak. So while few people would willingly open up about their bank accounts at a dinner party, some couples actually bring that discomfort into their relationship—with disastrous results. It's a case of "if we don't talk about it, it don't exist."
Still, the money taboo may finally be getting kicked off the list for another reason: in the tell-all age of Oprah, Suze Orman, and couples coming clean about $120,000 consumer debt on national TV, money just isn't nearly as hush-hush a subject anymore. Perhaps that's one of the reasons why, according to a 2009 Canadian survey, 14 percent of couples said they had severe disagreements about financial matters, way down from 25 percent claiming pecuniary discord in 2005.
Yet there's one more hurdle to get past even if couples are talking deep into the night about spending styles and mortgage payments: deep-seated fear, anger, and disappointment about the relationship itself. Because money is bound so tightly with power, control, prestige, and security, anger about money is sometimes a mask for more serious problems. If you feel bitter about having to trade a career for family, or if you feel neglected by a spouse who travels too much for work, money can become the weapon of choice.
So what's the solution? If money seems to be unravelling the fabric of your union, and you just can't seem to come together in any meaningful way on the topic, find a good counsellor and work through relationship dynamics and resentments. It's important to get to the actual root of your disharmony, rather than blaming the not-so-almighty dollar.
If marriage or a common-law relationship is in your future, start talking about money now. Knowing that he or she pays bills on time, or that there is a $17,000 student loan looming, will cut out surprises later.
Once you have your relationship issues taken care of and you're finally able to see, like Amy and Jared, where you're both coming from and why, it's time to work together and get on the same financial page. No screaming required.
- What's your style?
What is your partner's? The first step is to identify your personal money styles and what you're bringing into the relationship. Rather than setting your sights on income, include acts of service too, such as taking care of the kids each Friday so the other person can work an extra shift. Are you the Supply Queen, responsible for the family's spending, while your spouse, the Treasury Guard, saves and invests? Work with, rather than against, these attributes. No blame.
- Get the facts straight.
Once you know who is in charge of what, shed light on your current financial facts. Go back to the budget section in Chapter 3 to remind yourself how it's done. How much are you spending and on what? Are you saving for retirement or to meet long-term financial goals? Do purchases eat in to what you both value the most?
- Start a financial plan.
To meet financial goals head on, you've got to have a plan. There's no shortage of free financial planning resources and tools online or at the library, and you can visit
Chatelaine.comfor smart money tips and advice. Another option is to hire a certified financial planner who will sit down with you together, listen to what you want to do with your lives, and then draft a financial plan that will hopefully get you there in good time. (And don't forget meeting periodically for "financial tune-ups" too!) Again, couples with explosive money issues should consider sitting down with a marriage counsellor before hitting up a financial planner for advice.
Learning how to work together on your finances will give you amazing results. Think about it. When a couple earns, spends, and saves independently they're often heading off in different directions instead of running happily toward the same goals. It's hard to win the race when you're aiming for separate finish lines.
For instance, let's say you both know that someday you want to buy a cottage by the lake. You put aside $150 each month in a mutual fund. Meanwhile, your spouse, filled with an increasing sense of wanderlust, books a last-minute trip to Thailand for you both. In the end it takes much longer to build enough wealth to buy the cottage since only one person is saving.
There's nothing wrong with one half of a duo changing his or her mind about a financial goal (unless it's retirement savings, of course). But that's a conversation that needs to happen so you can develop a new road map. Maybe after coming back from Thailand you both decide you have the travel bug and want to explore new cultures rather than being tied down to a cottage. Or perhaps the trip makes you both long for a cabin in the woods.
Either way, when you work together on your finances you'll be reinforcing positive results and living the lives you want side by side.
You've bought the dress, picked out the cake, and the RSVPs are flooding in. You've even discussed money with your fiancé and know where you both stand on debt management, bill paying, and spending habits. You're all set for marriage, or remarriage.
Just one more thing to consider: a pre-nuptial agreement.
A what the what? Yes, your best friend signed one about six months before she walked down the aisle and so did your aunt before tying the knot for the, well, fourth time. If it makes sense for them, how about you?
Pre-nups, the controversial contracts hashed out before marriage, aren't just for wealthy lovebirds anymore. While they were once used to protect rich men from gold-digging women, perceptions about the pre-nup have changed. And now that women have more economic power, we are turning to these agreements to protect assets such as a house, an accumulated pension, or a business. We're looking for legal security to avoid some very nasty surprises if the marriage folds—nearly four out of 10 do in the country—especially those who are marrying later in life and have more to lose financially. People living in common-law arrangements can use a pre-nup-type document to help define their rights, even if they never actually marry.
(If you're already married and stay up late at night worrying about what would happen if your husband called it quits—even if you're perfectly happy together now—you haven't missed the boat. A marriage contract, also known as a post-marital agreement, does the trick too. Both of your signatures must be witnessed by at least one person and the agreement takes effect immediately.)
It's not that anyone plans for divorce before their wedding day, but it certainly isn't a bad move to think of a pre-nup as insurance. After all, you insure your house and belongings against fire and flood to be on the safe side, not because you want a blaze to break out in the basement or a tsunami to rage down your street. Unless you have the power to look into the future and be 100 percent certain your relationship will hold, taking precautions makes sense.
The law is slightly different in each province when it comes to divorce settlements, but as an example, in Ontario you list all assets and their value both on your wedding day and on the day you part ways. What you originally brought into the marriage, apart from the family home, is yours to keep. You have to share any increase in value of those assets with your ex though.
So let's say you opened a cupcake store a year before you wed and about three years into the marriage, cupcakes were suddenly sizzling hot. Everyone wanted to jump on the craze. The result? Your business went gangbusters—but you'll now owe hubby half of the increased value of your business. Meanwhile, if your husband's stockbroker picked some winners and inflated the value of his retirement fund, half of the increase is yours too.
In British Columbia, however, there's a chance you would have to split even the items you brought into the marriage as long as your family used them. Granted, a judge can modify the 50/50 split if one person racked up serious debt or the marriage lasted less than five years. (It's not exactly fair to be forced to split that much-loved Partridge Family album collection you've been adding to for 20 years, if the marriage lasted all of 75 days!) But without a pre-nup, you could find yourself in the position of sharing everything you have.
Imagine inheriting a beloved family cottage that your grandfather built on Vancouver Island—and watching it drop into an ex-spouse's hands. The family fallout would be enormous.
And don't think, "What's the point in signing a pre-nup? Judges routinely overturn them." That's not the case. If you both had independent legal advice and the pre-nup was signed well before the day you got married—so you can't say you were pressured into it the day before the wedding—and the pre-nup is not considered blatantly unfair, you're generally bound to it.
Pre-nups can be as complex or as simple as you want them to be. You can itemize every little teacup and ratchet set in the house, or you can write up a version of, "what's mine is mine and what's yours is yours, and whatever we get together we split." Costs vary, from $1,500 for a simple agreement, to a few thousand dollars for one on the more complicated side that includes a few back and forth conversations between lawyers.
Even so, pre-nups have another thing going for them: they offer swifter, cheaper resolutions to marriage breakups than typical divorce proceedings, which can easily cost many thousands of dollars, particularly if there is a business involved.
Just don't be tempted to reach for one of the DIY pre-nup kits found at business supply stores or online. With so many assets on the line, get a lawyer who can explain the consequences of any action you decide to take.
Nobody wants to start a marriage in the red—so why pay big money for white taffeta? It's hardly the best way to eliminate money fights in the early years of not-quite marital bliss. Considering that the average wedding in Canada is running in the neighbourhood of $20,000 to $25,000, some couples are beginning to reconsider what they spend, particularly if they're the ones footing the bill.
Going the cheap and cheerful route often leads to the best weddings anyway, says Jolyn Saramaga, creative director and wedding planner for Nuance Occasions in Edmonton. If you don't have money to burn, there's little chance you'll have a lame cookie-cutter, credit card-busting wedding attended by 200 people, but remembered by few five years later.
"The wedding should really be a celebration of the couple. If you're spending money just to have the best of everything, that's not a wedding," she says.
Still, no one wants to look cheap. So how can you walk the fine line between lavish spending and penny-pinching practices? Here are a few options:
The number-one way to slash wedding costs is to trim your guest list. Every time you invite one more person, the costs of catering, favours, rentals, and other fees increase. Instead, set down rules such as: only friends I've talked to in the last five years are invited, or, no dates for single people. If someone is really going to be put out by their elimination from the list, by all means invite them. Weddings are supposed to be about support and love, not hurt feelings. But make them the exception, rather than the rule.
Cut back at the bar. If you limit the choices, you'll slow down consumption and possibly pay less for the bartender. Stick to simple drinks like wine, beer, and a couple of wedding-themed cocktails.
Rethink your wedding's time or day of the week. Instead of going the traditional Saturday dinner and dance route, throw a cocktail reception on a Friday evening with fancy finger foods. Brunch receptions are also romantic—and much cheaper.
Trim back the decor and spend your money on things that guests will see as they walk through the door. The rest of the room can be scaled back. If the room is gorgeously ornate to begin with, you can cut down even further. You can also choose less expensive centrepiece options. During the holidays you can hit up end-of-season sales for spectacularly inexpensive Christmas tree ornaments and put them in inexpensive glass bowls from dollar stores for a fraction of the cost of fresh flowers.
Ask friends and family for help. Is your university pal a virtuoso on the piano? Ask her to play you down the aisle. Do you have a well-spoken uncle who can act as the officiant? Maybe your crafty friend will lend a helping hand with ceremony decorations, or your type-A, bossy sister can be the wedding planner. People are often delighted to be part of the process.
Nix the return envelopes and supply self-addressed stamped postcards instead. Or, go 3.0 and ask people to RSVP via email or even
Evite.com. All you really need to know is the number of people who are coming so you know how many rubber chicken plates to order.Turn to eBay and Craigslist for discounted wedding favours, cake toppers, ring pillows, and even dresses. Just be sure you check ratings so you know you're dealing with a respected eBay seller.
Now that you're married, you share a bed, kids, and a mortgage. But do you share a bank account? You've probably seen a lot of opinions and advice floating around about whether or not couples should combine their finances when they get married. Some say it's best to amalgamate earnings in a joint account. Others recommend keeping it all separate so both people feel they have say in where the money goes. (No doubt it's tough to give up control if you've been making all of your own financial decisions for the past 15 or 20 years.) Or maybe it's best to subscribe to the "Yours, Mine, Ours" banking philosophy in which couples keep separate accounts and a joint one too.
To share or not to share? Only you can decide how the two of you handle your money, but here are a few factors to consider:
- The upside:
Many couples consider putting both of their names on a single bank account—a right of passage for any marriage. The joint account makes it easier to track money, and if there is a disparity between salaries, the person making less doesn't feel that they're scrimping and saving while the other is living the high life. Also, if one of you should die, joint accounts are easier to access.
- The downside:
Loss of autonomy. If you decided to keep your maiden name after marriage, chances are good that chucking away some financial freedom will make you squirm. Sharing a joint account can also evoke feelings of resentment when one partner is contributing more than the other, or if someone entered the marriage with a lot of debt.
And don't forget gifts. How are you expected to pull money out of the account to buy your honey an extravagant present without tipping him off?
- The upside:
Maintaining separate accounts allows each of you to keep some money for doing what's important to you. Separate accounts are also a must if you have even a small home-based business. You'll want to keep finances separate to make bookkeeping easier.
- The downside:
If one half of the couple is notoriously bad at money management, there is no one watching if his or her account goes into free fall. Secret shopping and other forms of financial infidelity can go on for years and ultimately blindside the spouse and ruin their entire joint financial picture.
- The upside:
If you want the best of both worlds, set up a joint account for bills and mortgage or for rent payments, while retaining separate chequing accounts. To make it work, sit down and figure out how much of your income goes to these expenses each month. That's easy if you both make roughly the same income. You simply contribute a similar dollar amount. But if one person makes significantly more money, contribute a percentage amount instead. Either way, both people deposit an agreed upon amount into the account.
The biggest advantage to this system is that you'll both retain your financial independence and the bills still get paid. You know just enough about what your husband or partner is doing with his money, without getting bogged down in the details.
- The downside:
There are more accounts to keep on top of and, depending on how you set up payments, determining who owes what each month can eat up your precious time and cash in the form of bank fees.
"You can't be serious," says Nicole, arms folded and standing in her kitchen with its gleaming sinks and restaurant-quality stove. She'd just had it remodelled a few months before.
But Tony is dead serious. Nicole's husband of six years wants to separate and eventually get divorced. Not that Nicole is completely blindsided the night he comes home from a client dinner looking worried and claiming they, "need to talk." For years their relationship has limped along. Tony works 70-hour weeks and Nicole's resentment grows over lonely evenings and cancelled holidays.
So, in some ways, Nicole is relieved when Tony finally calls it quits. She'd been thinking about divorce for years, but felt intimidated at the idea of being completely financially independent. And then there's the cost of divorce.
Nicole is right to worry. Ending a marriage can be even more expensive than the wedding that started it all. The cost of splitting one household into two—think double the insurance, utility bills, and more—is alarming. But even before you get to that point, shelling out upwards of $500 an hour to pay for a top-notch family lawyer is enough to put almost anyone in the poorhouse.
No wonder plenty of women feel they're too broke to get a divorce and opt to stay in unhappy marriages for financial reasons. They've probably heard that divorced women fare much worse financially than their exes after a breakup.
In fact, according to the National Population Health Survey, 43 percent of Canadian women who have undergone a marital breakup (such as divorce or separation) have a substantial decrease in household income, while only 15 percent of separated or divorced men experience a financial decline. What's more, nearly 30 percent of recently divorced or separated men actually experience an improvement in the ranking of their adjusted household income. And women? Less than 10 percent see their standard of living go up.
But let's get back to the divorce process.
Aside from divorces that involve high-end legal representation and forensic accountants digging through paper trails, how much do they typically cost? Once lawyers get involved, you can expect to pay $10,000 just to get a contested divorce to the beginning stages; however, it's not uncommon to hear about lengthy, complex splits that skyrocket to $250,000. Maybe she's hell-bent on keeping her foot in his business. Perhaps he wants her to sell the pricey scarves and bags she hoards in the closet so they can split the cash—and she won't budge.
Most divorces with a moderate amount of conflict will run soon to be ex-couples at least $15,000 to $20,000 per person.
There are other cheaper alternatives out there. Office supply shops and bookstores sell do-it-yourself divorce kits. People who don't want to be bothered learning the minutiae of divorce law can also use a service like Untie The Knot Divorce Service Inc. (Untietheknot.ca), whose owner, based in Nelson, B.C., will complete the necessary paperwork for a fee ranging from $225 to $375 (plus court filing costs and taxes in some provinces) depending on your province and whether you have children. Even with provincial filing and processing fees, some divorces can be wrapped up for under a few thousand dollars.
Still, the reality is that most couples on the brink of divorce want more guidance, especially when dealing with custody issues and shared assets. To bridge the gap, many partners—who have no interest in paying someone big bucks to turn them into enemies—are now using a third option: mediation. A divorce mediator is an independent third party who helps couples negotiate a separation agreement without relying too much on the use of expensive lawyers.
Mediators, with a background in law themselves, charge between $100 and $300 an hour, or about half what a lawyer will charge. And because both people use the same mediator, the charge is hacked away even further, costing only a quarter of what a couple would pay for two divorce lawyers working in a backlogged court system. Even so, mediation can still drag on for months if couples go head to head over splitting assets or negotiating alimony. You can find mediators through provincial association lists, on the Web and even by searching the Yellow Pages (look under "mediation services").
If your marriage comes to an end, it pays to make sure your financial security doesn't also go up in smoke. So, is there any way to protect yourself financially if you think you might be served with divorce papers or you want to get the ball rolling yourself? Absolutely. While the best protection is a pre-nuptial agreement or marriage contract, it may be too late for that. Instead:
- Meet with a lawyer.
Hopefully you'll never need one, but meeting with a family lawyer before your divorce is a sure thing will help you get your head around what divorce entails. Find out what it might cost you. Ask lots of questions. Family lawyers have a bunch of tips to help protect your finances if the worst happens.
- Get accounts in order.
Are all of your family's financial accounts in your spouse's name? Establish your own credit history by opening your own account or signing up for a low-interest credit card with a small limit. Buy a few items and pay them off in full each month. It's also crucial to gather copies of all the important financial documents, including wills, tax returns from the past three years, mortgage refinancing papers, bank statements, pension statements, any separate financial papers and insurance policies. Pay stubs and employment information could come in handy later too. Keep it all in a safe (read: secret) place.
- Know what you're worth.
Use the papers you've uncovered and try to determine the value of your family's assets, including retirement accounts and pensions. If your house is filled with valuable antiques or other items, get them appraised and take photos of them. Better yet, wander around your house with a video camera. The images will prove an item exists and may jog your memory about others you forgot you had.
- Pretend it has already happened.
While you're still married and before you initiate a divorce, create a realistic monthly budget you would expect to need as a single-income household. Remember to include any bills your spouse usually pays such as car insurance or municipal house taxes. You may end up being on the hook for them later. This will give the court, or mediator, a better understanding of what you need to live on.
- In (your) name only.
If you'll be receiving an inheritance soon, don't put it in both of your names or use it to pay for property or property expenses. You could end up losing half of what Great Aunt Margaret left you. Keep your inheritance separate from the marital estate.
- Keep debt down.
If you're about to get a divorce, your disposable income is about to take a serious financial hit. This is not the time to make major purchases, plan home renovations, and sink yourself into debt. You'll want to keep your assets as liquid as possible. Start building an emergency fund if you don't already have one. It will be subject to the 50/50 split like everything else, but the backup money will help you feel you have some power over the process. Another option is to apply for a line of credit instead.
- Provide for yourself.
And don't count on alimony payments even if your salary is lower than you partner's. Instead, make sure you can pay your bills and have income coming in. That means looking for work if you're not employed and staying put if you are.
Be forewarned, these steps will not make you feel good, but if divorce happens, you'll be very glad you put your emotions on hold and got the job done early. Whenever a relationship ends, it's always sad and shocking even if you knew it was coming. Who wants to be digging around for old tax papers in that state of mind?
Not everyone decides to saunter down the aisle, exchange vows, and pen marriage certificates. And now that the whole "living in sin" concept barely registers to many Canadians, shacking up without springing for a ring appeals to a growing number of couples.
Data from the 2006 Census indicates that common-law relationships are on the rise with 16 percent of all families falling under the category. Two decades before, they rang in at only seven percent. And people in Quebec say, "I don't" more than anyone else with a stunning 29 percent of all families in La Belle Province claiming common-law status.
Maybe marriage is not exactly your cup of tea either. You have a committed relationship and who needs a piece of paper to prove it? That's a good point, but it's in your best interest to understand that common-law marriage is not considered the equivalent to a legal marriage and is treated differently if the relationship should fall apart. So how does a common-law "divorce" work? Here's what you need to know:
Your relationship is over when you say it's over.
What's yours is yours and what's his is his. The basic rule, whenever a common-law couple separates, is that each person keeps their belongings (maybe the house is in your name, or the car). You're also both responsible for your own debts. It's a smart move to keep receipts for every larger purchase you buy, or smaller ones if they mean something to you. Some provinces have different rules than others though, so visit your provincial government's website to find out where you stand.
Assets in both of your names get split down the middle. You'll need to decide if one person will buy out the other person's share, or if you will sell the property and divide the profit. If you can't decide what to do, the court will normally order that the asset be sold.
Child support and child custody are handled like those for divorced couples. Child support supports the child, so it makes no difference if you're legally married or not. Similarly, child custody is decided according to what is in the best interest of the child. Marital status is not the issue.
Whether you walk down the aisle flanked by topiary balls in a church, go the common-law route, or opt for a city hall celebration, getting married and staying married is not just about joining lives. It's also about merging debts, assets, and financial dreams.
Now that you've learned how to talk to your spouse about money, and know the ins and outs of protecting your finances, it's time to discuss other ways you can use money as a means of looking after your financial needs and those of your family. In the next chapter, we'll take a quick peek at some financial "extras" every woman needs to consider before she can call herself a supreme money queen. We're talking insurance, wills, kids' expenses, emergency funds, charitable giving, and how to organize all the financial paper piles that seem to accumulate at home. Here we go.