Family and Money Item #1 — Financial Risks of Living Together
Are there financial risks in living together rather than being married?
Here are three potential challenges/issues that occur to me: 1) One member of the couple receives a promotion that requires a move to a different city. Does the other member of the couple follow? This is a hard enough call for two spouses who are married. But at least the married spouses know that there is an expectation that the relationship is a permanent one. So it is a bit less risky for the non-promoted spouse to follow the one obtaining the promotion; 2) One member of the couple loses his or her job and remains unemployed for a long time. Again, this situation places stress on the members of a married couple. But the members of a married couple approach the situation with the attitude that they must work through the tensions that this situation brings to the surface. One member of the unmarried couple will have difficulty not reevaluating the relationship, and, even if he/she does not reevaluate, the other member of the unmarried couple will have a hard time not wondering if his/her partner is reevaluating. Again, the result is a stressful enough situation made a bit more stressful; and 3) One member of the couple receives a large inheritance. Is the other member of the couple entitled to a share? Does he/she have a right to ask? Is this something that should be talked about or something that is better not discussed? If the member of the couple not directly receiving a share of the inheritance does not receive anything from the one who inherits, how is he/she to interpret what this means about the view of the one who inherits as to whether this is really a relationship for the long term?
Family and Money Item #2 — When One Spouse Earns a Good Bit More Than the Other
Does your spouse earn more than you? Or less? Either way, is it a source of friction in the marriage? Does it make you or your spouse uneasy that one of you earns more and one earns less? Conflict results when one spouse feels (or both spouses feel) that both are not making equal contributions to the overall marriage project. When there is a significant income disparity, that needs to be countered by a disparity that cuts the other way in some other important aspect of the marriage project. Consider the traditional marriage, where the man brought home the bacon and the woman cooked it up in a pan (instead of today’s happy situation in which the woman does both — just kidding!). There were many cases in which this arrangement caused power games and conflict and friction. There were also many cases in which it did not. The good outcomes were cases where the woman made her contribution in another way–perhaps through raising children on a full-time basis–and where both the man and woman appreciated the importance of this contribution. Where the woman earns more, the man needs to be making a significant non-financial contribution to the marriage. Perhaps he is involved in important work that does not pay well, and thereby makes both marriage partners feel good about what their partnership is doing to make the world a better place. If both spouses value what he is doing, that counters their mutual realization that the woman earns more. Income is an important factor in making a marriage succeed. So it can indeed be a source of tension for one partner to earn significantly more than the other. But income is not all that matters. Marriages succeed where both spouses recognize and appreciate the overall role played by the other spouse. So an income disparity need not be a serious problem in a marriage even where one spouse earns a good but more than the other.
Family and Money Item #3 — Is It Stingy Not to Cover Your Child’s College Expenses?
There is obviously nothing “stingy” about parents who do not pay for a child’s college education because they cannot afford to do so.It does indeed strike me as stinginess for parents to provide for all sorts of luxury goods and services for themselves (both prior to retirement and in retirement) and not to help with a child’s college education costs. There is not one type of expense. There are at least three categories: (1) expenses that cover the basic costs of living–food, shelter, health insurance; (2) expenses aimed at enhancing the potential for future growth–education, fitness-related expenses, braces for one’s teeth; and (3) expenses aimed at providing for a feeling of luxury–vacations, high-fashion clothing, big-screen televisions. I will cover a good portion of the college expenses of my two boys if I am able to do so without depriving myself of money needed to cover my own basic costs of living both pre-retirement and during retirement. Money spent providing for my boys’ college expenses falls into the second category; these are expenses aimed at enhancing the potential for my family’s future growth. I will aim to cover my own basic costs before covering my boys college costs. But I will aim to cover my boys’ college costs before covering the costs of luxuries for myself.
Family and Money Item #4 — How to Talk About Approaching Death and the Transfer of Assets
There is no discussion that requires as much trust between the parties to the discussion as a discussion of the death of a parent and the transfer of assets to the parent’s children. The discussion is about a transfer of power from one generation to the next. If the parent acknowledges the transfer of power too soon, he can do harm both to himself or herself and to the children by doing so. If one of the children appears too eager to have the discussion, he or she can cause doubts in the mind of the parent about his or her loyalty, respect and love for the parent. One way I can think of to defuse the tension is to make the talks over the transfer of assets from one generation to the next not a single Big Event discussion, but a series of smaller discussions of at least somewhat less significance. Some issues could be addressed at age 60, and then some more at age 70, and then some more at age 80. In that way, it would not come as a shock to all involved when the third in the series of discussions (which would involve the hardest questions) was scheduled.
Family and Money Item #5 — Joint Bank Accounts and the Marriage “Contract”
The trend in recent years has been for money
advisors to make use of a contract model when advising married couples on whether to mix their earnings in a joint bank account or to maintain separate accounts. The usual advice is for the two spouses to keep their financial affairs as separate as possible. There are indeed good reasons for doing so for those comfortable with the contract model. I am not comfortable with that model, and I think it is often better for married people to maintain a joint account.The benefit of the joint account is that it requires more interaction between the spouses. Each spouse becomes aware of what the other spouse is spending money on, asks questions, and becomes more knowledgeable about the other spouse’s choices and priorities. There are times when added awareness of what the other spouse is spending money on causes friction, but it is a healthy step to work through that friction in a constructive way. The pursuit of important life goals is a joint undertaking when one is married. So it makes sense for spouses to tackle as many money issues as possible jointly.