“…for better, for worse, for richer, for poorer…”
Millions of Americans make those vows each year, but an alarming number of marriages end in divorce. In fact, it’s been estimated that the percentage of marriages ending in divorce could be as high as 40-50%. Of those unfortunate outcomes, a whopping 30% of divorced couples cite financial disagreements as the cause of their union’s demise.
Here are some steps you can take after the damage has been done.
Step 1: Talk about it.
A 2014 survey conducted by the National Endowment for Financial Education found that 1 in 3 couples suffered from financial infidelity. That means that a spouse was lying to their significant other about debts, loans, credit, or anything else money-related. If your marriage is already suffering because of finances, being dishonest about money can escalate the problem further.
As awkward as you might think it is to discuss your debts and other financial information with your spouse, full transparency can go a long way toward saving your marriage. In fact, 42% of couples surveyed in a 2015 study reported feeling happier in their relationships when they discussed money once a week.
In the interest of transparency, there are questions you can ask your spouse to gain a better understanding of their financial patterns. Examples include:
- How much debt are we talking about?
Get it all out there and in the open. Then make a plan together to tackle your joint and individual debt. What’s the lowest credit card you can pay off outright? Are you eligible for student loan forgiveness?
- Which one of you is more financially literate?
Which one of you is more self-aware about the standing budget and what you need to buy versus what you want to buy? How can you work together to improve your finances as a couple?
- How much do you make a month?
Compare this to the monthly bills that are essential such as utilities and food to get a big-picture view of your monthly budget.
- How much do you spend on the average day?
Keep receipts or use a budgeting tool like Mint to track spending. It’s the only way to single out the non-essentials you can trim jointly or individually from your budget.
- What are your income goals and milestones?
Do you have an emergency fund? Have you thought about how much it will cost to save for retirement? Create a savings plan you can both get behind and work together to achieve your financial goals.
Once you’ve addressed these and any other questions you may have, it’s time to formulate a plan!
Step 2: Plan it out.
When formulating debt repayment plans, organization is key. You need to meticulously itemize your existing debt – both yours and your spouse’s – and then you need to figure out what the monthly payments are for each account. Then, because you should always pay a little more than the monthly minimum, determine how much extra you can pay per month to eliminate that debt once and for all.
How to eliminate debt as a couple
- Add up your total existing debt (car payments, student loans, etc.)
- Total up the minimum monthly payments for each open account.
- Compare that amount with your collective income.
- Determine how much beyond minimum payments you can budget for per month.
You can also try the Debt Snowball Method to prioritize which debt you’ll pay off first. This method is a phenomenal way to gain some perspective on your marriage finances.
First, you’ll list your current debt from lowest to highest and include minimum payments. If you are able to outright payoff the lowest balance in that debt hierarchy, great: you’ll have that much more money toward paying off the next item on the list. From there, the more money you free up, the more you have to pay-off the bigger items — and save on interest payments.
Of course your plan and your situation will vary, but having an organized approach to debt can work wonders for your marriage.
Step 3: Consult a marriage counselor.
A marriage counselor can help you address the underlying issues behind financial infidelity. As Dave Ramsey sums it up:
“There’s a certain kind of malice involved with financial infidelity. This is a huge breach of trust and can ultimately destroy both your marriage and your finances.”
Financial infidelity may be less about the money (or lack thereof) and more about communication breakdown and broken trust with the love of your life. Having a plan to address financial concerns in a marriage is only a temporary solution if the root cause of the financial infidelity is not addressed. That’s where consulting a marriage counselor can help.
Counseling costs and benefits
Most insurance providers don’t cover costs associated with marriage counseling. But it’s still worth a call to your provider to find out if treatment would be covered under your policy’s mental health benefits. Even if treatment isn’t covered, consider the emotional and financial costs of divorce. Counseling is an investment in the future of your marriage — and it’s tough to put a price tag on that.
If out-of-pocket costs of counseling are too burdensome, consider revisiting the idea once you’ve paid off one or more of your open accounts with the Debt Snowball Method mentioned above. You can simply reallocate a portion of that freed-up cash toward receiving the counseling you need. You could also create extra room in your budget by limiting impulse purchases. Opportunities for trimming your budget will become more obvious as you begin to track your spending together.
Step 4: Seek qualified financial advice.
Once you’ve determined the true cause of the financial infidelity and you’ve formulated a plan, it’s time to get a second opinion. Consider seeking out a financial planner. We’ve covered financial guru Suze Orman in the past, and her expertise is invaluable when it comes to finding a reliable financial planner. In a Money Matters piece, Suze gives her take on the criteria for finding a financial advisor with your best interests in mind.
According to Suze, you’ll want to meet the planner on their turf (their office space) rather than have the planner come to you. This gives you a chance to see how they organize their surroundings. This might seem superficial but, as Suze observes, a planner or advisor who can’t keep his/her own office in order can’t help you keep your life in order, either.
Another thing to watch out for is a financial planner who just asks about the money in your initial consultation. A good financial planner should consider all aspects of your life when helping you formulate a customized financial plan.
Suze concludes with probably the most important tip: pay attention to how the planner is compensated. Whether you’re looking for another set of eyes on your budgeting plan or starting one from scratch, having a clear understanding of fees and rates will help you avoid unpleasant surprises down the road. As a general rule of thumb, Suze recommends fee-only planners who charge a flat or hourly rate and are not involved in financial product sales. This can help ensure you’ll hire a planner who will act in your best interest.
It’s important to do your homework for this step. A good planner can help you turn your plan into actionable data that could not only get you out of the red financially, but also help heal your marriage.
Staying out of trouble
Now that you’ve taken the necessary steps to begin healing your marriage, take preventative steps to avoid history repeating itself.
Keep the conversation going
Lack of communication is one of the largest contributing factors to financial ruination of a marriage. One 2015 survey found that 22% of husbands and wives had recently made purchases they did not want their spouses to know about. Going forward, there needs to continue to be clear, frank, open, and honest discussion when it comes to spending and saving. You’ve already done the heavy-lifting to start the healing process. Don’t jeopardize your progress by repeating behaviors that got you in trouble in the first place.
Budget for fun
Whatever budgeting and debt paydown methods you choose, make sure you budget for fun activities you can enjoy together. Put aside some money for an occasional round of mini-golf or a night at the movies with the family. As Dave Ramsay put it, “It’s okay to set aside some time and money for yourself each month. Even a small indulgence can do wonders for your money morale.”
You’re more than a couple; you’re a team.
Managing your finances takes time, effort, and energy — and the same is true for a marriage. When your marriage is weighed down by money problems, pointing fingers isn’t likely to help. Instead, face your money worries as a team, and tackle them together. By creating a financial plan you both support and keeping the lines of communication open, it’s possible to improve your relationship and your financial outlook at the same time.