If you’ve been married for more than a month you’ve undoubtedly learned that marriage means compromises. She wants to watch a romantic comedy while you want to watch an action film. If you don’t have two TVs so that you could go your separate ways, there needs to be a compromise. Maybe you agree to watch the romantic comedy tonight while she agrees to watch your action film tomorrow night. Or maybe the two of you are able to find a film you will both enjoy.
Decorating your home can also be a place for compromise as can be simple tasks such as grocery shopping. In fact, it can be said that happily-married couples make compromises almost daily.
Married couples are generally wealthier
Regardless of the age group, married couples are almost always wealthier than single people. There was a 15-year study of 9000 people that found that even when you control for factors such as income and education that marriage itself meant a 4% annual increase in net worth. Also, another interesting thing found by this study is that a couple’s wealth generally starts to drop four years before a divorce and that divorce ultimately reduces their wealth by 77%.
Wouldn’t it be smart?
Given the fact that being married is so tightly connected with finances, wouldn’t it be smart to view your marriage as if it were a business in addition to being romantic? Some couples are doing this and finding that taking some pages from the world of business has made their marriages wealthier as well as stronger.
Conduct due diligence
Companies spend thousands of hours and sometimes millions of dollars dissecting each other’s financial details before merging. If you’re moving towards marriage the two of you should have a due diligence and let each other know what you own and what you owe. When you know this it can prevent one of you from experiencing an unpleasant surprise down the road. For example, it might be embarrassing for you to admit you owe $28,000 on student loans but it’s better to get it out and on the table before you take your vows. Your partner might not like hearing this but it could eliminate future screaming matches or even a divorce.
Do a balance sheet and cash-flow statement
No company worth its salt would try to conduct business without having a balance sheet and a cash flow statement. A balance sheet will show your net worth as a couple, which is your assets minus any debts. A cash flow statement will list your expenses and current incomes. You can use these documents much like a business, which would be to determine your financial health and to spot potential problems. This would also allow you to track your progress in building wealth.
Businesses that are successful create priorities and decide where to focus their resources. A married couple should also do this. This means creating a business plan where you determine how much you’ll be saving for the future such as retirement, an emergency fund and college costs. Your business plan also needs to include how you’ll be for paying for the past like student loans, any credit card debts and your mortgage. Finally, you’ll need to plan how you’ll pay your monthly bills and still have money left over for fun.
You may find that you don’t have enough money to achieve all your goals. If this is the case, you’ll need to decide which ones are the most crucial and how to divide up your income among them.
Do periodic reviews
No successful business will create a business plan and then follow it blindly for an entire year. It will review its business plan periodically to make sure that changing circumstances haven’t made parts of it out-of-date. The two of you should do the same. Instead of letting your “business plan” sit in a drawer you need to dust it off several times a year and review it so you will see if you need to make changes.
Decide who’s the CFO of your marriage
Companies would never have more than one CFO or chief financial officer. The odds are that one of you is better at handling the day-to-day financial details of life such as bill paying and check writing. Make that person your CFO with the responsibility for handling these chores as this will make sure they get done. In addition, your CFO – whether it’s you or your partner – may be the one that shops for insurance, prepares the tax returns and researches large purchases.
But that person doesn’t make all the financial decisions all by him or herself. In the world of business, the CFO reports to a Board of Directors. In a marriage the two of you are the Board of Directors and should be making all the big decisions together.
Practice full disclosure
Companies that are publicly traded are required by law to keep their shareholders informed using quarterly financial statements, annual reports and announcements of their major events. While the two of you won’t need to keep a federally-mandated schedule, you should have regular meetings where you sit down and review your finances.
If you’re going to make good financial decisions together you need to practice full disclosure. Unfortunately, a poll done recently by Harris for NerdWallet discovered that about 20% of us that are in a relationship with a partner who’s saving for retirement have no idea how much their partner has saved. This is not only a lack of transparency in the relationship it’s really a deliberate dishonesty.
When one of you has secret accounts, is concealing purchases or hiding debts this undermines both trust and intimacy. You can have separate accounts and separate amounts of spending money but you should never lie about your finances in order to avoid a fight. When this happens it’s a big red flag that there’s something wrong that the two of you need to discuss.
If you need help
Finally, if you feel you could use some help managing your money, here’s a video from the American Institute for Economic Research that offers a lot of good information.