The #1 Reason for Divorce?

For decades, the divorce rate in America has hovered around fifty percent.  And while the reasons vary, a common thread for the majority of divorces includes money problems. In fact, some studies suggest that money problems in a marriage are the number one cause of divorce.  The financial and emotional toll of a divorce can debilitate individuals and devastate families.  If we could resolve our most serious family money issues, we could remove perhaps the single biggest hurdle to a successful marriage.  Here’s a list of 4 of the most common money problems in a marriage along with some solutions that can help get you on the right track:

  • Poor communication. Couples who don’t discuss their finances are almost bound to run into trouble eventually.  The ones I’ve seen that work out reasonably well are where there is a high level of trust between partners and one partner happily relinquishes most of the financial decisions to the other.  In the south, this is often the husband.  Where this strategy begins to unravel is if the husband dies first leaving the wife with very little understanding of the family finances and not much experience in managing money and investments.

Solution:  The best solution for all couples is to establish periodic and pre-scheduled open and ‘safe’ communications about the family’s finances.  “Communication is key…in any relationship, any scenario. If you are not heard, you don’t feel loved or respected and that can cause resentment”, says Kelly DeRoy, a young married associate at my firm.  How often should you review your finances?  “Review finances together every month (track spending/saving). Lay all the cards (literally) on the table”, says Beth Moody, CFP®.

  • No savings. Over fifty percent of families in America have less than $1,000 in savings.  With virtually no savings, you are guaranteeing that there will be financial stress in your marriage.  “No savings can feel like no security. Living paycheck to paycheck with no form of a security net to cover the unexpected can cause tension between a couple. Start saving now, create an emergency fund; opt out of going to dinner and put that cost into savings that will benefit you down the road”, says Mrs. DeRoy.

Solution: You simply have to build reserves for unexpected expenses.  The best way to do this is to have your bank or credit union or employer automatically transfer a given amount into a segregated reserves account from each paycheck.  Start out small, say 2% of pay, and increase the amount as you get pay raises.  How much is enough?  As a starting point, shoot for three months of your take-home pay.  If you feel less secure in your job or if you lost your job, finding a new one might take a while, raise the goal to six months or a year.

  • Money secrets. Over the years, I’ve witnessed a number of cases where one partner ‘hides’ money from the other.  Finding out about a secret stash of money is guaranteed to breed mistrust.  And once that happens, you can bet that the mistrust will bleed over into other aspects of the marriage. 

Solution: “We’ve all heard that “secrets don’t make friends”. There should be no secrets between spouses. Being able to be honest and vulnerable with your spouse will enrich your relationship”, says Mrs. DeRoy.  If you can’t get past this one on your own, a marriage counselor might be helpful.

  • Different Money Values. In my observation, about 80% of couples fall into a category I call a ‘spender’ and a ‘saver’.  The spender sees money as a tool for enjoyment with little concern for the future.  The saver will tend to stress over all the future money needs and is obsessive about saving.  Solution: This can actually be a healthy relationship if they can come to an agreement on auto-saving for a few agreed-upon goals such as home down payment, retirement saving and saving for a child’s college expenses while agreeing to ‘spend the rest’.

About 5% of the time, I’ll encounter ‘two savers’.  Clearly, two savers are the easiest to deal with since they are on the same page that includes accumulating wealth.  Solution: Part of their risk is being bored with life and can easily be resolved by developing a ‘fun’ plan.  With one couple, I had them commit to taking two trips over the next twelve months.  One had to be out of the country and one within the country.  They were reluctant but agreed.  It changed their lives and they have become seasoned travelers and are thoroughly enjoying life with their family.

About 15% of the time I find couples are made up of ‘two spenders’.  These are by far the most challenging group to help.  One couple we worked with were both professionals and very good income earners, but they had a history of always managing to spend just a bit more than they earned each year.  Solution: We developed a detailed budget with auto-investments in retirement plans, emergency reserve accounts, future ‘big-item’ spending accounts (for things like paying cash for cars).  We set it all up but time and time again, they’d invade these accounts for personal ‘instant-gratification’ expenses.  We eventually fired them as clients.  Today, they are still good income earners living in a nice home but very little in the way of savings.  Their long-term plan is to always work.  That’s a strategy that might work, but more often than not, will turn out poorly.

If your marriage is important to you, be willing to invest the time to develop a plan for handling the family’s personal finances that includes regular open and productive communications as part of a detailed written financial plan.  If you’d like professional help, consider working with a Certified Financial Planner™professional.