A financial expert tells why your marriage might need a "mid-nup" finance assessment.
Marriage and Financial Honesty
This isn't about hidden assets, a Cayman Island account, and a love nest funded behind your back. The fiscal danger you're likely to face at midlife isn't a charlatan partner; it's the joint self-deception of laissez-faire finance, the failure to question longtime habits and your unspoken deals and assumptions.
For some couples, that means simply not talking about money; for others, it means having the same dead-end fights over and over. Either way, by midlife many couples have fallen into fixed money patterns that lead, at best, to missed opportunities (you could have left that soul-killing job years ago; you could have gone back to school for that art degree) or, at worst, to financial chaos.
It doesn't matter how successful or savvy you are. Nearly any couple can succumb to the comfort of habit and assume that both partners are on the same financial page. Earlier this year, Fidelity Investments surveyed midlife couples with a minimum of $75,000 in income or $100,000 in assets. The wives and husbands weren't exactly in sync; for example, 39 percent disagreed on when the wife planned to stop working.
Even couples who signed a prenup or set ground rules for their finances at the beginning of their relationship can't count on those understandings to carry them through all the changes that accumulate by midlife: kids who have moved out, aging parents to care for, shifts in the economy that change investing and job options.
Sooner or later, most couples need a "mid-nup" summit, a no-holds-barred review. The payoff? Relief, especially if there has been anxiety or fighting. Clarity. And, often, renewed intimacy. And then there are the financial rewards. "You'll have better returns on your investments because you're not putting your head in the sand and you're working in partnership," says Carrie Schwab-Pomerantz, author (with her father, financial services honcho Charles Schwab) of It Pays to Talk: How to Have the Essential Conversations with Your Family About Money and Investing.
Financial Roles
Most partners fall into financial roles early in a relationship and stay put, as they do after picking a side of the bed. A 2005 survey by OppenheimerFunds found that women are often in charge of budgeting (67 percent said they balance the checkbook) but less likely to choose investments (only 25 percent buy the family's stocks and bonds). Less than 20 percent of couples say they have equal responsibility for investing.
A division of labor may let each partner play to his or her strength, says Candace Bahr, a founder of the Women's Institute for Financial Education. The downside is that many couples stop -- or never start -- communicating exactly what they're doing. "When things get dropped or change, fingers are pointed," says Holly Thomas, a Tampa, Florida, financial planner.
Having one person handle everything isn't necessarily a bad system, as long as there's transparency and the other partner stays interested. Too often, one partner abdicates, Schwab-Pomerantz says. Instead, both have to be accountable, willing, and able to "challenge or question each other's decisions.''
In her 30s and 40s, Vicki played bean counter and chief investment officer in her marriage. (Because money was such a heated issue for her and her ex-husband, and to maintain his privacy, we omit her last name.) As a self-employed real estate agent earning six figures, she says she was more comfortable with money than her husband, who earned less. "There was no discussion," she recalls. "I did all the check writing and handled everything." Vicki never showed her husband the books, she says, and he never asked. "I honestly think the barriers were emotional," she says. "He didn't want to deal with the fact that he didn't make as much money as I did."
Vicki made smart choices about big things -- life insurance and estate planning -- but she didn't track cash flow. The couple spent on cars, rafting trips, travel, clothes, furniture. When credit card balances crept up, she'd work harder to pay them off and then repeat the cycle. For more than a decade, they hadn't found a way to talk constructively, even as their money stress escalated. In her mid-40s she found herself divorced and facing six figures in credit card debt.
Eleven years later, Vicki is zealous about financial partnership. She and her new husband, Don, talked about how they'd handle money on their very first date. One answer they agreed on: his, hers, and ours accounts. By the time they got married, they had already shared credit reports, written a budget, and held monthly spending reviews.
The skills they learned in those sessions -- how to suck the emotion out of money talk, ask and answer hard questions, and understand each other's needs -- translate to other parts of the relationship. When crises erupt, Vicki says, "we have a basis from which to communicate."
Couples in Financial Trouble
If the benefits of financial transparency are so compelling, why do even savvy couples run into trouble? In part it's because money is intimately tied up with every other big issue, from choices about work and children to independence and identity. Each person inherits values about money. And there are still few useful models for husbands and wives who swap breadwinning roles back and forth.
"We talk about money as little as possible," says Jane, 40, of Austin, Texas. "We avoid it because it's such a sore subject." (So sore that she asked us to change her name, and her husband's.) Jane and "Bill'' have a happy marriage, she says, and actually agree on big-ticket questions like housing and investments. But money is still a hot button. Early in their relationship, Jane was the bigger breadwinner and, though Bill disapproved, she felt she'd earned her upscale wardrobe.
Now, with two kids, she has shuttered her real estate business and given up her $125,000 annual income to stay home. Recently, Bill quit his job to start his own software company. With family income now about $100,000 a year, Jane has scaled down her shopping, but Bill has even more trouble accepting her decisions -- he gets "practically apoplectic," she says. Jane has taken over the bills to lessen the conflict, but they still can't find a way to talk.
Developing new financial muscles can be so arduous that many couples just don't make the effort. "Who wants to change their lifestyle if they don't have to?" says Jill Burke, who lost her job as a librarian for a large Philadelphia law firm in 2003, when she was her family's primary breadwinner. She and her husband of 23 years, Kevin, had no clear idea how much debt they'd accumulated and had no contingency plans. The job loss made them open up and focus on their options. Although they're comfortable with the changes they've made -- swapping a three-bedroom suburban home for a town house and learning to live debt-free -- Burke would rather skip the crisis next time, thank you.
At 46, Susan Weeks was making $95,000 a year as a global finance manager for Procter & Gamble when the company offered her a buyout. She had long wanted to cut back on her 60-hour workweek and spend more time with her husband, then in his late 50s. Shortly after he retired, though, his portfolio took a big dive, and the Cincinnati couple became more cautious investors. When Susan mentioned retirement to their financial planner, he brushed it aside, saying, "You're much too young." The couple assumed their time to relax was a long way off -- and that's where they left it.
The buyout offer reopened the discussion. They traded in their home for one in Florida, and a new adviser there showed them some alternative investments. Recalculating their expenses, the couple found that if Weeks worked a less demanding job, part-time, they could still afford the life they thought was out of reach. Despite a 50 percent drop in income, Weeks says, "Life is a lot more fun than it used to be."
For Kim Tackett and Steve Barbaria, personal change came from the cataclysm of 9/11. The two had owned a design firm in Sacramento for 23 years, billing up to $1 million annually. Their unspoken deal was that one day, maybe after their two daughters finished college, Barbaria would pursue his own artwork and Tackett would do what she calls "save the world" work. But they had no timetable.
Shortly after 9/11, over a glass of wine during a weekend getaway, Kim said -- not for the first time -- "I'm really sorry I never joined the Peace Corps." This time, Steve challenged her: "Why don't you?" What followed was a complete overhaul of company and couple. Kim began doing pro bono work for nonprofits, which included designing a Web site and traveling to Burkina Faso, in West Africa. By 2005, they were poised for the big break: They gave their staff six months' notice and then opened a new, two-person company. Looking back, Kim says the change was long overdue. Not coincidentally, she adds, she has lost 35 pounds and feels better than she has in years.
Be Prepared
Of course it's much better to prepare, to run a financial stress test, before crisis strikes -- or that great opportunity appears. To do that, though, you have to get your partner to listen.
Jennifer, a 40-year-old San Francisco lawyer, had broached the topic of joint accounts with her husband, Richard, several times in their six-year marriage. (Both names have been changed.) He dismissed it; she felt too hurt to push. Things worked well enough when they both were employed full-time. But with two young kids, Jennifer now works 30 hours a week, earning about $82,000. With Richard, an engineering consultant, making more, most of the family cash ended up in his accounts.
This past spring, Jennifer drew up a spreadsheet showing where their money was going and a list of questions to consider: Were they saving enough for retirement? Could they afford to take the kids abroad every year (a priority for her) or to buy an airplane someday (his dream)?
The hard numbers cracked Richard's resistance to advance planning and setting priorities. They agreed to merge some of their accounts and track their spending and goals together. "I feel closer to him now, like real partners," she says.
As with many worthy goals, launching into major financial discussions is almost no one's idea of a good time. Many serious talks are planned, but few actually take place. The trick is making them about how you can use your money -- and, usually, how you can make and save more of the stuff -- to get what you both want out of life. Ask each other: What do you want to do in the next decade? If you had only a year to live, what would be most important? "You have to unleash the dreamer," says Elizabeth Jetton, 52, a financial adviser in Atlanta.
Getting out of the house -- changing your perspective, quite literally -- can jump-start your creativity. It's no coincidence that Tackett and Barbaria's epiphany came in a Napa restaurant or that Jetton and her husband combine money planning with hiking in a state park. Likewise, Vicki and Don worked out a 10-year financial plan during a trip to the Rocky Mountains. A less exciting but still effective outing: a trip to your adviser's office to have the big-picture talk about finances, with him or her as moderator.
The wrap-up of your mid-nup should be a pact: No matter how busy you are, how painful it may be, or how unnecessary it may seem, you agree to sit down and do it again -- monthly or quarterly.
For Vicki and Don, the financial full monty brought them closer and helped them clarify their goals. They had talked of buying a bigger house or investment properties, but during their Rockies escape this spring, they realized they were already living in their dream home. Instead of buying any more real estate, Vicki says, "we're going to pay off this house in the next five years."
The sense of freedom they've gained has paid relationship dividends. "It takes a lot of emotional maturity to be so open, and it's scary," Vicki says. "But it comes back to you twofold or more." That's a rate of return any adviser would endorse.
Christine Larson is the coauthor of The 7 Most Important Money Decisions You'll Ever Make.
Originally published in MORE magazine, November 2007.