How Expensive Is Your Marriage?
April 12, 2018Twenty or so years ago, my employee Greg and his soon-to-be wife, Susan, opted to take a pre-marital course that would help them prepare for life as a couple. They had talked about their plan for their marriage before stepping into a counseling room, but they both knew there were aspects they hadn’t considered.
Not everyone discusses this stuff first
There were several other couples in that course and Greg was shocked when he realized that most of them had never discussed their life goals — let alone their financial ones — until that day, which in some cases was just weeks before their wedding date.
It’s not unusual for us to never have discussed these topics with our spouse before our lives are merged, and sometimes our marriages end up costing us more than we anticipated. That’s when we need to sit down and re-evaluate what we’re doing differently from when we were single.
How expensive is your marriage?
Income & expenses
The first is how much your expenses and income increased after getting married. If your income has increased at a higher rate than your expenses, your marriage is saving you money. But if your expenses have increased at a higher rate than your income, it’s costing you money.
Net worth
The second deals with your net worth after marriage. Determine what your net worth (total of investments and value of assets like your house, car and other tangible property minus all debts) was before you got married. How has that changed since being married?
It is possible you are spending more than you’d like but are acquiring valuable assets in the process, which puts you in a better position financially than when you were single. Alternatively, you might be doing well with your expenses as a married couple but making poor investment decisions, causing your financial situation to worsen even though your day-to-day money management has improved.
Other costs to evaluate
Day-to-day expenses
Go to the grocery store alone and purchase everything you need as a household for the next week. The following week, do the shopping with your spouse. Then compare the two experiences.
Do you purchase more or less when you shop together? Some couples work as a check and balance, discussing purchases and finding ways to save as they go down the aisles. Others become more impulsive and get into a spending frenzy, which ends up costing more money than they would have spent as individuals.
Major purchases
Consider evaluating your behavior in how you currently make major purchases.
- Do you and your spouse make the decisions together?
- Do you have a plan for the expense?
- Have you done some comparison shopping?
Look at the criteria you’ve used to make your most recent major purchase. Then imagine you’re making the purchase again, only this time, sit down with your spouse, create a savings plan and do some extensive comparison shopping. If you find your purchase was the best you could have made, you’re in decent shape. If you didn’t make the best purchase, you may want to beef up your criteria.
Investments
A good way to evaluate whether you and your spouse are on the same page with your investments is for each of you, independently, to revisit or look over your current investments. Then, individually make hypothetical changes to how you’d manage your portfolio.
Compare your strategies, risk tolerance and some future investments you’d consider buying. How different are your strategies? How could your different ideas about investing be affecting your current portfolios? Some couples share similar investing strategies and others differ tremendously.
Cost of borrowing
Test your knowledge of your credit strength. Was your credit score higher when you were single? Is it stronger now? Do you know when to use joint credit accounts vs. individual credit? Do you know how much debt your spouse has? Couples should know how to leverage their credit and be fully aware of each others’ debt loads.
Taxes
The marriage tax penalty became less of an issue in 2018, now that tax brackets have changed to all but the highest earners seeing a difference when they marry someone with a similar income, but it’s still something to consider. Even though the tax brackets have changed, most married couples still benefit the most from filing jointly due to the rules around other deductions.
Look at your tax liability and how it is affected by the alternative minimum tax. Since AMT doesn’t follow the same formula as regular tax brackets, it can be easier to trigger when earning two incomes. Sit down with your CPA to determine if this affects you.
Gifts for each other
To determine if you’re spending unnecessarily on each other, look at whether or not you both have the same ideas about gifts. Do you put a spending cap in place? How do you each go about purchasing gifts? You can also evaluate the gifts you’ve purchased over the course of your marriage. How much did you spend on them? How valuable does your spouse find the gifts? There has been a lot written about the different ‘gifts’ people value most; you could be spending on your spouse when they may not want a purchased gift at all.
Ways to reduce the cost if you find it’s too high
Re-evaluate your household budget
Define roles in the budget and track your spending together on a regular basis, re-evaluating it every quarter. List all the major purchases you anticipate within the next year and set goals for when you want to acquire them.
Create a savings plan; if you both have different ideas on what purchases you want to make within the year, you can use this opportunity to synchronize your plans. Then, do some comparison shopping. Consider more than just cost; look at quality, warranties or anything that could end up costing you in the long run.
Watch out for the “his and hers” mentality
If you opt to manage separate accounts, make sure you at least have a joint investment account so you can meet your investment goals together. Also be sure to utilize each spouse’s strengths in your investing strategy. You may find that one is a long-term strategist and the other is a good decision maker on when to buy and sell.
After you’ve tested your knowledge of each other’s goals and strategies, you should have a better idea of how you can work together to maximize your investments.
Find balance for your life goals
Gauge if your goals match. Your spouse might be anticipating a large family and this could be more expensive than you had planned, or they may feel strongly about sending your kids to Ivy League schools. If your goals don’t match, you both should consider how and where to compromise so your finances aren’t at stake.
Keep your credit strong
Each of you should maintain strong credit scores and use them for leverage. If a couple has shared debt, each is individually liable for it regardless of who incurred it during the marriage. Joint liability can hurt the couple if they don’t, or if one of them doesn’t, manage their credit, since it drags both credit scores down.
Discuss your attitudes about debt before you plan to use joint credit. Does your spouse feel debt is a disadvantage or even dangerous? Or maybe they feel it’s necessary to meet your financial goals. Either way, you may want to be prepared to make substantial compromises if your opinions differ.
Make your gifts more meaningful
If you’re spending money on your spouse to show your affection, consider how they prefer to receive it. The book The Five Love Languages by Gary Chapman describes the different ways people react to love. Your spouse might prefer quality time over receiving gifts. Just an understanding of how to show your spouse affection in a way they will most appreciate it can save you money in places you may have never considered.
Evaluate your tax options
Run a tax calculator for you and your spouse filing together and also as married filing separately. Then determine how to make a penalty less impactful or even turn it into a benefit. You can run a free estimate on each scenario at turbotax.com. For most married couples, it’s most beneficial to file jointly.
Understanding and synchronizing our values and financial behaviors in marriage is by no means easy, but most married couples would probably argue that sharing their lives with the person they love makes all the work worthwhile. Wouldn’t it be great to not only enjoy your marriage, but to have it cost you less, too?