Till Death or Debt Do Us Part?

A friend recently shocked me when she said: “Tope, can you tell me how an individual can declare bankruptcy?” That sentence began a long discussion about a marriage gone wrong leaving not just emotional scars but also a significant and an unfair amount of debt on the shoulders of one of parties. I am definitely not a bankruptcy lawyer/expert, but her story inspired me to share some tips on how to deal with money in a marriage so that your vows remain “Till ‘death’ and not ‘debt’ do us part” .

Read, Reflect and Restructure if necessary.

Understand your individual money colors: One of the biggest causes of marital conflicts is finance, so why should we turn a blind eye to it? It is not necessarily how much money a potential spouse has that should form the basis of making/accepting their proposal, it is how they spend however much or little they have. It is important to discover and understand each other’s money color (discover yours at: https://ourfinancialcoach.com/2012/05/15/what-is-your-money-color-3/). A union of an investor and a spender will ‘produce’ many conflicts if both parties don’t take the time to understand and utilize each other’s strengths to mitigate the risks associated with their individual weaknesses. Understanding each other’s money personality will help couples designate certain roles related to money: for instance, a spender may not be in charge of authorizing disbursements out of the emergency savings account, but may be good at planning vacations within a budgeted amount.

Declare your assets (and liabilities): People often say that love is blind, but there really is nothing blind about love and money. Just like politicians are asked to declare their assets when taking their oath of office, couples need to inform one another about the individual assets and more importantly debts,which they are bringing into the marriage. Although the discussion may be unromantic, it is necessary to understand how much the ‘honey’ owes, if and how they intend to pay it back (that is if you don’t want repo men knocking on your door every day after the honeymoon). It is deceitful to marry someone else without making full disclosures about your financial position thereby denying them the ability to make an informed decision.

Understand the law: Each party must understand local laws regarding responsibility for debts entered into by spouses prior to and during the marriage.  Situations where the individual who incurs the debt is solely responsible for its payment may not require joint approval of such debts as against situations where spouses are jointly liable for each other’s debts. If you are both responsible for the debts incurred by either party in the marriage or you co-sign your spouse’s debts, then you have indirectly taken responsibility for its payment, therefore both parties must consent to such obligations  prior to their assumption.

His, Hers and Ours: Regardless of the depth of your love for each other, I recommend that each party have absolute control over a portion, however little, of the money they earn. Throwing both parties’ earnings into one big commingled pot is a recipe for conflicts and resentment. I am not condemning joint accounts, I am simply saying each party should have some money which they control and can use to buy those things they wish to buy. For instance, Remi (the husband) can choose to buy a power bike from his personal account instead of taking money from the joint account he maintains with his wife, Mosun.

Do not sign if you disagree: There are a lot of compromises that couples have to make for marriage to be successful, however this should never involve jeopardizing the future or other prospects of one or both parties. For instance, Remi’s insistence on buying a glass house worth Two Million Dollars on a joint family income of $150,000 per annum makes no sense, therefore Mosun does not have to feel obligated or pressured to compromise and sign off on the associated loan.

Sound financial practices: Just as in the case of individuals, couples need to limit financial troubles by implementing sound financial practices;  Couples should endeavor to set clear financial goals, maintain budgets, minimize/avoid debt, appoint a money captain who  reviews bank and credit card statements regularly for errors, fraudulent activity or avoidable fees. Most of all, couples should learn to live within their means, lack of money is a major cause of stress and anxiety, so proper management of finances is essential for blissful unions.

Acquisition of big-ticket items: One half of the marriage should not make significant purchases either with cash or on credit without consulting the other. The definition of a significant purchase depends on the income level and other peculiar characteristics of each family. However cars, major investments or new home purchases are significant irrespective of income level and should not be made without the consent of both parties.

Build and maintain adequate reserves: It is not pessimistic but prudent to set money aside to take care of essential needs in case of future unemployment, other loss of income or even family expansion, it is also a good practise to limit debt obligations to such that can be covered on one instead of two salaries in case of unemployment.

Communication is key: Regardless of who makes the most or only family income, it is important for couples to discuss money matters in clear and concise language. It may not necessarily be a pleasant discussion all the time because money tends to bring out inadequacies and vulnerability in people more than other matters, however couples need to be open and honest about their financial affairs. Ease the discussion by avoiding blame and defensiveness but instead focus on common goals and your strength as one unit.

I hope these tips help you strengthen money management in your union!