Put aside the romantic notion that love conquers all -- and pull out your calculators. Successful partnerships require a plan, a CFO (usually) and regular progress reports.
Marriage makes people richer.
Not all marriages, of course, and "richer" is relative. But overall, people who get married and stay married build significantly more wealth than single folks:
The median net worth of married-couple households in a 2002 Census Bureau wealth study (.pdf file) was $101,975. For single men, median wealth was $23,700. For single women, $20,217.
A 15-year study of 9,000 people found that, during that time, people who married and stayed married built up nearly twice the net worth of people who stayed single. Even when all other factors are held constant -- stuff like income and education -- just the fact that they were married contributed to a 4% annual rise in these couples' wealth.
Wealth declines typically started four years before a divorce was final, and the breakup ultimately reduced the typical person's net worth by 77% of that of the average single person.
Of course, most people don't marry for money, and we have some nasty names for people who do: gold digger, black widow, gigolo.
But marriage is far more than a romantic arrangement; it has legal and financial ramifications as well. Those who ignore the business aspects of marriage do so at their own peril, as that divorce statistic shows.
Yet many people seem shocked by the advice that women (and men, too, for that matter) should prepare themselves financially before ending a marriage. The notion strikes these folks as cold and calculating.
My take: I think a lot fewer marriages would end if -- in the beginning -- people would think more objectively about finances and how they were going to handle them.
Love does not conquer all. If you and your soul mate can't figure out how to paddle in the same direction, you'll wind up going in financial circles or -- to extend the metaphor painfully -- down the drain.
I speak not just as someone who has covered issues surrounding couples and money for years. I speak also as someone who's been happily married for more than a decade. I've learned that you don't have to have the exact same approach to money to succeed (I'm a saver; hubby's more of a spender), but you do have to be willing to listen to each other, compromise and put a plan into action.
Here are the business skills I think are most important:
- Do your due diligence. Here's the least romantic date idea in the world: Sit together at a computer and pull your credit reports. Then prepare a list of what each of you owns and owes (your net worth). Finally, create a cash flow statement that shows your current income and expenses. You can't make a plan for your partnership until you understand your starting point, which is where you stand financially right now.
- Determine your goals for your partnership. Successful businesses tend to have business plans, outlines of what they hope to achieve in the coming years. Your plan needs to include retirement savings. If you have kids or want them, college savings should be part of the mix. Add any other goals that are important to you, such as buying a home or taking a special vacation. If you have any toxic debt -- credit cards or payday loans -- paying that off should be a priority.
- Create a plan to attain those goals. You'll probably discover that you have to prioritize. To save enough for retirement, for example, you may wind up contributing a bit less to your kids' college funds. Or your desire to get out of debt may mean putting off that cool vacation. You'll find plenty of resources on this site to help you, and you also might consider hiring a fee-only financial planner for guidance. You can get referrals from the National Association of Personal Financial Advisors (whose planners tend to specialize in higher-net-worth folks) and the Garrett Planning Network (whose planners specialize in middle-income clients and offer hourly rates).
- Appoint a chief financial officer. Smart business owners learn to delegate and specialize, which usually means having a CFO. Having one person in charge of the day-to-day financial details, such as paying bills and monitoring accounts, also can help your marital finances stay on track.
- Stay up-to-date with your reporting requirements. Publicly traded businesses are required by law to reveal the details of their financial situations every three months, along with a comprehensive annual report. It's also important for married couples to review their finances together at least every few months, with an overall financial review each year. This is particularly true if you take my advice to have a single CFO. The other partner needs to know what's going on, even if he or she isn't keeping the books. (Ethical businesses, by the way, don't try to fudge or hide unpleasant details in the fine print. Honesty about financial matters is crucial in marriage, too.)
- Work out your conflicts. No one is always right -- not in business, not in marriage, not in life. Partners have to figure out ways to communicate and compromise. When business partners reach an impasse, they may bring in a coach or mediator to help them through the conflict. If you've got an intractable problem in your marriage, invest in some counseling.
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