Let us know if this sounds familiar:
Jill works hard. She has a full-time career and no plans of slowing down (any time soon). She’s got ambitions, goals, an automated workflow, and would love to add on “solve world peace” as a task in Notion if she absolutely could. If someone were to ask what she thinks about a work-life balance, she would reply, “I love my job and I’m fortunate enough to do something I love while also being paid to do it.”
When Jill’s not on Zoom calls trying to make the impossible happen, she’s attempting to get a Peloton workout in, tuning into the Bachelor, and posting some seriously cute pics of her labradoodle (while also refilling her Kim Crawford Sauvingon Blanc that may or may not be her third glass for today).
On the topic of personal finances, Jill can be described as being “more frugal than most, but savier than the rest.” She believes in saving most of her hard earned money, investing in safe ventures, and isn’t afraid to “work” until at least age 65 (as recommended by most financial analysts that she follows on Twitter).
Matt, Jill’s fiancé and fellow millennial, also works hard. He also works full-time but firmly believes that the work life balance is more of a “work to live” mentality. He’s happy to watch the clock get down to 4:59PM, instead of getting a few more reports done, so he can close up his laptop and get in a few video games, listen to the latest Joe Rogan podcast, and talk sh!t to his buddies in their group chats (that may or may not make sense to anyone outside of the chat since the inside jokes are just that “strong”).
Matt’s spending mantra includes “money comes and goes, and you can’t take it with you.” He isn’t afraid to buy the latest and greatest models of anything, pre-orders every Call of Duty video game, and subscribes to every possible entertainment opportunity (from Hulu to Coachella), well, because, YOLO.
Relatable Jill and Matt are super excited to spend the rest of their lives together. They are totally aware of their differences but are super proud of their compatibility regardless.
With so much planning and future ahead of them, they’re starting to see the friction between them thickening as they try and align on every single topic. Though they differ in most ways, there’s one thing that they can absolutely agree on: they can’t agree on anything when it comes to spending money.
Sound like you and yours?
Let’s break down what you can do to have a financially successful marriage even if you can’t agree on everything.
Step 1: Appoint a CFO of your relationship
No, we don’t mean go out and post a job listing on Indeed, we mean look within the two of you. If you want to be successful in your marriage, in terms of accomplishing goals, tasks, and every day chores, it’s important to play to your strengths. This is especially true when it comes to finances. Between the two of you, who is better at staying on top of your finances?
Pick the stronger candidate and appoint him/her to be Chief Financial Officer (CFO) of your relationship. This distinction makes for efficient operations and ensures that the responsibility of paying certain bills doesn’t fall between the cracks. It’s a great way to set expectations within your relationship so there’s no ambiguity about who paid what bills, which account these bills should get paid from, and what debt you have/haven’t paid off yet.
That doesn’t mean that the CFO has to do all of the leg work. Rather, the CFO could track the household budget, schedule payment of household bills, but delegate to the other spouse purchasing decisions.
Need help deciding who should do what? Draft a high level budget, include what needs to be done – like contributions to a retirement account or investment accounts – and then delegate out who should do what.
Step 2: Discuss debt – early and often
Debt is common – so common. In fact, it’s actually more rare to see a couple without any debt at all. Today, 86% of marriages have at least one person entering the marriage with debt. 86%! The good news is that 84% of couples said they feel comfortable talking about all aspects of their finances – including that debt.
So, why is it so important to discuss debt early and often before getting married?
Just as it is important to make your payments on time, discussing debt allows you and your soon-to-be spouse to decide how to handle debt accrued prior to marriage, and even after marriage. There are many ways to tackle this, but the most trusted and informative way to enter marriage safely with finances is to draft a prenup.
A prenup (prenuptial agreement) is a law binding contract between the two of you that can specify that premarital debt should remain the “separate property” of the party who owns it, and can also establish that debt incurred after the marriage – whether credit card debt, student loans, or other- are separate. A prenup can allow you and your future spouse to discuss who is responsible for what so that expectations can be clearly set before entering the marriage.
For example, if your future spouse plans to attend graduate school, should you be liable for part of that student debt? Why not? Without a prenup, that answer is not so certain.
In addition, beyond the issue of who is responsible for what debt, it is important for you and your future spouse to come up with a plan of how to reach your financial goals. Will you each plan to pay off your student loans first? What about credit card debt?
Talk it out and write it down. By getting this roadmap set prior to marriage you’re setting you and your partner up to go into any situation with a secure baseline and the principles to be able to handle anything that might come up.
Step 3: Decide what should happen to inheritance
What happens when Daddy Warbucks passes along his millions to you? That’s all your money and not your spouse’s…Right?
Unless you have a prenup, not necessarily. Of course, every state differs in their laws, but depending on the length of your marriage, how the money was managed (in a joint account or separate?) and what state laws are at play, part or all of that inheritance could be subject to division in a divorce.
If either you or your soon-to-be spouse (or both) expects that you could receive an inheritance during your marriage, discuss what you would like to have happen to that inheritance.
Do you have children from another marriage? Should this inheritance go to them only? Or to your new spouse as well?
Most commonly, couples usually decide that inheritance should be considered separate – not marital property. If this is the case, your prenuptial agreement can include provisions that state any inheritance should remain the separate property of the spouse who received it.
Ambiguity should be left outside of a marriage. Plan it all out so you can rest assured that surprises will be kept for the good stuff (and not the avoidable stuff).
Step 4: Create a budget that works for both of you
Compatibility is one of the most electric things about being in love with someone. Though not everyone can understand “why it works” between you two, you two can, and that’s all that matters.
However, when it comes to finances, let’s remove the emotional triggers and get logical about how you two envision spending money as a couple. Now that you’re going into a legally binding contract to become “one” under the eyes of the law, how do you plan to align your differing spending habits?
After all, spending habits often have a direct correlation to how you live your life. In fact, often your views on money can closely parallel how you invest your hard earned cash – shopping or savings? Bitcoin or cash under your mattress?
Like relatable Jill and Matt, these habits become increasingly obvious when you have a partner with different views. Before making things official, it is essential that you and babe talk about the differences in your spending styles and how to find the balance between the two.
If Jill likes to save, what’s a reasonable amount to save every month to meet financial goals (like buying their first house together? Starting a new business?) and if Matt likes to spend, what’s his monthly spending budget?
As with most things in life, there is no “ideal” spending / saving type or financial habit. It’s what works for the two of you so you can meet all of your personal and potential goals together as a couple.
Step 5: Stay flexible
Flexibility is a very strong trait among successful couples and is crucial in the health of your marital finances. If you are able to plan, but also able to roll with the punches and react accordingly, you are setting yourself up for success.
When couples are flexible about finances, it typically means that they have most of their priorities in line, while still being able to enjoy travel, and a little spontaneity. If both you and your partner have a flexible view on life and money, you will likely have an easier time with the money conversation.
***Bonus: you two may be able to remain flexible on all topics of your relationship (like what to watch tonight, or order for dinner, or politics) or at least dream about that possibility. ????
How to get started
Set expectations before you get married so you can set your marriage up for financial success. As finances are the hardest topic to discuss among married couples today, it’s important to do some exposure therapy and regularly discuss all the aspects of your finances. By creating a roadmap for your future, you’re releasing your marriage from any avoidable topics that are just too painful to discuss (without a little practice and understanding).
HelloPrenup is specifically designed to help couples tackle the heavy topic of finances and get you and your partner on track to a successful marriage. Our success is your success. We created this platform to help couples like you get a head start on their marriage planning where so many couples fail to do so.
To get you on your way to financial freedom, here are some clauses that we typically see couples include in their prenup for optimal success:
>> Sunset clause: an expiration date for your prenup. Once the expiration date is reached, it’s as though the prenup never existed. In the event of divorce, the marriage is now at the state’s discretion for how to handle the separation of assets, debt, etc.
This is ideal for negotiating with a partner who may not be keen on having separate assets for the rest of your marriage. It’s a place of common ground for couples who are split on the importance of a prenup and lets both parties rest assured that their needs will be met at some point during the marriage. #compromise
>> Lump sum payment(s): These are often (but don’t have to be) cyclical payments that are paid to the less wealthy spouse who may leave the workforce for any reason related to the marriage, or just has significantly less wealth to begin with. These act as a compromise for couples who may want to keep their assets and accounts separate, but want to make sure that the less wealthy spouse is compensated by the wealthier spouse – often, in the event that less wealthy spouse stays home for whatever reason- childcare, unexpected illnesses (cannot work), etc.
Lump sum payments can be especially helpful for less wealthy spouses who are waiving their right to alimony. Alimony, or payments to the less wealthy spouse upon divorce or separation, are crucial for a spouse who may have given up income opportunities to divide and conquer on other fronts of the marriage – again, such as childcare etc. If a spouse waives rights to alimony, and they were not compensated during the marriage for childcare or any other income lessening situation, then they could be setting themselves up to be financially insecure upon the unforeseen circumstance of death or divorce.
Make sure you discuss possible “staying home” opportunities and what it means for compensation if you or your partner does leave income opportunities for the good of the marriage.
>> Real estate recapture: a clause that states if you and/or your future spouse contribute money to a joint “blank” (think kitchen / bathroom remodel, house, etc.) above a certain dollar amount, then that lump sum amount will be “recaptured” and returned as separate property to the person who made the contribution upon divorce. Are you and your fiancé contributing to a down payment on a house? Or only one of you? Or are you renovating a house that is considered one of your separate property? Decide a threshold dollar amount (any lump sum over “x” amount) to make sure that the money is returned back to the person contributing upon divorce.
We’re rooting for you. Finances aren’t easy to tackle in a relationship, especially if you two aren’t on the same page about it. The sooner you two start making finances a regular part of your diet, the easier it’ll be on your relationship.
Need clarity on how our system works? Overall assistance on how to get started? Reach out to us at Hello@HelloPrenup.com. You got this.
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