She makes 500k a year at a tech company; he stays home. He secretly bought a mustang and “surprised” his partner with it. She failed to mention the mountain of student debt she’s saddled with before they said, “I do.” All of these disparities and lapses in communication can contribute to the myriad of ways finances can make or break a marriage.
While some of them are less avoidable and mere facts of life, like when one partner chooses a high-earning career path and the other does not, many of the biggest factors that can lead to divorce surrounding money are mere communication disconnects. The failure to set expectations early on can likely lead to marital money strife somewhere down the road.
High-Income Marriages vs. Low-Income Marriages
Money cannot buy happiness, but higher-income marriages seem to be less prone to divorce. A study conducted by Emory University in Atlanta found that the more money a couple makes, the less likely they are to divorce. However, such couples can face strife that low earning couples do not face, often in the form of the complex and arduous process of dividing up a myriad of assets.
A second study from Michigan State University found “a direct relationship between the divorce rate and a couple’s income. According to the numbers, couples who earn over $125K per year are 50 percent less likely to divorce than couples who earn under $25K per year.”
It’s no surprise that the number one cause of divorce in America is infidelity, and finances trail right behind it as the second reason for divorce. Enter financial infidelity, a non-romantic form of cheating that is no less insidious. When someone catches their spouse buying something behind their back, like a huge impulse purchase that could have long-lasting financial repercussions on a couple’s financial situation, the chances for divorce ratchet up.
But financial infidelity doesn’t have to be a luxury car that suddenly appears in the driveway. Smaller secrets can also erode trust over time, such as claiming to buy something on sale when they actually paid full price or pretending a new purchase is an old one.
According to a Journal of Financial Therapy study, 27% of couples have kept a financial secret from their partner. Across the board, marital and life satisfaction was lower for participants who had experienced financial infidelity than those who did not.
Jealousy takes many forms, and once again, we can find a parallel to romantic jealousy in a couple’s financial circumstances. If one partner makes significantly more money than the other, the pressure for a split increases. This pressure is highest among couples in which one partner works and the other does not. Such an arrangement often leads to a power imbalance that permeates every aspect of married life.
For example, if one spouse is off working most hours of the day or off on business trips for a large portion of their career, the other spouse can be left feeling lonely, while the working spouse, unsurprisingly, can end up feeling depleted. Such is a fertile ground for terminating a marriage.
The State of the Economy
Perhaps surprisingly, divorce rates tend to increase when the economy is doing well. According to the American Academy of Matrimonial Lawyers, divorces tend to pick up rather than decrease during an economic boom.
Like a job seeker who is more willing to seek greener pastures when they have the finances to weather a job transition, couples are more likely to call it quits when they feel like they have better financial odds than when they don’t.
When the economy is doing poorly, couples are far less risky, fearing that a major life transition could severely damage their financial standing for years to come. When one considers the cost of divorce alone, this is very easy to understand. Between hiring a lawyer, and dividing up household assets down to the last dinner fork, things can add up quickly.
If each partner in a relationship has a wildly different credit score, tension will increase. A study by the Federal Reserve Board found that “the couples’ average level of and the match quality in credit scores, measured at the time of relationship formation, are highly predictive of subsequent separations.”
The researchers claim that a credit score can be used to predict not only an individual’s skill at maintaining financial peace, but also their relationship skill and level of commitment. One can see how this could be true, considering the level of responsibility needed to maintain a solid credit score. After all, if a spouse can’t maintain personal financial stability, how would one provide stability to a partner?
That being said, even someone with a poor credit history who is making a concerted effort to raise their score might still face marital problems. When money disagreements arise, for example, the person with the lower credit score might shoulder the blame, even if the truth lies somewhere in the middle.
Often intersecting with financial infidelity is the mountain of debt an individual can enter a relationship with, or the debt a couple can accumulate together. With interest rates often keeping individuals or spouses in a permanent hole, it’s no surprise that debt can lead to the end of a marriage.
Sometimes, the debt can accumulate before a couple has even really settled into their marriage, from the wedding itself. Often an excessive expense, weddings can leave a couple crippled from day one.
A Qualtrics survey found that 45 percent of newlyweds between 18 and 53-years-old went into debt to pay for their wedding. It’s perhaps no surprise that newlyweds so young might incur debt, but maybe it’s more surprising that couples on the older end still ended up putting themselves in a hole to get married.
Furthermore, the study says, “nearly half of the newlyweds who obtained wedding-related debt said money has caused them to consider divorce.” On the other side of things, only 9% of newlyweds who did not incur debt from their wedding contemplated divorce shortly after getting married.
The Cure? Communication
It’s no secret that communication is the key to any relationship, be it marital or platonic, and yet, millions of people still find themselves in marital strife due to a lack of clearly communicated expectations. According to the same study from Qualtrics, 45% of recently married Americans did not discuss their debt with their partner before getting engaged.
While such a conversation might be uncomfortable and full of shame, couples must do so before considering anything serious. For example, finding out a partner is saddled with debt could be an unfortunate relationship killer from day one, but better to find out about that particular piece of baggage before tying the knot to avoid the messy divorce process.
Protect Your Assets
Perhaps the most famously uncomfortable pre-marriage conversation can also lead to a happy, long marriage with good communication. A prenuptial agreement allows a soon-to-be-married couple to decide upfront how each fiancé’s assets should be held during the marriage and in the event of a divorce.
This includes both assets each partner brings into the marriage with them and the assets a couple incurs while married. For example, without a prenup, a judgment could transfer one partner’s personally-acquired assets to the other partner. Things get even more complicated if one spouse dies: do the late spouse’s assets go to the surviving spouse’s family, or the late spouse’s family?
All of these scenarios can be grounds for heated, relationship-ending conversations. A prenup sets expectations for each of these scenarios ahead of time so that, for better or for worse, each party knows what will happen should the relationship end for any reason, and disagreement is much more unlikely.
When hard conversations around money are avoided, divorce becomes far more likely. Even though it may seem awkward or uncomfortable to some, you two have to talk about your money, no matter how difficult it may be. Couples need to have an ongoing, open dialogue about their financial situation to avoid the many money-related pitfalls in a marriage that often lead to divorce.
Whether a spouse is hiding a massive impulse purchase such as a luxury exercise bike in the closet, or whether a spouse enters a marriage concealing a mountain of debt; couples are going to find their chances of maintaining a strong, healthy marriage are going to increase if they speak up about the good, the bad, and the ugly of their finances.
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