A Tale of Love
I love sayings. One of my favorites is about married couples. The saying is, “Couples get divorced over three things—money, sex and religion.” I am no expert on sex or religion, so this tale focuses on the money part of the saying. Couples do break up over money, lots of them. It’s rare that you find a couple where both people are knowledgeable about money, especially when the couple is young. This is a tale for the young, because by the time I meet most couples they have successfully navigated most of the issues that make money a source of disagreement or divorce. By the time they meet me they have learned how to save money, they have accumulated some assets and are planning for their financial future. But what happens to the couples I never meet? What makes money a source of marital turmoil? In most cases, it’s because the spouses are unknowledgeable about money. My financial advice to young couples is to learn about money. Learn the money basics, and then discuss lifestyles.
Money is a complicated concept in and of itself. It’s exacerbated when two people eager to please each other have to merge their perspectives about saving, investing and spending. In many cases, when it comes to money, the characteristics that are so attractive to one spouse about the other might be the very same that lead to disharmony. Let’s take a glimpse into some situations I have seen.
Several years ago, one of my friends met a wonderful woman, and after a whirlwind romance, they married. My friend isn’t exactly the impulsive type, and soon thereafter, reality set in. His new bride had a spending addiction. Her credit cards were extended to their limits, and yet whenever a new credit card solicitation appeared, she would sign up, and soon it too was at the limit. They had discussed her spending at length and had seen a counselor, and yet she persisted. One time my friend even paid off and cancelled all her credit cards, but soon she had others and had charged even more than before. The situation was hopeless, and he threatened to leave her if she didn’t change her ways. Finally, when she didn’t, he left her.
My friend and his ex-wife are still good friends, but their long-term goals were so divergent that he couldn’t envision the future he wanted as long as he stayed married to her. As I mentioned, my friend is not impulsive; in fact, he’s a plodder. His wife was the antithesis. It is what initially attracted him to her. It is also the reason he had to leave her! They say that opposites attract, but when it comes to money, it’s not true. As a father, I preach the importance of shared money values to my children. So to them and to others, make certain your future spouse shares the same values about money as you do. Personalities aside, examine attitudes toward money.
Along a similar vein, there is the story told by a very successful money manager who also divorced his wife over her spending. It seems he came home one day from work, and his wife had purchased all new furniture for their apartment. The hedge fund manager looked around and was impressed with her sense of style and her desire to make his life more pleasant. But he soon divorced her. Where she saw beauty and comfort today, all he saw was the loss of even more beauty and more comfort tomorrow. He knew the money she spent today, without consulting him, was money invested in a depreciating asset. He knew the money spent today would never grow, and thus they would never be able to purchase something even more beautiful or more comforting or more enjoyable tomorrow. Although they did not have divergent values, they had divergent values at that time. They both admired beauty and desired comfort. He could delay his gratification, however. She could not.
I had another friend who got divorced over money. They had a different problem from those couples that had divergent values. They had similar values, but they were the wrong ones. They were both overspenders. When they met, neither was in debt but neither had any savings either. They both liked to save for things they wanted to purchase. What happened? For this couple, it became an internal competition to see who could spend more of the couple’s money before the other. When one had saved a few bucks to purchase something they wanted, the other would spend it on something else before the other one could. It was a “me-first” mentality, which ultimately led to their break up. Even if you have similar values, it doesn’t mean they are the right ones.
Still another couple that I know almost broke up due to what I describe as a separation of duties, but with no risk control. This one happens more than people think. For this couple, they had shared values that were positive. They were saving money to buy a house. They invested the money safely for the future purchase. But, they had different perceptions of what the word “safe” meant. The husband was what I would call a risk junkie, while his wife was risk averse. They were on almost polar extremes when I had them complete a questionnaire. To him a safe account meant something very different from his wife. When a house they wanted became available, there was a problem. The wife thought they had saved enough money for the down payment. She mistakenly thought they had saved $20,000. However, it was only $15,000. Where did the other $5,000 go? The husband had invested the money “safely” in the stock market, and although the investments were good ones, ones that would eventually recover, they were temporarily depressed. The amount that she had mentally earmarked for the house had decreased in value by the amount that she suspected was missing. She wasn’t happy to say the least, but it taught them a valuable lesson. They learned, and so should you, the following; “Never save for short-term goals by investing in long-term investments such as stocks.” It is a good rule to follow. It also showed them they both needed to monitor the family portfolio so that they were on the same page when it came to risk and on the definition of the word “safe.” In the words of Cool Hand Luke, “What we’ve got here is a failure to communicate.”
Let’s move to the last mini tale. It’s not a tale exactly, it’s something my grandmother told me. From the time I was a little boy, she would warn about the evils of gambling. She would say that most things in a marriage are negotiable, with one exception. If a spouse gambles, you will eventually lose your house, which is Cuban speak for you will never have any money. She made me promise to never gamble. I have kept my promise. I never knowingly engage in a game of chance in which I have a negative mathematical expectation. So I pass this on to the reader. If you are in love with a gambler, be prepared to lose your house.
What’s a young couple to do? Without shared values on saving and spending you are headed for trouble. Make sure that you communicate your financial intentions and that they include saving money. Don’t worry about how you will invest the money. After more education, you will find an agreed-upon approach. But if there is a chasm about saving and investing, it must be bridged through financial education. If you can’t bridge the gap, you must keep trying or else you might soon be having the same discussion with someone else. Love does not conquer all when couples can’t agree on the basics of saving and investing, and opposites do not attract as far as money is concerned.