For better, for worse, for richer, for poorer – until death do us part.
Sadly, with money fights being the second leading cause of divorce behind infidelity, many of us do not adhere to this marriage vow.
Few individuals consider financial compatibility before they tie the knot, so when the time comes to combine their finances, it can trigger massive differences of opinion and even wreak marital havoc if not dealt with wisely.
This problem is all the more significant when there are substantial assets at play, including businesses, real estate, investments, and large family inheritances and gifts.
So what are the top financial mistakes that you should avoid making in your marriage?
1. Not talking about money at the start
A lot of fights about money involve a clash of financial attitudes, behaviours and beliefs.
Most couples fail to clearly discuss financial planning and goals with their partner at the beginning of a marriage, often resulting in unresolved disagreements on savings, debt, assets, retirement, and other financial obligations further down the line.
To avoid this type of unnecessary conflict, work together on key areas of financial vulnerability and try to understand each other’s psychological financial drivers.
2. Merging bank accounts too quickly
Although joint accounts are necessary for essential household bills and enable equal access to money in the account, they can cause problems when one spouse goes “rogue” and deceitfully drains it away.
So, if your partner is a big spender, it would be advisable to keep a separate personal account to store some of your hard-earned money and avoid it being unnecessarily frittered away.
Joint account holders also have every right to withdraw money and close the account without the other’s consent, which can leave that person penniless. They also tend to make breaking up more complicated, because it can be messy, lengthy, costly and problematic to separate and untangle the funds in a joint account. To avoid this, make sure that your relationship has long-term potential before you open one.
3. Failing to consider marital contracts, like a prenuptial
Entered into before or during a marriage, these contracts address how marital assets, including business shareholding and assets, are dealt with and divided on divorce.
Such agreements are not enshrined in legislation in the UK and there is no absolute guarantee of protection. However, a well-drafted prenuptial or postnuptial agreement following the necessary legal guidelines is highly advisable. They provide some clarity, certainty and also peace of mind, while keeping costs and legal disagreements to a minimum if a couple were to divorce.
4. Losing financial independence
When parents (particularly women) leave work to raise a family, they often abdicate their financial independence to their spouses as they find that managing finances is a tedious chore.
This often shifts the balance of power in the breadwinner’s favour and can trigger an unhealthy dependence cycle, prejudicing them in the long run.
One toxic trait includes high net worth individuals providing their wives with expensive gifts rather than handing out cash for them to buy items themselves, as a form of control. These women tend to be left vulnerable upon divorce too, because they have not set up independent financial provisions of their own to weather marital storms.
Many blindly assume that their partner will do right by them financially if they part company. They often go into massive meltdown when that is not the case, and have no access to money to maintain their lifestyles.
I strongly advise wives not to stop working completely if possible. Always find ways to maintain employability and job-ready skills to ensure that there is available income if needed.
5. No emergency funds
Everyone should set aside funds for life’s financial thunderstorms. Not having the money to fix a broken roof or to pay unexpected debts can put a huge strain on a marriage and result in a spending blame game.
To avoid this, always have a rainy day fund set aside together in case of emergency scenarios. I have seen many couples caught out by a sudden unexpected crisis, which can lead to marital destruction as they become financial competitors instead of collaborators.
6. Financial infidelity
When you are married, the burdens are shared, so ensure that the lines of communication are always open and honest.
Many individuals try to hide expenses from their partner, relying too easily and heavily on plastic and taking out credit card loans, assuming that they can pay them off before their spouse finds out, but then struggling to do so.
Concealing expenditures and uncontrolled spending can pave the way for greater deceit and mistrust down the line, and if left unaddressed can backfire and lead to a ruinous marriage.
7. Not registering ownership in your matrimonial home
Where possible, register both your names on the matrimonial house title deeds to avoid arguments of ownership in the event of divorce.
If it is only registered in one spouse’s name, the non-owning spouse should register a notice against the matrimonial home to protect their rights of occupation. It also prevents the owner spouse from selling the home from under the other’s nose.
Joint mortgages are also advisable, because although both spouses are equally liable for making repayments, it alerts one spouse of any threat of repossession from the mortgage lenders if the other leaves or stops paying the mortgage.
8. Not safeguarding family inheritances and gifts
Many spouses are unhappy that family inheritances and gifts received during marriage can sometimes be used to fund divorce settlements for the other partner.
With couples now marrying later in life compared to a decade ago, spouses today bring in materially greater pre-marital wealth, often in the form of gifts and inheritance. Some of it will be used to purchase a family home or business assets, inevitably becoming mixed and mingled with marital assets.
Although there is no absolute guarantee of protecting and ring-fencing these pre-marital assets from being shared in the event of divorce, it is advisable to get professional advice on keeping pre-marital wealth separate if you wish it to be so.
Finally, if you want to explore any of these options, seek professional advice. A marriage may be a partnership, but you need to look out for yourself if you want to be “for richer” and avoid becoming “for poorer”.
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