Marriage after divorce offers new beginnings and so much hope, but money can be a minefield. I am here to offer a path that is new, different and beautiful. But the necessary ingredients are to offer your spouse trust in the financial partnership and to face finances head-on. Together.
Why is money so painful in a second marriage? Misty Lee, owner of The Strategic Divorce Coach, said the process of divorce exposes every single expense and asset from the marriage. Imagine a marriage with financial infidelity or secret accounts that are revealed in the process. Or more fundamental, a sudden interest in just how much was in the 401(k), the IRA or the brokerage account or how much equity was in the home, when it was barely a thought in earlier years.
Recently I was talking to a woman about her retirement-plan savings rate, and she seemed startled when I asked her what her husband's savings rate was. She didn't know, and in her reaction she seemed to insinuate that it was his private business. Imagine that.
So back to divorce -- it may be the one time that both spouses are thrust into seeing and caring about every nickel in those accounts. The divorce process is designed to be adversarial. Money may have set fires in the marriage, but in divorce, money goes nuclear. Money can take on new meaning, as every grievance, related to money or not, gets a dollar sign put on it in the arms race of asset division.
Lee has seen this up close. "I have seen people become beat down during divorces because of the chaos of this process, stress of long-term implications of division of money, and the costs of the divorce, itself."
It's no wonder that after a process like that, a new couple starting out fresh might reflexively go down one of three paths -- avoidance, suspicion or complete separation of finances.
First, avoidance. If money in the marriage or through the divorce was a source of conflict, why would you want that negative energy to enter this new, budding relationship? Let's kick that can down the road for later. The issue is that we can avoid money, but it won't avoid us. Just because you choose not to address credit card or student loan debt, or bills, that doesn't stop them from arriving in the mailbox. Avoidance means losing critical time to compound savings, putting potential strain on a marriage because you will have a more serious burden of saving.
Suspicion about money brings nearly instant toxicity and is understandable but unfair to the (presumably innocent) spouse. I once listened to a story of a female physician whose husband had a secret gambling problem, and he maxed out multiple credit cards in their name and ran up debt in a business he started. After their divorce, she created a long list of fairly extreme ways she would protect herself in a second marriage. Imagine the burden that such distrust could add to the new marriage.
I don't advocate blind trust, of course. Many marriages operate that way, with spouses who relinquish all decisions, control and even knowledge to their partner. If there is a rare gambling addiction or financial infidelity, then such an environment offers fertile ground for abuse. Instead, a marriage must begin with trust, even with money, but the protection from abuse is best provided by the equal partnership and transparency of jointly managed money in the household.
The third path to separate all finances seems simple and achievable with a prenuptial agreement and separate accounts. It is a less extreme version of the second approach but is maybe more common. They divide the bills in half or even by a formula based on what is fair for their respective payments. They may or may not know the financial condition of their spouse. What they know is that they are protected in at least a limited way.
As logical as this may sound, it is -- at best -- not ideal. At worst, it doesn't work. First, for not ideal. You go on a romantic date night to celebrate each other. Who pays? Does he pay? Is he now personally less rich while her wealth remained intact? Who books and pays for vacations? Separate finances can sometimes lead to escalating spending wars. Because lives cannot be divided so neatly, this is a system that, without a lot of care and communication, can quickly lead to conflict.
Take this couple in a second marriage with completely separate lives. She arranged a financial meeting to see how she might retire. An hour in, we both realized her precarious situation. He earns more and contributes the most to their household. She earns less and has far less in savings for retirement. She is very much reliant on his contribution to the household and the lifestyle that she understandably wants to maintain in retirement. The million-dollar question became (literally), "does he have a million dollars saved?" If not, they are in a pickle.
If you find yourself in one of these reflexive paths based on fear, you might be missing an opportunity to go down an intentional path based on hope. Yes, you explored dead ends and never want to take those paths again. I agree. Don't take those same paths. Instead, remember that when we take those paths that lead to dead ends, we get a map of the forest. In other words, couples starting over can find power in their combined histories if they take the knowledge of the past as motivation to forge the narrow but happier paths to healthy financial management.
A couple recently wrote to me about their financial situation. We will call them "Mary and Sam." They met in their 40s and fell in love. Tough divorces left them without retirement savings and some credit card debt. They were both knowledgeable about money but didn't have it in the foreground of their budding relationship until an encounter with another couple shook them up in a good way.
In an open discussion over dinner, their friends revealed that they had a goal of saving $1 million dollars. The way they spoke about the goal was exciting, like a game. Mary and Sam were intrigued, and after that dinner, they wondered if they could have a financial goal to share, similarly.
First they had to get out of debt from their respective divorces, the most difficult of financial goals. With a strong commitment to it, they paid off the debt in months, not years, and the act of clearing that debt brought excitement for an even bigger goal: Could they save enough to be able to actually retire one day?
After figuring out what it would take to retire, they adopted an aggressive savings rate and tucked all pay increases safely into savings. As their savings balance grew, they started to feel the excitement and the sentiment expressed by their friends. Saving was fun for both of them. Money, a source of pain and conflict in their former marriages, became a source of fun and hope for their new marriage.
A newlywed couple, Darrin and Jeffery, recently reached out to let me know that they heard a podcast I was on that encouraged people in their 40s and 50s to save 20%-30% to catch up on retirement. They described their excitement entering their second marriages and the fire that the podcast lit in them to take control of their finances together. They put their house on the market and worked out a plan to get their savings on track by the end of the year. Finances overnight became a mutual interest, hobby and challenge.
So if this is you in a new second marriage or years in, my best advice is to bring hope and optimism for a happy financial future. More importantly, set a financial goal and face it head-on. Together.
Sarah Catherine Gutierrez is founder, partner and CEO of Aptus Financial in Little Rock. She is also author of the book "But First, Save 10: The One Simple Money Move That Will Change Your Life," published by Et Alia Press. Contact her at [email protected]