I just received some information about a recent study that our friends at Experian did with regards to money, finance and marriage. About 59% of people said finances played a role in their divorce. That’s way over half and many couples never talk about money and how finances will be handled before they get married. Sometimes love just isn’t enough to keep a happy home if the bottom keeps falling out.
Experian’s most recent study, “Survey Results: When Divorce does damage to your credit” – the reveal a lot of other serious statistics. In their online survey of about 500 adults that had been divorced in the last 5 years, approximately 44% said their former spouse ruined their credit (I fall into that camp) and 59% regret not being more financially independent.
Sometimes it is not so simple
Everyone’s situation is different and if I had done things differently in my own marriage on the financial front I am sure things would be different. While finances play a part there are also other things in a marriage that can add to the stress. For me personally I wish I had saved more for emergencies. When I got laid off from my job in 2006, being the primary bread winner it created an even bigger stress on our marriage. Not only did I have to deal with the financial picture of our marriage but the depression that somehow I wasn’t good enough in my career. I almost wish I had gone to therapy sooner than I did. The straw that broke the camel’s back with regard to dissolution of my marriage was not related to financial issues but when you stack up all the factors that led to my divorce the stress of not effectively managing finances didn’t help to glue the marriage together. It has taken close to ten years to even
The Freedom of Financial Independence
Another statistic that didn’t surprise me one bit is hearing that 59% of respondents regret not being more financially independent. I can completely understand why many aren’t more financially independent. Keeping track of finances can be very stressful and it’s not exactly fun. Some of it may be psychological. I know for me I get anxiety balancing my checkbook but once I got a better idea of where I was financially and used some baby steps it greatly reduced my anxiety. I found Emma Johnson at Wealthy Single Mommy has a great article with “11 Financial Steps to a rich life as a single mom.” Much of the tips on here work great even if you are still married. Nobody that gets married every plans on getting divorced and financial independence doesn’t mean that a couple can’t co-mingle or share in the joys in their individual abilities and responsibilities to manage money as a unit.
Who is on First?
The Experian study goes on to discuss how lack of or a misstep in communication can create financial havoc in a marriage or relationship.
“Forty-seven percent didn’t know their spouse’s credit scores until marriage, 38 percent were unaware of retirement savings prior to the wedding, and 37 percent discovered their partner’s long-term financial goals after exchanging vows.”
What’s equally disturbing in the study is the large number of individuals who had no idea how much was owed on student loan debts. A personal experience I have with “Ironman” – my boyfriend of two years is how much of an importance we place upon personal finances. We are still cleaning up our individual financial pictures from our divorces/breakups and experiencing much of the same feelings as many surveyed. In the study Experian also explored how much financial knowledge married couples have in comparison to divorced couples. The results are not at all that surprising.
For married couples over 25% knew about their partner’s annual income in comparison to divorced couples. It also staggering to know that married couples are significantly much more aware about their partner’s long term financial goals, bill payment habits and retirement savings. It should be emphasized that just talking about finances may not be enough but the quality of communication is important.
Communication Conundrums about Finances
The Christmas holidays have been tough on me and not having a tenant in the efficiency I rent out has also put some restrictions on my income. Add to that a delay in getting my bonus at work and managing my finances for the short term has been a little bit stressful. I was embarrassed to talk to Ironman about it. Psychologically I felt it would demonstrate weakness. On his part he felt bad that I didn’t “trust” him enough to tell him. We talked about it and worked it out. He is helping me with small renovations to the efficiency so that I can rent it out for a higher price then what I was getting for it. If you are in a relationship or about to get married these kinds of discussions are important especially if you are scared. Your partner can help understand and possibly offer suggestions for a plan that you both are comfortable with.
How important is financial compatibility?
I believe financial compatibility is very important. Ironman’s ex-wife was a spender and Ironman’s personality is that of an indulger. It’s not enough to just want to have a lot of money as a couple but it’s important to understand how each person tracks their money, how they use credit and how fiscally responsible they are. As Ironman recounted stories of working three jobs he finally found a breaking point and told her she needed to get a part time job because he was killing himself trying to feed the family. He recounted tails of spaghetti made with chopped up hot dogs because they couldn’t afford better food. He was sick and tired and tired of being sick and tired. Have you ever felt that way? In the end once they divorced he was left with judgments from unpaid car notes and bills. Slowly he has gotten back on his feet and paid off the bills but much of that can be avoided and more savings placed in retirement then paying off old bills from a divorce.
Impact to Millennials
As Millennials rack up large student loan debt and find ways to pay it off I can understand why a large majority of millennials aren’t get married. That’s good news that the divorce rate has dropped as individuals wait longer to get married. As they wait maybe they should consider checking their financial compatibility. There are many quizzes online about financial compatibility such as Experian’s own “How credit compatible are you and your partner?” or other types of financial compatibility quizzes. I learned a lot about the importance of financial compatibility when I got my marriage annulled in the Catholic Church and the church’s view of literally “joining everything” and that includes bank accounts and finances. Even if you disagree about how to spend money, joint accounts force you to work out an agreement. While the premise is their to be financially independent the onus is also on you to be able to negotiate and add substance to discussions on finances.
What can you do differently?
The survey states that if there was one thing divorcees could have done differently, about 49% would have saved more. I would also add to communicate more and earlier before major problems arise. If you have a difficult time like I did with regards to communicating about finances seek help from a relationship communications coach or a therapist. Don’t leave your partner in the dark about finances since it can create a bigger problem later on.
Some simple quick habits when communicating with your partner can help. Conduct a monthly audit of finances and spending habits. For the first time I was forced to really tighten my budget instead of just saving money and finding deals like a hobby. Be clear about your financial goals and what’s important to you.
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