I got married for the first time in my twenties. I thought we would be together forever. But within a few years, the marriage unraveled and I found myself going through a difficult divorce. I won’t get into the telenovela details here (though I did a little bit here, if you must). In short, it was awful in all sorts of ways. But not knowing where all our money was, because I had let him be in charge of it? That was uniquely painful.
The happy ending is that I eventually met a great guy whom I’m still married to and had a couple of amazing kids. But my “starter marriage” is by no means an anomaly. With national divorce rates hovering around the 50% mark, it’s pretty common to realize you’ve made a mistake the first or even second time around. And the more I travel the country talking to women about their finances and closing the gender investing gap, the more I hear women (usually after a glass or two of rosé) admit they’re staying in the wrong relationships because of their finances. Ouch.
So, what do you do when your marriage is going swimmingly, and money’s the last thing on your mind?
If you’re reading this and thinking “Thanks, Sallie, but I’m happily married or partnered.” Great. This article’s definitely for you, and now is an ideal time to take stock of your financial life. Have the dreaded “Money Talk” with your partner — we show you how, here — and clear up any grey areas.
Why now, when things are just peachy? Because if you can get answers to key financial questions now, you won’t be scrambling if the worst happens later.
In the event things do go south, there’s no one-size-fits-all solution for dividing assets. For example, factors such as the length of your marriage and the state you live in can alter the rules of the game significantly. I’ve watched several friends go through this, only to be tripped up by the details.
Here’s a quick and dirty inventory of what you should do while life’s on easy street:
At the very minimum, find out how much is in your and your partner’s individual checking, savings, and investing accounts; also know the value of other assets, such as real estate and valuable collectibles. Which of the accounts are joint — ie, held in both of your names? Are there outside assets you may be entitled to if you call it quits? Knowing the answers to these simple questions can save you from unpleasant surprises later on.
Consider a postnuptial agreement. A whaaat? If you’ve already signed a prenup, you should be set. But if you’ve already sealed the deal without one, a postnup is an agreement made after your wedding day that dictates how your assets will be divided in the event that you split up.
Know your state’s laws. It isn't as simple as "what’s yours is yours, what’s mine is mine,” and dividing everything else 50/50. The laws are state-dependent. In community property states most assets acquired during marriage are subject to equitable distribution. This doesn’t always mean an exact split down the middle, and it may be up to a judge or mediator to help iron out the details.
Learn which assets are marital assets. Any account accumulated after marriage is classified as marital assets. In a community property state, even if it's his 401(k), you may be entitled to a portion of it, and vice versa. There are special rules about splitting IRAs and 401(k)’s to avoid any withdrawal penalties. If you ever cross that bridge, it’s a great idea to consult an expert such as an accountant or tax attorney.
Understand the pros and cons of what you could end up with. For example, many women end up with the house and let hubby take the investments. Depending on where you are, the house may have significant ongoing expenses such as taxes, insurance, and maintenance. It’s also possible the house won’t increase in value at a rate similar to the investments (or vice versa). And when you go to sell your house, it has different tax implications than an investment account.
Get the 411 on alimony and child support. In the absence of a prenup or postnup, alimony, which are on-going payments from one spouse to the other, can vary greatly from state to state. Some states award alimony for life, while in others it is limited to a few years. If you have kids, a judge may award child support. Again, states vary on how long the support lasts, and how college and other education costs are handled.
Have a handle on what else might be in your corner. For example, if you’ve been hitched for at least 10 years and you get a divorce, you may be entitled to a spousal social security benefit. As long as you don’t re-marry and your ex’s benefit is higher, this could kick in as soon as age 62. Not a bad deal.
If you think you may be on your way to living in Splitsville…
The first, most obvious thing to do is get emotional and practical support from your family and #girlsquad. After that, taking steps to prepare financially should be at the top of your to-do list.
For example, if you’ve taken a career break, you may want to re-enter the workforce. If you’re already working, see about getting that raise. Then invest the raise. Research from the U.S. Government Accountability Office has shown that women's household income, on average, fell by 41% after a divorce. That's nearly double the loss that men experienced.
No matter where you are in your marriage, taking control of your finances is always a good call. Even if your partner does most of the planning, and you’re ok with that, you can still be in control if anything unexpected happens. And if you’re ready for that ring to come off, well, there’s no better way to gain back your independence.
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