Check Out the Assets on Her!
OK, confession time. When I was young, single and looking for the future Mrs. Elephant Eater and I was checking out the ladies’ “assets”, their 401(K) balances, savings accounts and investment real estate portfolios were the last things on my mind. Hey, I’m a guy! I would suggest that if you are looking for a future partner and money is your primary concern when choosing a mate, this may be why you’re still looking. There are many things other than money that make a successful relationship including mutual attraction, trust, shared interests and enjoying one another’s company to name just a few. That being said, before you start to get to serious and make big commitments, I would look long and hard at your financial compatibility. While choices about career/earning, spending, taxes and investing are all very big components of our wealth building process, I would argue that no choice that we made has affected our financial success more than our successful marriage.
I can still remember the first time we got serious about discussing our finances. We had been dating for over 5 years, were engaged and planning to be married in the Catholic Church. We had to go through pre cana classes per Catholic Church rules before they would marry us. Having friends who were married ahead of us, we heard nightmare stories about these classes where a day was wasted being lectured to about things like living together before marriage, sex before marriage and other topics for which, no matter how you feel about them, the ship has already sailed for most people by the time they are taking pre-marriage classes.
However, our class was much different and got our attention immediately when we had a priest walk in, say a brief prayer and then make the following statements. (1) The Church places the highest value on the institution of marriage and the fact is that statistically over 50% of couples sitting in that room would see their marriages fail. (2) We would spend that day focusing on what research shows are the biggest causes of divorce in an effort to prepare us for successful and lasting marriages. (3) The biggest factor cited among divorcing couples leading to divorce and therefore what we would spend the bulk of the day discussing was …. financial problems. We then spent well over half of the day having essentially a seminar on personal finance, financial planning, financial compatibility, etc. with only a couple of hours spent on everything else (communication, religion, kids/family, fidelity, etc.).
This was eye opening to us. In a way we were lucky because we realized going through those sessions that our overall values and philosophy of money were similar and compatible. However, up until that day, I’m sure that like most couples, we never really talked about money and how it affected our relationship. Shortly thereafter we sat down and came up with a plan of how we would combine our resources. Ever since, we’ve continuously been very open when communicating about finances and placing a priority on staying on the same page as we’ve navigated life’s challenges and adventures together including getting out of debt, buying, selling and building a home, traveling, moving to a new city, changing careers, having a child, and planning our early retirement.
Our plan has always been that we would maintain around a 50% savings rate by using Mrs. EE’s income to support our living expenses. We’ve always used my income to buy paper investments and pay off debt consisting of her initial school loans and car loan and then our mortgage. Some years we saved much more, and some years less, as we adjusted to job/career changes, building/paying off our home, learning about using tax advantaged accounts, maternity leave etc. However, the principles and plan we established based on what we learned that day have stayed the same.
The value of having a marriage without financial strife has been immense. While like all couples we disagree and on occasion fight, we never fight about money. Prioritizing how we spend our money together has caused us to purposefully spend money on things like travel and developing hobbies together which has further strengthened our marriage. Having a partner who is competent and who can be trusted fully has allowed us many benefits like taking risks in our careers knowing that the other would be there to support everything if a choice didn’t work out. This has also allowed us to “self insure” against many worst case scenarios (job loss, disability, death) instead of trying to do it with expensive financial products. We have been able to focus on our daughter AND our own relationship without both of us having to be worried about working full time jobs as we became parents. We are planning a life together around early retirement after achieving financial independence by the time we’re 40.
Our specific plan has worked great for us because we always had a 2 income household and our career trajectories were very similar. Your situation may be totally different and so everyone needs a plan customized to their individual needs and situation. Whatever your plan and your path, if you are sharing it with a partner, planning and communicating about money should be a top priority in starting off on the right foot. If you’re more worried about what would happen if your stock portfolio dropped 50% tomorrow than you are about developing and nurturing your marriage, remember that in time the losses in value you see on paper with your portfolio will come back, but when your spouse walks away, 50% of your assets are going too and no amount of time will change that. If your biggest concern in life is the expense ratios of your investments or the amount that your financial advisor charges, talk to a divorce attorney and see if those fees and expenses are more palatable.
If you are going to choose to walk the path to financial independence with a partner, figuring out a plan that works for both of you is vital. Then the dream of financial independence and early retirement will be a unifying goal, bringing you closer as you build your ultimate life together.
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