It’s engagement season! And while everyone’s busy admiring the ring and talking about wedding colors, it’s tempting to gloss over more serious issues, like your financial future and money styles.
I’ve been working in the divorce field for over 20 years and I’ve also been divorced myself. Now I’m happily remarried. So the suggestions and advice in this article are from both professional and personal perspectives.
As I sit in the mediation room and I listen to a couple describe how long they’ve been struggling with the problems that brought them to the decision to divorce, I often feel that if they’d had heart-to-heart discussion about tough topics like money styles, using credit, whether to return to work after having children and household responsibilities earlier in their relationship that we wouldn’t be mediating their divorce. They’d still be married.
As a newly engaged couple, you can choose to have these discussions now, before you tie the knot. It’s like marriage insurance because you’ve had the tough discussions before you’re confronted with a crisis you’re likely already on the same page as you start to deal with the problem that’s arisen.
And you’ll be confronted with a crisis sooner or later. We create some crises ourselves, by over-spending, paying bills late, or mouthing off at work and the boss overhears. Other crises happen to us, like the 2008 recession or getting your identity stolen. Other crises arise so slowly over time that we don’t even realize they’re happening, like inadvertently pushing all the income responsibility onto one spouse or failing to have enough income tax withheld from your paycheck. But one thing for sure: you’ll confront plenty of crises during your marriage.
So whether or not you actually write up a premarital agreement or prenup, it’s important to have the discussions:
• What happens if one of us gets laid off?
• If we have children, who will take off work and for how long?
• And how will we handle the discussion if our feelings change about returning to work?
• Do we anticipate having to support our aging parents? If so, what will we do?
• Will we live on a budget? Or will we each have our own accounts and contribute a set amount of money to joint finances each month?
• What if one of us comes up short money-wise one month? 12 months?
These are just a few of the topics you’ll want to discuss.
These discussions and decisions can be challenging. That’s why we suggest using mediation or Collaborative Law to facilitate the process. In mediation with Peace Talks, you’ll work with both an attorney or financial specialist and a therapist, so that if the discussion is hard you’ll have help and support. We make sure that you talk about everything you need to talk about before you get married.
We’ve mediated premarital agreements like this for years, and we’ve learned some interesting things and we’ve helped couples understand each other better.
For example, with one couple we worked with the husband had become a millionaire overnight. But he’d been raised in a poor family and he had a really strong work ethic. He had a sense that the millions could disappear as quickly as they’d appeared, and he knew that he’d need to reinvest a lot of his money into updating and upgrading his inventions because, as you know, the world moves very fast and people copy good ideas quickly. He couldn’t assume that his one invention would continue to be the only choice for people who needed it.
On the surface, his financial picture was that of a wealthy man with solid investments. It wasn’t until we discussed how quickly things could change for his business and the fact that he wanted to continue to invent things that it became clear that his savings would likely be used as business reinvestments, not fancy trips and expensive cars.
He talked frankly about sharing a room with 3 siblings growing up. He talked about using his newly acquired wealth to support his former stepson, his mother, and a cousin. He had no legal obligation to support these people, of course, but he felt very strongly about helping out since he could.
His fiancée knew part of this story, but not all of it. Tears came to his eyes as he talked about his former stepson, and sharing that room with 3 siblings. Once she heard and understood where her husband-to-be was coming from, what his values and priorities were, she agreed that they were important to her, too, and that she wouldn’t stand in the way of any of these goals.
That’s the happy ending.
But imagine if they hadn’t had that discussion in advance. They had a baby on the way, and what if his fiancée later resented how much he spent helping others rather than buying a new house for their new family? What if he reinvested his savings into a new business venture which failed? For both spouses there could be blame, shame and guilt attached to these events. But because this couple had thoroughly discussed these possibilities in advance and agreed that they intended to live modestly and that when the baby came that mom would give up her high paying job to stay home without an expectation that she return to work, this really reduces the likelihood of misunderstandings.
And, perhaps more importantly, because they knew how to have these kinds of conversations if a new situation emerged that neither had anticipated they’d already have the skills to have similar difficult conversations because they’d done it before. That’s a really important part of the premarital agreement discussion—just the practice of how to talk to each other when things aren’t as you’d hoped or expected.
Even in my own life it’s been helpful to remember these tips and to remember to have the discussions early, before the problem becomes worse. I remember one time I was fretting about needing to take $20,000 out of the home equity account to cover a number of bills. I was really upset and I was having trouble sleeping. But instead of holding onto this information even longer, I shared it with my husband. I showed him the checkbook and how we’d spent our money, and why this $20,000 was necessary. Once he saw the balance sheet, he understood, and we agreed to withdraw the money. I felt better immediately. By withholding this information from my spouse just because I anticipated that the discussion would be unpleasant, I was actually making the problem worse.
Mediation and Collaborative law help you to have these discussions in a safe and neutral setting. Your mediator or collaborative professional will help you identify all the options for each topic and go over the different choices with you so that you’re able to agree upon the best choice. And if you don’t agree, it’s the mediator’s job to help you understand why not and if there’s a possibility to bridge the gap.
We’d much rather see you before you get married than later if things go wrong. Mediation and Collaborative Law can help you draft an agreement which makes sense to both of you and also teach you the skills to have these sorts of discussions on your own in the future. Because the only constant is change.
By Stephanie Maloney, CDFA
Stephanie Maloney Certified Financial Planner (CFPA) in the Los Angeles area and as a Divorce Mediator and President at Peace Talks. This article has helped you better understand Mediation and Collaborative Law for Premarital Agreements and Prenuptial Agreements.