Rich Girl Roundtable: Money, Marriage, & Risks of Combined (and Separate) Finances (with a CFP!)

Katie:

Welcome back, Rich Girls and Boys, to the Rich Girl Roundup weekly discussion of The Money with Katie Show. I'm your host, Katie Gatti Tassin, and as always, every Monday morning, Henah and I are going to dig into an interesting money discussion. But before we do that, here is a quick message from our sponsors.

All right, so before we get into the conversation, this week's upcoming main episode is about—oh boy, gird your loins—the resurgence of sugar baby culture and the romanticization of marrying a rich man. So it's going to be a spicy one, to say the least. All right, onto this week's Roundup. Henah, how are we doing today?

Henah:

I'm good, Katie. We're excited. We have our first ever guest at a Rich Girl Roundtable. I think we'll rename it this week.

Katie:

Yes. Rich Girl Roundtable. I love it.

Henah:

Thank you. I feel like we're in knighted times. So this week's question came from feedback we've gotten in the past, actually, about conversations about combining or not combining finances. It's one of the most personal money topic I think that we've heard about, because it evolves so quickly into commentary about relationships in general, which came up a lot when I actually shared my perspective, which we can get into. And so we thought it'd be fun to invite Bill Nelson to the conversation. He's a CFP so he knows what he's doing. He's a certified financial therapist as well, and he's the author of Marriage-Centered Money: Get On the Same Financial Page and Achieve Your Life Goals Together. So I'm really excited to welcome Bill to the show. Katie, I'll kick it off with you.

Katie:

Yes, likewise. No, I just thought it would be fun because Henah and I obviously have our various hot takes, but I was like, I'm not a financial therapist. I am in no way qualified to be popping off about this, so let's invite someone on who is. So Bill, can you tell us a little bit about what you do day-to-day in your job as both a CFP and a certified financial therapist?

Bill:

Yeah, absolutely. First of all, thanks so much for having me on here today. Really looking forward to talking about this topic. So I started my financial planning firm back in 2016. I started off, I was an engaged newlywed couple at the time. I tended to attract a lot of engaged newlywed couples at the time, and what I found was that a lot of the financial planning information out there just isn't really geared toward couples. There's a lot of all the rules of thumb and things that you talk about. Just on this particular issue, you can find people who will tell you you always need to combine your accounts a hundred percent of the time, or you should never combine any accounts, and anything in between. And so then that just led me down a rabbit hole as I was trying to figure this out in my own personal life to figure out how to help couples navigate these dynamics.

So in my day-to-day life, I do the typical CFP financial planning stuff that you'd expect for couples, but I like to view the work that I do as helping couples either prepare for a long and happy marriage ahead or repair any damage the money has done to their relationship.

Katie:

Prepare or repair.

Henah:

That's a clever way to put it.

Bill:

Thank you, I appreciate that.

Henah:

I've read a large number of divorces happen because of money issues. Is that what you've seen?

Bill:

It is true, although it often is a little bit exaggerated. Money fights are a leading indicator of future marital problems, but they are not the primary cause, as you hear sometimes.

Katie:

Okay, so I'm happy that you cleared that up because I've always kind of wondered...that statistic gets thrown around a lot and I feel like we all hear that. "Oh, people always get divorced because of money." But I like this reframe of, it's not necessarily that much of a one-to-one as much as it is a leading indicator of problems. It actually really illustratively highlights for me what makes this conversation so tricky and I'm going to say triggering for people, is because often when we start talking about how a couple approaches money, there's almost this undertone or implication of what it says about their relationship or whether or not they trust one another. It's very tied up in that. And I know, Henah, following some previous episodes we had done, you had mentioned that some of the feedback you heard took you down that rabbit hole. Do you want to talk about that?

Henah:

Yeah, so we covered this as a Rich Girl Roundup a couple of months ago, and it was called "How Katie and Henah Approach Their Finances In a Couple or With Their Partners," and we shared that my husband and I, we have some joint accounts and then we have our own separate accounts. And it was so strange the feedback we got, because we got comments that "you don't trust each other," that "divorce must be on the horizon," that because we don't combine everything there must be an issue. And I just thought that was so fascinating because to me, having shared accounts and our own separate ones feels like the optimal hybrid approach. I always grew up with the "always have something for yourself" mantra, and so I think I approach my money a little bit differently than what our audience was expecting, and so there were a lot of implications, I think, thrown around about that. I mean, Bill, what has been your purview when you hear things like that or that there must be a lack of trust?

Bill:

Yeah. So I like to remind people that even couples who combine all their joint checking accounts, savings accounts, et cetera, they also have separate financial accounts. Almost always. If you work and have a 401(k), there's no way to have a joint 401(k). It's impossible. If you have a Traditional IRA, Roth IRA, the I in IRA stands for "individual." There's no such thing as combined retirement accounts in that way, and yet couples make it work. You don't need to literally have everything combined in order to be working together financially.

What I would be interested in exploring, though, in those cases is in cases where there's a desire to keep things separate, why is that? Is there some sort of past financial trauma there? Is there something that you've seen either with what money was like growing up with your parents? Is there something you've seen with friends? Or is there just some baseline desire for some sort of financial independence, not with everything, but to have some financial ground for yourself so that then you can go and lean in with the rest of your money?

Henah:

What you said was really powerful about everybody still has a separate account in some ways, because I was thinking there's no real separate everything in a marriage, because your joint lifestyle will impact each of your separate numbers either way. So how you spend is going to affect even your separate accounts and I think it works vice versa. Katie, what strikes you about how he framed it?

Katie:

I actually really liked this slew of questions that he just offered of getting to the bottom of the underlying beliefs that are driving a desire for separation in some ways, because I think when my husband and I first got married, and I've shared this on the show before, we lived together prior to being married, so we had that roommate model to start where we actually didn't have any joint accounts. It was just separate financial lives, and then splitting bills and Venmoing one another. And I think the step beyond that is having a joint checking account that maybe you are both contributing to that will then pay for joint expenses, but then you also have your separate individual expenses on the side and your investing or saving your money for your goals on the side.

And I think what we ended up finding for ourselves was that we have shared goals. Almost all of our goals are shared, and so that ranges from our desire to retire early to our desire to be homeowners with children someday in the future, because everyone knows how I feel about buying a house. But all of these things are eventually going to happen together, so it didn't really make sense for us to plan as though we were individually tracking toward them, because we are not. And so what we ended up deciding to do was all the money from my income, all the money from his income, it all goes into a joint checking account that we are both entitled to. He's entitled to spend my money, I'm entitled to spend his. We treat it as though it is our money. And then, after we pay all of our credit card bills, his, mine, and ours, with that joint pot, then the portion that's left over goes into a joint taxable brokerage account because, as Bill noted, all of our individual retirement accounts are separately funded with paycheck contributions.

And I think that the main thing that made me so comfortable with that though is that both of us had made a decent amount of financial progress individually prior to getting married, and so he and I both have roughly equivalent amounts of money in savings and individual taxable accounts from before we got together. So we didn't turn around and retroactively mush everything together. We kept all of that separate, and eventually I'm sure we'll spend down his and spend down mine together, but we basically just said, "From the point of marriage forward, now we are one. Now we're a team; now everything is going into the same pot." In retrospect, I think I've landed on in my mind what is the ideal balance between it feels like what we're dancing around here, which is the realism of one in two marriages end in divorce, and that is a real possibility, but also truly benefiting from all the financial upside of partnership.

And so if you are married, you probably want to benefit from that upside. Marriage is hard work, right? You want to get some financial benefit out of that hard work together to build that team and to build that shared vision of the future. So Bill, what do you think about that?

Bill:

I think that, yes, one in two marriages in a divorce, and I think what often happens in some of the statistics that we led off talking about, people hear that and one of two things happen. Either, "Well, if that's the case, I need to protect myself and trying to figure out what we need to do there," or, if half of marriages ended in divorce and money is one of the leading stressors on marriages, if you learn to manage money well together, the odds there go down. Learning how to manage money together can actually make your marriage stronger. Now, that does not necessarily mean you need to combine everything. What you just described, Katie, is what I often see, where couples get married, they start to contribute to things jointly, and they have the things that they had established before marriage.

And eventually, odds are pretty good those are going to come together, at least to a degree, but it's just really important to keep in mind whenever we talk about these statistics; often we talk about them in the negative light, but that doesn't mean that's a foregone possibility. That doesn't mean there aren't things that you can do to improve those odds. Sometimes though, depending on what your concerns are about combining everything...

Katie:

They're valid.

Bill:

Sometimes they're valid.

Katie:

I was just joking. We combine all our finances and we don't trust each other at all. No, I'm kidding. We do trust each other.

Henah:

Going back to the question of what is the case for not combining them, one of the things I had written was if you have very different money mindsets, you should probably try to get as closely aligned to that as possible before marriage. But if there's a reason that you can't agree and you're both still committed to getting married, then I think keeping them separate might be a way to go. Bill, you see this every day, so maybe you have a more nuanced perspective of this.

Katie:

I do.

Are we wandering down a dangerous path here?

Bill:

No. No, I don't think so. So using separate accounts strategically in the concept of a clearly defined plan to achieve your life goals as a family is great. That works well, and it works particularly well when there are money mindset issues or you each have different spending habits or whatever the case may be. There are ways to strategically use some separate money in the context of a joint plan that helps both people buy in. What I don't like, though, and where I see people get tripped up with this, is if we're using separate accounts as a way to not have those conversations. And we know if we combine our money, we're just doing it so we don't fight about money, so that we don't actually talk about these things. I think you need to have those conversations first and you need to really clearly understand what those money mindset differences are, where they come from, and how they impact your day-to-day financial management. And then when you do that, you can certainly layer in some separate accounts strategically to help manage those.

Henah:

Yeah. I wanted to ask you, I had a couple other instances where I feel like it may not make sense, and maybe you can shine a light on where in the process it does make sense to talk about it beforehand or after you get married. I think one that's probably really common is just where there's someone who has excessive loans or debt and the other partner doesn't want to be on the hook for them. What do you recommend in that case, or what have you commonly seen?

Bill:

That's hands-down the hardest question that I get from couples.

Katie:

But wait, can I ask, though? Because I don't think whether or not you combine your income makes a difference. I think you are either legally or not legally on the hook depending on the state you live in and whether or not you get a prenup, not whether or not you guys are putting the money together. So Henah, did you just mean that if you're putting all your money together, then by default some of your income is going to be going toward their loans? Is that what you're saying?

Henah:

Right. You're essentially taking responsibility and some of your literal dollars to support X, Y, Z debts or loans that they might have. Not so much from a legal standpoint.

Katie:

Yeah, I realize if someone is like $50,000 in credit card debt, you may not be thrilled about working for the next two years to pay that down with them, but I feel like that's the point of getting married though, is to be part of a team where you can help one another. Is it a bad sign, maybe?

Henah:

Would you feel differently if you had been in that situation? If Thomas came to you and said, "Hey, actually, when we get married, I'm going to have $50,000 in debt that you're taking on?" Because you just said the reason that your perspective worked so well is that you came in financially aligned, you came in with relative financial progress, so that's why you felt comfortable. I guess what I'm saying is I don't know that everybody would be like, "My husband has $30,000 in student loans left. Does that mean that I want to spend extra amount of time paying for that?" 

Bill:

So I will say that my sample of people that I talk to might be a little bit biased, because these are all people who are looking for financial help, but more often than not, a spouse that comes into the marriage with $50,000 of credit card debt is feeling unbelievable guilt and anxiety about that. And what can even seem at the surface like not caring or being dismissive or putting their head in the sand is coming from that. That is certainly not always the case. Sometimes there is just pure financial irresponsibility, but I care way more about what the spouse's attitude is toward the debt than I do the actual number itself. If they're recognizing that this came about because of X, Y, Z behaviors that they're not doing anymore and they're committed to, A, not doing that again, and B, improving the situation, that's great. If they don't care, if they're still using the credit cards and if the problem's getting worse, that becomes a whole separate issue.

But in cases where the spouse wants to make a change here, I then go to the other spouse and it's important for them to realize that whether or not they're legally responsible for the debt, whether or not they're actually going to put some of their income toward paying down that debt, that debt's going to affect them. If you are the spouse who's in really good financial shape, saving a bunch of money, and your spouse is struggling financially, you can say it's not your problem and you can continue to live your lives the way that you are, and 20, 30, 40 years down the road you're going to be traveling the world by yourself in retirement and your spouse is still going to be struggling.

Katie:

I'm so happy you said this, because this is what I see as the main breaking point of keeping everything separate, is that while keeping everything separate might be straightforward, as long as you are both working to support yourself actively with income, the moment one of you does not have income anymore or maybe one of you can retire and the other can't, suddenly the calculus is going to change. And it becomes a difficult time to suddenly transition to, "Oh, okay. Well, am I going to support you now because I saved for our entire life and you didn't? Am I funding both of our retirements, or are you just going to keep working until you can retire too?"

And the situation where you maybe have children and one of you wants to be a stay-at-home parent, then does the person who continues working, does that become the collective income or is it like, "Okay, well, what portion of your income are you giving me?" I think that these are the conversations that really introduce complexity where it might seem straightforward in the beginning. You have to have those conversations ahead of time. I can just foresee that it can make some of those just general life planning questions a lot more complicated and tricky if you've been operating as though you're completely financially separate from one another, and then suddenly there's a life event that now you're like, "Oh, but wait."

Henah:

Well, I think you're bringing up a really good point of the questions that we don't often ask before marriage. A lot of times when you head into a marriage, it becomes very present-day or past approaches to money instead of being like, "Well, I would like to take time off when I'm a parent. Are you going to contribute into an IRA for me...

Katie:

Yes, exactly.

Henah:

...so that I'm also saving for retirement...

Katie:

Exactly.

Henah:

...as you are?" We've done checklists for things, Bill, in the past, of elder care and whatever. I feel like this should be the pre-marriage checklist, of these are the other questions you want to consider too. I have very intimately witnessed when things like mental illness or addiction becomes an issue. And addiction is an illness as well, but it's not as if it's a one and done, everything is going to come back tied with a bow, and then there'll never be a problem again. It is one of those things that really does ebb and flow over a lifetime. In the case of what I'm talking about, it's not something that was ever apparent because the illness set on after the marriage began, and of course that is impossibly hard to plan for. You can't know that that's going to happen. Have you ever dealt with that? How has that kind of conversation come out?

Bill:

I've seen it the most just in my personal practice with gambling, things that come up down the road. And certainly, things like that happen. And you are correct. Often either they're not present at all prior to the marriage, or they're hidden. And yeah, certainly in those types of scenarios there is a really strong case to make for at least short-term limiting access and limiting the damage that can be done by that while the person's seeking care for whatever problems they're having. I completely agree with that.

Katie:

Do you think that having healthy, proactive financial practices together can help avoid that damage from getting too far? If you guys are really on it with watching where the money is going, that at the first unauthorized transfer you would be like, "Wait a second, where did that a thousand dollars go? What's happening there?" How does this happen that you've seen?

Bill:

It does happen, and it happens more often not only than you might think, but even the people who are engaged in these financial secrecy type things even are recognizing. There was a study that came out a few years ago where 27% of people admitted to keeping a financial secret from their partner, but 53% of people admitted to behaviors associated with financial secrecy. So basically, one in two people who are engaged in this problem aren't even acknowledging that it's a problem.

Katie:

So mechanically, how does that work? Is it a secret credit card that's getting run up?

Bill:

Secret credit cards, secret debts, secret accounts, bonuses that people are hiding, things like that. I could probably come up with more crazy scenarios, but nothing that I've seen.

Henah:

I feel like I've read a lot of the people go to the ATM and they take out cash and they put the cash in a separate account.

Katie:

Maybe I'm too controlling, because I feel like the second something gets spent, I'm like, "What was the $15 on Amazon?"

Henah:

I think that that leads back to you saying, "We trust each other, we have these shared accounts," blah, blah, blah. I think for you guys it works because Thomas is okay answering those types of questions.

Katie:

I would expect that I would be asked and have to answer those questions, too, which is just, what is the money being spent on? And part of it is just for the logistics of tracking because something will come up in Copilot. The other day, I saw a $200 charge for "Purely filter," and I was like, "What is this? Is this you?" I didn't know what it was. It's like, "Oh, it was a water filter." I'm like, "Oh, okay." Funnel it under the correct category and move on. But that's fair that you're saying it works because he's okay with that, but I think that is an expectation that I also would place on myself.

Henah:

Sure. What I'm saying is that you both are okay with that kind of approach to money, and I don't know that everyone...You are Money with Katie, so this is an interest of yours, it's a thing that you really pay a lot of attention to. I don't know how many other people feel okay with that. I know for me personally, my husband has had to start hiding birthday gift orders from me because I have access to everything, and I'll see that he bought a gift and I'll be like, "Well, now I know what it is," and so he started to put things on his debit card because I don't check that as much, whatever. So I think there's an angle of this where you have to be on the same page, to your point, Katie, of what transparency feels good to everybody, and then where does it feel like maybe a little bit too much or less. I don't know. Is that something that you've also come across, Bill?

Bill:

Yeah, I think that you can combine everything if that works for you and your spouse, particularly if you have really good communication processes in place that works really well, and there are some hybrid approaches that can work. Being able to buy birthday gifts without your spouse knowing what they are ahead of time, that's not a bad thing, certainly.

Henah:

I'm imagining my husband being like, "Do I have secret behaviors?" I guess, yes, for my birthday gift. Katie, you alluded to an optimal approach that...

Katie:

Yes.

Henah:

...yeah, you wanted to talk about. Let's hear it.

Katie:

Okay. So I think when I look back on our situation, we did not get a prenup. We intended to. We basically just never got around to it, which sounds so dumb. My husband is an attorney. He was like, "I think we should get a prenuptial agreement." I was like, "Cool. I agree. Let's do that." And then it basically never came up again and we ended up getting married without one. And I think that the best ideal scenario is getting a prenup that will specify how your assets would be split in the event of the dissolution of that marriage, including language around what will happen if one of you decides not to work at some point and is no longer contributing to your household income.

Because I do think that that's where 90% of the problems arise for people later in life, especially when I hear from women who have gotten divorced later in life being like, "I lost everything. I have nothing, and I've been out of the workforce for so long that X, Y, Z, I took care of our kids." And I think that getting a prenup can really clear those things up ahead of time and allow you to really benefit from the potential upside fully of working toward a shared vision, shared financial goals, and ultimately give you that flexibility to support one another's dreams in the event one partner needs to go without income for another reason. Maybe you're trying to start a business or maybe you just need a year off. There are plenty of reasons why someone might want to stop working for a time.

So I personally like that idea, because then you can take more strides toward combining. I think that there is this idea that combining finances will make it harder to undo things or, "I want separate money in case anything ever happens," but from what I understand, simply keeping things physically separate, "This is in my account, this is in your account," does not actually legally separate them if you are married. And it might depend on what state you're in, but I believe in the event of a divorce, it does not matter if it's in separate accounts. It's still technically joint property that's going to get split up.

Maybe this is taking it even further than we have yet, but I think that I see it as the prenup being the insurance policy and making sure that if one of you does stop working, especially if you're going to be taking care of a home and children, as Kim Davis said, "You're not living off the fat of the land, you're providing your household with an invaluable service that would probably cost a hundred grand a year to outsource everything," that you can actually specify in a prenup how those things would be treated.

Short of that, this question in general got me thinking about, what is the point of marriage, not in the spiritual sense, but in the purely contractual, legal sense? What do you stand to gain from introducing the state and federal government into your relationship and making that relationship legally binding? I think it is a commitment device. I think it introduces some interesting tax breaks. But at the end of the day, if you feel you are risking more by legally binding yourself to this person because of their financial habits, I would ask Bill to weigh in. In lieu of an ironclad prenup, if you're truly interested in keeping your personhood legally separate from this other person, maybe it's not a good idea to legally bind yourselves together. You could spiritually bind yourselves together in ceremony, sacrament, whatever faith tradition you practice, but what's the point of marriage?

Bill:

Do you want to build a life together or not? You have very correctly identified some risks associated with getting married and how things could potentially go wrong, and there are ways to handle those risks as you've identified, but we talk about taking financial risks all the time and there are typically returns that come with that, and I would argue the same is true here. There's a lot of security that comes from marriage as well. There's a reason, for example, that most people don't want to have kids before they get legally married, because once you're legally married, there's some security. If things don't work out, there are processes in place to handle that. The pros and cons are a little bit more nuanced than sometimes we talk about when we just focus on the "what could go wrong" perspective. And again, when you are able to work together with somebody on your finances, things can be much more efficient than they would be if you both were going on your own.

Katie:

I'm glad you brought up pros. I was thinking about this in preparation for the conversation. What has getting married really done for us in a practical financial sense? And I think it allowed us to upgrade our quality of life and find efficiencies with things like shared resources, allowed us to navigate our careers more fluidly. I anticipate that if one or both of us wanted to take a break in the future, because all of our income is going into one pot, there's some slack in the system. And I also think it's made our journey toward our financial independence number a lot more fun working toward it together and keeping one another on track, and it reminded me of that if you want to go fast, go alone; if you want to go far, go together. So yeah, I agree. I think there are benefits.

Henah:

I think that you guys are coming from a very factual standpoint, although I think that most of this is very emotionally driven. When you are in love with somebody and you're thinking about marriage, there's really not a whole lot of conversation about planning 30, 40 years in advance. It is very much like a, "I love you, you love me, shouldn't we make this a thing? We're going to do this, and then we're going to buy the house, and then we're going to have kids," and I don't think people really think about these things.

So if anything, I think the conversation we've had here today highlights not just the present, but how can you look ahead and really start to think about your life and retirement together, your life when you have a family together, your life of if this ends in a disillusion, you're still going to be on the hook for a couple of things. So just thinking of the tactical outcomes that come from having to separate those things after the fact. But I know you have an interesting last question, I think, which I would love to get Bill's thoughts on as well.

Katie:

Yeah. My question is...I guess it in some ways goes back to the debt thing. I'm sure it varies for everybody. But A, what do you owe to your partner? When is something a deal-breaker? I think, Bill, you said it primarily comes down to attitude and how that person is approaching it. But what if you're the financially irresponsible partner? Someone that's listening to this could be like, "Oh shit, I'm the one with the debt. I'm the one that has the spending thing that I'm trying to work through," and I think that that's another interesting lens to look at this through, so I'm just curious from a professional standpoint what you think about that.

Bill:

Yeah, I'm always interested in understanding why that's the case. What are the underlying reasons for that? Because what can look like financial irresponsibility can have some underpinnings there that we can potentially work with if we understand what's driving it. Even just beyond that, you can be the spouse who really wants the prenup in place, and your fiance is not into that. That can create some of these feelings of, "Well, am I the problem? Am I the one who's wrong?" Getting really clear on what you need to feel grounded so that you are able to commit to working with your spouse.

There was a really interesting study that I think it was Indiana University did earlier this year that actually studied engaged and newlywed couples, and they told half of the couples in the study they had to combine all their accounts. They didn't let the other half of the people combine any of the accounts, and they studied them for two years. And they found that the couples who combined everything had much more successful outcomes, happier relationships. They tended to stay together more frequently. The financial outcomes were better. And so I think that it's easy to look at that and say, "Yeah, you gotta combine everything." The problem with that, though, is that everybody who participated in the study was willing to be told what to do.

Katie:

Sure.

Bill:

And that is not the case.

Henah:

I saw that study. It was like, is the result because they were willing to do it or was it because, actually, the money led to being happier? And they were like, there's really no way to make that correlation.

Bill:

And I'm pretty convinced that couples, the more you combine things, the better you tend to do in the long run. I think the study pretty clearly showed that, but the question is what do we need to do to get there? And I think being told, "Yeah, you just gotta combine everything. You've just gotta suck it up and deal with it," that doesn't work well if you have some of these specific concerns about debt coming into the marriage, about what happens if one of us stays home down the road. Because, Katie, you've mentioned it twice and you're spot on. That creates really, really weird power dynamics in relationships...

Katie:

Yes.

Bill:

...down the road.

Katie:

Power dynamic, that's the perfect...I hate to be like, "It's a mindset," but in some ways I think as long as you're still viewing something as only yours, I feel like I could see that leading to resentment in the future. "Now I'm the one that has to sacrifice and provide for you, when all this time now you get to..." I don't know, maybe I'm projecting my own feelings on it, but I felt like for us it was like, "Well, we should do this now and set this precedent early." Because if suddenly in the future one of us wants to take a break and it's like, "Okay, well, now you have to provide for both of us," it'd be like, "Well, what the hell? I didn't get to benefit from your stuff while you were working, so now you get to benefit from me? That's not fair."

Bill:

If you keep everything separate and one of you becomes a stay-at-home parent, you are either asking your spouse for an allowance or you're asking them for compensation and negotiating raises, both of which feel really weird in the moment.

Henah:

I have a question on that, Bill. When we were talking about prenups, are postnups a common thing that you see when people come to the realization that maybe beforehand it wasn't something they had planned for, but now might be something they need to look out for?

Bill:

Yeah, they happen. I wouldn't say they're super common, but it's something that you typically can do.

Katie:

I was listening to a lawyer talk about this and they were like, "Postnups are nowhere near as enforceable," I guess, because there's no leverage on the line. With a prenup it's like, "We won't sign this marriage contract unless these things are true," but it's like, "Well, if you've already signed the marriage contract, then the postnup doesn't have..." Almost like there's no collateral. I don't know if that's a good way to describe it.

Bill:

I do find that sometimes there's a mathematical case for that being the case, but in other cases it can give you some of that stability. The case that you talked about, Katie, earlier about having the ironclad prenup so that you're able to combine everything and work together and you have all this spelled out. There's not necessarily a mathematical case for that. The prenup might not even be doing much in that scenario, but it gives you that stability you need so that you can work together more effectively going forward.

Katie:

Now that we've talked all this through, I'm starting to notice that there's almost two layers, where it's like the prenup might be more impactful for a worst-case-scenario type outcome, where it's like, "Okay, well, in the event the marriage ends, at least I know this part will be protected and I'm guaranteed, and so now I feel like I have the safety net I need to jump." Whereas it seems like the other piece of this, the other layer for which the prenup is not super impactful, is just the incoming and outgoing funds and progress that can be made while you are married, and that may be that fear or feeling of, "Well, I am more financially inclined than my partner and I'm nervous that I'm going to slow myself down if we combine everything, because if they aren't on the same page, then now my goals are being sacrificed because they're not with it," which a prenup does nothing to protect you in that case.

Because if you stay married the entire time, and that's the goal is to stay married the entire time. But is that where you would say, if these are concerns, would you recommend people work with a professional, go talk to a financial therapist and get to the bottom of that, get on the same page?

Bill:

Yeah, I'm certainly pro financial planning, financial therapy. It's why I do what I do. But having proactive conversations, particularly if there are sticking points, it can be really helpful to get to the bottom of it and give you each what you need so that you can then move forward and work together, regardless of whether or not we're literally combining every cent that you have.

Henah:

With our audience, they're probably around our age, in their late twenties, early thirties. Is there an optimal time, Bill, that someone starts to have this conversation? Is it when they move in together for the first time? Is it once they get engaged? I want to see, how can we meet our audience where they're at, or if this is a decision they've already passed in their timeline.

Katie:

Yeah, like if they're already married and have been married.

Henah:

How do you come back now? What is the next step? What is the tactical thing our audience can take from this?

Bill:

Yeah. So in an ideal world, you are talking about money with your partner in the same way you'd be talking about what you want to do about kids and religion. And you might not be bringing up your salary and your credit card debt on date number one. That's probably not a good time to start that conversation, but...

Katie:

Do it. Do it.

Henah:

Unless you're Katie.

Katie:

Slide the paper across...

Bill:

Yeah, and haven't been single since 2007, so I'm probably the wrong person to weigh on first date advice. But as you get more serious, there shouldn't really be any surprises by the time you get engaged. If you're already married and there are surprises on the table or there are things that you think you need to talk about that you haven't, or communication hasn't been great up until this point, the first step is just to start talking about money. If you need to start really small, that works too, and then you can ease into it a little bit more. Certainly, whether it's a marriage counselor or a financial planner, financial therapist, there are third parties they can help. You have some of these conversations, depending on what the issue is, but it's never too late to start. It's never too late to start saving. It's never too late to start investing. It's never too late to start talking about money.

Henah:

Bill, do you deal with a lot of second marriages?

Bill:

Some. Those do come with their own sorts of questions, certainly.

Henah:

Yeah. Do you find that people in a second marriage have a very different approach to money than they did in their first marriage?

Bill:

Yes, actually I do. I think that the desire to combine out of the gate, there's a lot more concerns about that. I see it most on the estate planning side in terms of setting up trusts and things to make sure, particularly if there are children from the first marriage, that they're taken care of no matter what in addition to the second spouse.

Katie:

Interesting. That's a good question, Henah. Is there ever a perfectly healthy, awesome situation where people are keeping everything separate?

Bill:

The case I was trying to advocate for was either combining or some sort of hybrid option. To me, the hybrid option works really well. I've never seen a case where it made sense to keep everything separate. There are people who make it work, certainly. I think that in those cases, it's money does no harm, first and foremost. It is not something that is helping the couple pull together. Often, the financial outcomes aren't as good as they could be if things were combined, at least to a degree.

Henah:

Do you find that different generations have had different approaches to money? I get the sense from your website that you work more with millennials, but is that something that you've seen a huge change on? Because I think, Katie, you've talked about this. A lot of us watched our own parents and the boomer generation go through things a certain way, and so that has drastically changed how we approach our own finances or independence or autonomy, whatever that is. Has that been a common theme that you've seen?

Bill:

Yeah, so I'm holding up the chapter in my book on this. 28% of millennial couples keep their finances completely separate after getting married. 13% of baby boomers, 11% of Gen Xers did the same, so over double.

Henah:

Wow.

Katie:

Oh, even lower for Gen X. Interesting. It seems to me that the more financial autonomy women have to make and save and invest their own money, it feels like it's following that trend, which is obviously a good thing. We are all for women's financial autonomy.

Henah:

Katie, do you feel like it might be a shortsighted decision, though?

Katie:

To keep everything separate?

Henah:

"I make my own money, so I'm going to keep everything separate. It's good for me, go me," and then later it's like, "Well, X, Y, Z."

Katie:

I guess I lean on what Bill said about as long as it's doing no harm, that's maybe fine, but to his point, you tend to not have as strong a financial outcome. So I would say that it could end up being shortsighted, yeah. It might work right now, but in a different life phase may no longer make sense, and that that could be a very challenging time to make that change.

Henah:

Yeah. Thank you.

Katie:

Thank you so much for joining us, Bill. That was really fun.

Bill:

Thank you for having me.

Katie:

Rich Girl Roundtable was a success, I think.

Henah:

We'll have to try it again, on a less emotionally and financially charged topic, maybe.

Katie:

No, I feel like these are the best topics to have experts here for.

Henah:

Bill, we had a conversation about the impacts of small business shopping, and Katie was like, "I'm going to play devil's advocate to you the whole time." And then we got to the end and she was like, "Well, you came out looking like a great person and I came out looking like a capitalist pig." And I was like, "Well, now in this conversation you'll come across as the very wise, sage person, and I will come across as the, "but I have feelings, I am baby."

Katie:

No, not at all. But that is funny, because before we filmed the small business one, I go, "No, it'll be fun. It'll be a spirited debate." And Henah goes, "But I'm baby."

Henah:

I'm baby.

Katie:

That's all for this week's Rich Girl Roundup. We will see you on Wednesday. Bye.