While marriage itself has been declining for years and the marriage rate in the U.S. is at its lowest level since the 1920s, remarriage is on the rise. Analysis of the most recent census data reveals that marriages where at least one partner had said “I do” before topped forty percent. Even with the best of intentions, second (or third or fourth) marriages are more likely to fail. A major factor in failed second marriages is money. Here are a few ideas on how you can keep money from splitting you and your new spouse apart.
1. Have open and honest discussions about money before you head to the altar. Of course this is good advice for all marriages, but in second marriages the stakes are often higher because you probably have more assets, children are likely in the picture, and you’re older. Be direct and allow ample time for the “money talk” before the wedding; it will save you a lot of misunderstandings and heartaches later. Luckily, because you and your spouse are older and wiser, it is often easier to talk about money the second time around.
2. Identify and come to an agreement on your priorities. Your individual goals and your goals as a couple will establish a roadmap for your financial plans. What do you each want to see happen in the next five years, ten years, and beyond? Do you want to change careers? Are you hoping to retire early? Do you want to own a vacation home? Look at this as an opportunity to dream a little bit and then develop a plan to achieve your dreams together. Many financial advisers recommend that you formalize your plans and write them down.
3. Keep personal accounts but also establish a joint account. You may be used to being on your own, if you've been single for some time. You can ease into a financial partnership with your new spouse without giving up your personal freedom by maintaining a personal checking account and debit card. “What’s yours is mine is nice in theory.” says Sarah Max, a writer for Barrons.com. “But practically speaking, it’s not a good idea to co-mingle all of your accounts. This is especially true when debt payments, alimony, kids’ college tuition, and a host of other expenses related to your previous lives can muddy the financial waters.” Set up a joint account for household expenses to pay for things like mortgages, utilities, and food.
4. Don’t be timid about writing a prenuptial agreement. Prenups are not just for the wealthy. They should be a routine matter for most couples especially those who are embarking on a repeat union. Prenups can protect the inheritances of children or grandchildren from a previous marriage. If you are debt-free or have considerably less debt than your spouse, it can protect you from inheriting their obligations. It can forestall arguments and reduce conflicts down the road.
5. Discuss inheritances. It is in only human nature that we don’t like to talk about estate planning because it reminds us of our own mortality. However, how assets will be divided when we go to the great beyond can be a major sticking point for couples who remarry—especially if there are children and grandchildren from other marriages. Unless there are other provisions when you die your estate passes to your spouse and then in turn to that spouse’s children. Even for families with small estates this can become a major source of family disputes which all too often leads to protracted litigation and huge legal bills. A solution often employed is setting up a revocable living trust which allows you to exactly specify how your assets will be divvied up. As a bonus your heirs will be able to bypass the headaches of probate. One common financial arrangement is to specify support for your surviving spouse with your assets ultimately passing down to your children. Avoid fights within your blended family by telling your children about your plans before you die.
6. Agree upon spending rules. Set the level at what point a purchase needs to be discussed with your spouse and jointly agreed to. If your budget allows, you may want to set a monthly amount of money for each spouse to have some personal “mad money”. Martial harmony is enhanced if both of you feel you have some measure of individual financial freedom.