Money Obedience

Even though the average cost of a wedding in the United States fell $6,000 in the last year, thanks to the recession, the average US couple still spends $21,814 on its wedding (according to CNN Money). The latest report on median individual income is $26,625! (People living in the suburbs of major cities make slightly more, and those with a four-year college degree or higher making on average just below double the median amount, according to the Current Population Survey). Given those numbers, it’s clear that a couple intending to marry has to either save a great deal beforehand or agree to pay down a large debt afterward just to have an average wedding ceremony. Granted, you could argue that some of the wedding expenses are recouped by the couple via gifts. Nonetheless we are still talking about some serious money here – a whole year’s income for most people, and half for those who have invested a great deal already in their education (and might have the student loans to show for it!).

The upside: the “big day” normally leads straight up to the honeymoon, when the couple spends lots of quality time together as married folk for the first time in their lives. That is the way it ought to be. Start out happily and then we all hope to enjoy the rest of our lives together.

Alas, divorces are the reality for many. About 20% of all marriages end within 5 years of the “big day” and 33% are over by the 10th anniversary. (The data you hear quoted as “50% of all marriages end in divorce” means that in all lifetimes of all married people taken together, half of those couples’ marriages will likely end in divorce. Presumably, the other half ends in the death of a spouse.) Remarriages have a worse prognosis. While the marriage itself might have been worth a try, the wedding day expense might hardly seem worth the investment – especially if it ends before the ceremony’s all paid for!

(Before you jump to the conclusion that living together might be better – these relationships are even more unstable: 49% of these are over by year 5, 62% by year 10. You’d save yourself the wedding expense by shacking up, but you don’t necessarily save the relationship. But I digress… let’s stick to discussing the married folk for the moment.)

Married couples start out spending lots of money on the wedding and then spending lots of quality time together on the honeymoon. But what happens afterwards? How much time do we spend on each other once we are settled in our marriages? How much do we “invest” in our marriages?

I haven’t even discussed the negative financial impact a divorce has on each partner of a failed marriage. (Please go to the post “Better Finances for Married Couples” for more on this topic.) To avoid financial ruin as a result of a crisis in the love department, it makes sense to keep investing time and money in the relationship to preserve a relatively higher net worth. Never mind the personal and emotional aspect of having a good marriage… the financial part of the marriage should be motivation enough to keep investing in the relationship!

The smart thing to do, then, if you’re going to marry or live in a marriage-like relationship, is to approach your joint financial future the same way you would other big investments, like retirement. Every month you put money into the retirement account (right?), so you move closer to accumulating a good chunk of money over a very long time. You should do the same with your marriage. Invest a little bit regularly to get tremendous pay-offs later. How about a weekly date night? How about surprising your spouses with their favorite things every now and then, just for the heck of it? (My spouse loves a clean house – you can see the stress just melt off him when it’s spotless. Me? I go for the gooey stuff: hot baths, foot rubs, or just let me fall asleep with my head on your lap while we’re watching TV.)

Invest a little in your partnership over time, and watch your investment grow into a long-term love that pays big financial and emotional dividends. You get to that point by, as vilkri-he says “by pulling on the same end of the rope” instead of pulling against each other. Imagine spending a comfortable retirement with your life partner at the end of all that! What could be better?

My wife and I believe there’s a connection between our financial decisions and our life goal, which is to have a fulfilled and happy life, and you may already know that this connection is the main theme of our couple’s blog. Today let me stretch the connection between money and happiness a little by writing about how marriage itself affects our money.

It has been well documented that married people acquire more net worth than single people. Apparently married people acquire 77% more net worth than their single counterparts. (You can read Jay L. Zagorsky’s comprehensive study about the impact that marriage and divorce have on wealth.) I guess we could say that getting married could be one of the most important financial decisions we can make. I find it funny how a decision about love or happiness can have such an effect on finances.

Let me testify here about my own experience even though I am only one point in a statistical sample. I did spend more freely when I was single. Once I got married and we planned for children, I became much more conscientious about spending money for a good purpose rather than just for the heck of it. After all, a family forces me to be more responsible overall, not just about money.

It almost goes without saying that there are a bunch of other risks associated with getting married, but there is definitely a financial risk involved. In the unfortunate case that a marriage falls apart, the wealth effect is tremendous. Eventually, divorced people end up with a net worth about three quarters less than when they were married. That is an enormous cut in one’s net worth! Apparently one’s net worth starts declining four years before the actual break up. So, married people who end up divorcing do get some warning about what’s coming, but I suspect that most of us would not associate a declining net worth with an imminent divorce. If that was the case almost everybody should be on notice right now since overall net worth fell by over 10% in 2008 according to a Fed study! Or should we get ready for an avalanche of divorces hitting us?