In The Ten Worst Money Mistakes Anyone Can Make I listed the following as #7:
Marrying the wrong person
As I noted, this can be a double-edged sword. I stated:
There are actually two major financial mistakes related to marriage: marrying a spendthrift and getting divorced.
In this post I’d like to discuss the latter of these two problems.
50% of 50% of 50% of 50% of 50% is Not Much
The other day I was taking a walk with my daughter and the subject of divorce came up. Specifically we were talking about an article we had seen where a guy had been divorced five times. Yes, five.
I’m not going to get into the emotional side of divorce in this article as our conversation didn’t really go there.
Instead we talked about how dividing your assets in half every few years can leave you pretty darn poor, even if you start out with a bunch of money.
As we were talking, I used the following example with my daughter:
- Assume you were fairly well off and had $2 million dollars
- You got divorced (#1), had to divide your assets in half, and now had $1 million.
- You got married again, then divorced (#2), had to divide your assets in half, and now had $500k.
- You got married again, then divorced (#3), had to divide your assets in half, and now had $250k.
- You got married again, then divorced (#4), had to divide your assets in half, and now had $125k.
- You got married again, then divorced (#5), had to divide your assets in half, and now had $62.5k.
So after five divorces you move from doing pretty well ($2 million) to barely having any savings at all ($62.5k).
Heaven forbid that you married a spendthrift or two out of those five or you’d probably have a lot less than $62.5k left!!!
The Moral of the Story
In the end, who you marry is a HUGE financial decision!
Of course we don’t marry just for money (or even mostly for money) — at least most people don’t — but being financially compatible and being a person you can commit to the rest of your life are two key points any of us need to keep in mind when we get married.
I’m interested in your money and marriage stories — for good or ill. Anyone have something they’d like to share?
When I got married I tried to get a prenup because I was the one with assets and my ex had about $225k in debt. He used to work on Wall Street and had a history of big pay checks that could pay off the debt. It was 4 weeks prior to the wedding date and I couldn’t find a lawyer, called 3, who said I could get a strong prenup that would hold up in court. I wanted the prenup because my ex was acting in a way that raised red flags. Together we created our own documented understanding of what assets we were bringing to the marriage and what would be considered shared assets. Two years later, I called time out and we separated. Love doesn’t conquer all. We stay married so he could remain on my health insurance plan and so could his 3 kids from previous marriage. He never found another job but started his own biz and kept spending money he didn’t have. Ironically, he decided he wanted a divorce, even though he was still benefiting from the insurance. We agreed not to ask for spousal support, he took his stuff that he inherited from his grandparents and I kept my assets. He was ordered by the court to pay child support and that was the only major detail in the divorce. I was very lucky that I didn’t end up having to split my house, 401k, stock acts, savings, and pay him support. He made one full child support payment and that was it. I’ve never gone after him for the money because his career and life has gone downhill, while mine has gone up. I am custodial parent of 2 wonderful children who see their father when it fits his schedule. They are both in honors programs in school, we travel the world, volunteer locally for many good causes involving education and the environment. I’m mostly on a friendly basis with my ex, until he does something ridiculous that is going to effect my children. I host family gatherings that include my former stepchildren, my ex and his girlfriend, and her children, on a regular basis.
I was financially very lucky when the marriage ended, but I think it also had to do with keeping a level head and not using the lawyers and court system as expensive psychologists. Will not get married again, especially to someone that is a spendthrift, albeit an intelligent one.
Thanks for sharing your story. I appreciate the contribution and perspective.
Perhaps a different way to look at what I outlined is this:
Assume you were fairly well off and had $2 million dollars
You wrote a prenup. You got married. You got divorced (#1) and still had $2 million.
You wrote a prenup. You got married. You got divorced (#2) and still had $2 million.
You wrote a prenup. You got married. You got divorced (#3) and still had $2 million.
You wrote a prenup. You got married. You got divorced (#4) and still had $2 million.
You wrote a prenup. You got married. You got divorced (#5) and still had $2 million.
Of course that brings up the subject of the pros and cons of a prenup, but we’ll save that for a future date. 馃檪
Oh man, that’s rough. I guess, that’s another lesson. You can’t ignore the warning signs. Love isn’t enough for the long term.
I recently read that divorce is not bad news. Both people will be happier in the long run. Having a prenup would help a lot, though. Yeap, I agree. Marrying the right person to begin with so you don’t have to get a divorce.
I’m not a lawyer so maybe I’m wrong; but this seems like an outdated scenario focusing on a person (obviously male) who is the sole breadwinner in FIVE marriages? Wouldn’t a more likely scenario today look like:
Assume you were fairly well off and had $2 million dollars
You got divorced (#1), had to divide your assets in half, and now had $1 million.
You got married again and your joint assets grew to $1.5 million, then divorced (#2), had to divide your assets in half, and now had $750k.
You got married again and your joint grew to $3 million, then divorced (#3), had to divide your assets in half, and now had $1.5 million.
ETC.
Ok, I realize not everyone has millions to bring to a marriage; but I think it’s odd that in your scenario only one person EVER brings assets to the table.
There are a lot of issues with the scenario I listed — it was for illustration purposes.
Yes, both parties would probably have assets to bring into a relationship. Would they be substantial? Maybe, maybe not. In my friend’s case, his partners did not have substantial assets.
Would they accumulate more assets during the marriage? Maybe, maybe not. If they were spendthrifts, the assets actually could go DOWN during the marriage, not up.
And the biggest issue of all with my scenario — that someone started with $2 million. How many people have $2 million? Not many.
In my friend’s real-life situation, I’m guessing his net worth has never been higher than $100k and 90% of that is tied up in home equity. The $2 million scenario was just to illustrate a point, but as you say (and as I’ve pointed out here), there are many, many ways it could pan out.
It’s clear that you’re using arbitrary amounts for illustration purposes; so I don’t see that as an issue, much less the biggest one.
Nor was I suggesting there is much to be gained by digging into the weeds of how spending would impact the nest egg, since that’s both obvious and beside the point.
By far the biggest issue, imo, is that the scenario is anchored in a universe where the serial divorcer ALWAYS contributes the assets, while not even one of his — obviously it’s a he — spouses contributes a penny. As a guy, maybe you don’t realize how off-putting and even offensive that scenario/assumption is to your female readers…or at least this one.
Realize that I’m probably coming across as someone who is over-sensitive about feminist issues; although actually it’s rare that I get bothered enough to comment. This just seemed particularly clueless though, and worth pointing out.
Also, in case I wasn’t clear, that universe doesn’t really exist anymore. It faded a generation or two ago.
Obviously it’s not my intention to offend anyone. I never write with that as an objective. So if I’ve offended you, I apologize.
The example I used started off from a friend. He is male. He is the sole breadwinner and has been in every marriage. So that’s the example I started with and carried through.
The main point is that divorce is expensive. Marrying the wrong spouse is expensive. Even if mostly the man or mostly the woman both of them evenly bring assets into the marriage, marrying the wrong person is VERY expensive. And the more you do it, the worse it gets. That’s the point and it holds true for almost all situations (there are exceptions to everything).
I’m not sure what universe you’re referring to that doesn’t exist anymore. Do you mean the one-person bread-winning house? If so, I have news for you — it most certainly does exist. Maybe you mean the man as the sole or primary breadwinner. If so, it’s still more likely to be the man as highlighted in this NY Times piece:
http://www.nytimes.com/2013/05/30/business/economy/women-as-family-breadwinner-on-the-rise-study-says.html?_r=0
Yes, sole/breadwinning women are on the rise, but the chart here still shows it only at 24.3% of couples (FYI, I got this article while Googling — top result, so there may be more recent data, but I’m sure it’s not over 50%).
So I could be accused of being insensitive, but looking at the facts I don’t appear to be clueless. Though I may, in fact, be clueless. It wouldn’t be the first time. I’m always willing to learn and expand, so would appreciate any clarification you’d like to add.
We have been married since 1989, first marriage for both of us. We have always lived within our means but have collectively become more thrifty over the years. It’s been a good uphill climb to grow our assets since we have similar mindset. I know many women, without big careers, that have suffered greatly financially after divorce or death of a spouse (one person I know was saddled with a huge unpaid tax bill after the death of her spouse).
Our story is similar to yours. We celebrate our 25th anniversary this fall.
My wife is more frugal than I am (I know, hard to believe) which has been a blessing to me and our finances.
Divorce is terrible in so many ways, including financially; however, your example doesn鈥檛 really work, at least in most states. The money you bring into a marriage does not become community property if you are careful and keep it separate. Your income and assets acquired during the marriage are considered community property, however, and are subject to division in a divorce, and that is your real issue, as are attorney鈥檚 fees, child support and alimony. But if you get married later in life, this concern that you鈥檙e going to lose half of your pre-existing nest egg is just not real. If you want to be careful and you also want a great relationship that doesn鈥檛 take a huge emotional hit from a prenup request, then put your premarital estate in a trust or LLC before you get married, don’t comingle it, and focus on being a great spouse so you don’t ever have to experience divorce, the true cost of which, in my opinion, is the huge emotional toll.
No personal experience with divorce only observation of friends and in some cases it turned out OK. One couple did not have high paying jobs so it really did not matter too much in that they were dividing very little and were both civil in the divorce. Both will need to work until the bitter end in no early retirement for them.
Another was a stay at home mom and shopaholic who had a extreemly cluttered house. Hubby left for another woman and she needed to reinvent herself and has. Still loves to shop but now knows her limits and budget. SHe made out OK while he took a hit. She still need to learn some financial things though.
It does help when your wife is on the same wavelength ( most of the time) and is more frugal to the point of being cheap that you are. We agree on money expenditures and savings and she is proud in how well of money managers we are. It also helps that we have a good strong marriage and complement each other in our weakness and strengths. We don’t want the big house even though we could afford more but we live in a very nice middle neighborhood doing what we love and live the lifestyle of the millionaire next store. Comfortable and not keeping up with the Jones’s.
i think we are ignoring the costs besides the assets split during divorce.
– i understand that the legal costs of divorce are quite high, and it escalates if parties are not in agreement about splitting assets, alimony payments & child custody. in the heat of the moment, ego takes over & ignores these costs.
– the emotional toll of divorce also translated into financial impact in terms of psychological & psychiatric treatments needed over time – both for self & kids
– the potential loss of income over time due to divorce especially when kids are involved – i’m sure neither my wife nor i can sustain current earning if we had to also take care of the kid.
– the savings missed by not staying in a shared setup v/s an individual one. of course one can go back to finding a roommate, but how likely is that after a divorce?
i think if you have found the one you’d like to settle down with, you should be confident about changing their financial mindset before making the commitment…
Great comment! Thanks for leaving it.
First and foremost, divorce is horrible emotionally, financially and in every other way.
As a divorced male of three years and former family breadwinner, I got out easy compared to what I have seen from other men and women going through the divorce grinder. A few thoughts in no particular order:
1. Control the crash with your soon to be former spouse and negotiate through the division of assets, child custody, what to do with the house, retirement accounts and anything else of tangible value. If you can do that together, you will save both of you huge attorney bills.
2. Keep the kids, if any, front and center. Maintain a residence fit for a family near your children, adhere to the custody schedule and take care of your children.
3. Dig out as soon as possible financially and emotionally. If you are reading this blog, you likely will be in the enviable position of splitting assets and not debt like so many other people. In my instance, I was able to maintain about 60% of our net worth as my portion of the divorce based on the maintenance of my retirement account. Whatever your case, sit down and work your plan to get back to normalcy as soon as possible.
4. While you are digging out, do not make any long lasting, life altering commitments. Hold off buying a house, do not buy a sports car, don’t get remarried–focus on digging out. If you were able to just split assets and not debt, digging out won’t take forever.
5. Realize that you have a lot of life to lead and focus on the positives that will occur in your future, not the negative experiences of the recent past.
Oh and 6. Work hard to maintain your work life…the last thing you need is to suffer another life altering event like a job loss.
I thank my lucky stars that I had the foresight to get a prenup! It still ended up costing my at least $200,000 to my bottom line due to her uncontrollable spending. She blew all our savings and ran up $40,000 in credit cards behind my back.
I got $40,000 in the divorce (I kept my investment property and retirement accounts, this is just house sale proceeds after we paid off all the debts she ran up.) and she got $80,000.
Fast forward 1 year. She blew the $80K and ran up an additional $20,0000 in cc debt. I bought a used Porsche 911 (eye roll, cliche I know) and bought a house.
I’m now a millionaire + and she’ll never retire. Her plan is “work until I’m dead”….