Marriage and Money
#stayrich #liverichly Do we want golf lessons? Pilot lessons? How many big trips should we take each year? This is fun! I get to fantasize about spending money with my best friend!
Divorce is the very most expensive thing a wealthy person can do. Divorce can incinerate millions in legal fees and stupid behavior, and cost you millions more in assets that go to your ex. So, uh, don’t get divorced. Here at Solving Wealth, we’re not opinionated on children, sex, in-laws, or politics, but we’ve got all sorts of opinions about money! To prevent money from being the thing that causes divorce, there are some very practical and simple things Mrs. Solving Wealth and I do regularly.
First of all, we view our marriage as permanent. Because of that, it’s not neccesary to think in terms of my money and Mrs. Solving Wealth’s money. It’s all our money. Are you worried that your date is after you for your money? Well, don’t get engaged yet! Their colors will show after a few months to years. Until you are both convinced that the other person is absolutely worthy of sharing everything you own, don’t get married! I know couples that didn’t join their finances, and it seems to work for them. But I don’t know how those marriages work. I know how to make a marriage work where everything is shared.
There’s one exception to this rule, and that’s our personal fun money accounts. Money flows into those accounts based on the budget we built together, and that money is purely personal. That means that the fun money gets spent on whatever each spouse wants, with no judgment: not even a raised eyebrow.1
It’s vital that we stay on the same page about two things: budgets and investments. Every year, we sit down and talk about how we want to change our budget, based on our long term budget rules that tell us whether we are getting a raise, taking a paycut, or leaving things alone. We also redo our budget category allocations after every big life change, like a move. By starting with how much to spend based on rules we agreed to, and allocating the money to each budget category together before we want to spend it on something in particular, we head off most money arguments before they get started.
Within a budget category, we also don’t spend money above a certain threshold without talking first! We haven’t adjusted the threshold up in years, and we probably should, because it’s now about 1/500th of our monthly budget. On the other hand, it’s nice to just send a short text to Mrs. Solving Wealth that I’m paying the property taxes. A simple thumbs up emoji is enough for most things. We have a few exceptions to this, but they are for recurring expenses, like groceries, or all the purchases that might go into a single project, like a bathroom remodel.
We also have a portfolio framework, which is our ideal allocation to each asset class. Of course as assets go up and down, some asset classes grow until they are above their ideal allocation. We have an agreement to spend out of those, unless we have a specific investment thesis we’d like to explore. If we find an asset that we’d like exposure to, we sit down and have a specific conversation about. So for example, Mrs. Solving Wealth might bring me a rental property that she thinks is a great purchase, or I might talk to her about a stock that I think will outperform. We make all investment decisions together, and either spouse has implicit veto authority by just not saying yes. If you can’t convince your spouse that an asset is worth buying, it’s probably just fear of missing out that’s motivating you. That veto has saved the Solving Wealth household from so many terrible investments!
We also regularly game out possible future investment scenarios together. What if cryptocurrency collapsed, or went to the moon? What if real estate values declined by 50%? What would we do if the stock market collapsed? By talking about it ahead of time, there’s less worry about what to do in the moment.
We also game out future expenses and lifestyle decisions together. Do we want a vacation home?2 Do we want golf lessons? Pilot lessons? How many big trips should we take each year? What’s an ideal fleet of vehicles? This is fun! I get to fantasize about spending money with my best friend! We also talk about short term budget decisions, like whether to buy a piece of art and let the durable furnishings budget category go negative for a few weeks by overspending.
Lastly, and we don’t do this as often as we should, we go over our cash flow and balance sheets. At least once a quarter, but ideally every month, I give Mrs. Solving Wealth an update on how we spent our money since the last meeting, how much money is currently available for spending in each category, and how all our investments are doing. I do the paperwork on this, not because Mrs. Solving Wealth can’t, but because I’m a big nerd who actually enjoys this stuff. The regular readouts help keep the trust level up. I get someone asking intelligent questions, which helps me trust that I didn’t make a mistake, and Mrs. Solving Wealth learns about our current financial situation. It’s at these meetings, typically, when we decide whether to cancel Netflix and go to HBO for a few months,3 or whether we want to buy a vehicle.
That trust is the key to a happy financial union. Once we’ve delegated a financial decision to each other, no nitpicking! We trust the other person did their best!
Eliminating money arguments won’t make divorce impossible. But it will remove one cause of marital friction! Resolve to talk to your spouse about your finances: all your finances, and build trust with each other as you decide how to spend your riches!
Look. I know I basically never cook. But copper cookware is just really pretty! It’s a weird thing to collect for a person who doesn’t cook. I get it. Well, I don’t, actually. It’s a compulsion. But anyway, thanks to the rules around fun money, I get to collect it with no criticism.
Spoiler alert: no! Owning a house out of town seems like a terrible idea, even in today’s world of internet connected whole house shut off valves! We tried it, and we’re still fixing the place up after we moved to town! It would have been simpler to just own one house at a time. I’ll do a future post about our strategy for luxury vacation homes.
Yes, even rich people spend time cancelling subscriptions! The return on investment is amazing for this time spent. It only takes a few minutes to earn a few hundred bucks over the next year!