If you love your spouse, you'd make them financially independent. If you don't truly love your spouse, then you'd make them depend on you for all their financial needs.
Depending on someone for money is a terrible feeling. Imagine being a grown adult and returning home to live with your parents after four years of college.
Every time you go out, you've got to ask them for a couple bucks to buy a loaf of bread or more likely, beer money to hang out with your buddies.
Now imagine marrying someone, giving up your job to raise a family, and being entirely dependent on your working spouse for all your spending needs. A common situation, but is it ideal?
It's one thing to depend on someone for money as a kid. However, it's another thing to be dependent on someone as an adult with so much education and experience.
For all this talk about the desire for financial independence, it's odd that some couples aren't willing to establish separate financial accounts to allow each other more freedom. There should be a concurrent quest to build your couple's finances together and separate.
My Husband Is A Rich Controlling Miser
I recently received an e-mail from a reader who highlights the point about the importance of financial independence in a marriage. I asked her to elaborate her thoughts on the subject after her initial e-mail, and this is what she wanted me to share. She clearly loves her spouse, but she has issues too.
It's been a while since we last corresponded, but I wanted to drop in and say how much I agree with you regarding the importance of having separate financial accounts.
My husband and I are worth about $4 million, up from $900,000 in 2012. Last year, he made over $1 million from his business, but you would never know it.
We live in a house worth less than 40% of our annual gross income, while some people spend 3-5X their annual income on a house. We have a 10+ year old car and he prefers to bike everywhere.
I've been a stay at home mother for the past 10 years. I help out with our business where I can. However, between picking up our daughter from school and shuttling her between activities, I admittedly don't do a large amount of business work as I used to. It's his baby.
I've been with my husband since the business first started. For years, we hardly made any money and I was his support system. I did a lot of the grunt work in the beginning to help lift the business off the ground.
I was also a happy, independent woman who had a day job before our daughter was born. Having my own paycheck to spend is liberating.
Despite the rise in our wealth and our income, I felt trapped. We only have joint accounts with different spending habits. My husband is a miser who wants me to run all expenditures by him first. We're talking about even a $25 toy for our daughter.
If I spent $1,000 more a month, it wouldn't make a dent to our budget. We only spend about $4,000 a month and pull in over $100,000 a month. However, to him, spending $1,000 more a month would be a big “no no.” That would would be a 25% increase. That's right, spending more than 5% of our monthly income is way too much for him to handle. That cheap bastard.
My Husband Is Too Frugal!
He simply cannot let go of his excessively frugal ways, even if it was hurting our relationship. As you know, being a stay at home parent is hard work. I resent having to “ask for permission” before buying anything, even it's for our family.
My husband spends more time on his business and on his hobbies than he does with me and his daughter. He's always jockeying to promote his business by doing interviews and TV spots. It's nauseating how full of himself he is.
He tells people publicly how little he cares about money to justify his parsimonious ways. But in secret, he is money crazy. All he wants is more of it!
Given our differences, I decided to get a divorce after 15 years of marriage. It was a tough call but I'm much happier to have my freedom back.
He bought another house close by while my daughter and I stay in our original home to reduce disruption. I think you called it “bird nesting.” I call it stupidity because it was an unnecessary $300,000 expense if we would have worked things out.
He can hoard his money as he pleases. I'm now free to do as I please with half our assets.
Love Your Spouse: File For Divorce
If you haven't figured it out by now, money is one of the top 10 reasons why couples divorce. Financial dependence is the worst!
The other reasons include: infidelity, lack of communication, constant bickering, weight gain, unrealistic expectations, lack of intimacy, lack of equality, not being prepared for marriage, and abuse.
If you have one spouse making all the money, there will naturally be a lack of equality, no matter how much you believe there isn't.
It's like a couple owning a car. If one spouse only has the keys, that spouse determines their destination most of the time.
Think about the power dynamics in the workplace and how it is frowned upon for managers to date their subordinates. Think about the #MeToo Movement.
If you want to control your spouse, then feel free to make more money and throw up checkpoints before every dollar can be spent. The lack of equality between spouses is a bigger problem than society recognizes.
No wonder why divorce is so common among wealthy people.
Ways To Make Your Spouse Financially Independent
- Marry. Marriage brings about stability for the less wealthy spouse. Assets accumulated after the marriage will be divided equally in a divorce. Alternatively, assets will be distributed based on the conditions of the prenup. A spouse will also receive their deceased spouse's Social Security benefits.
- Sign a prenuptial agreement. Although not romantic, a prenuptial agreement helps protect the less wealthy spouse in case of a divorce through not fault of their own. The longer the marriage, the more at risk financially a non-working spouse becomes. The greater the net worth difference before marriage, the greater the importance of a prenuptial agreement.
- Establish independent financial accounts. Independent financial accounts should be additions to a couple's main joint accounts. The independent accounts should be seen as “pressure release valves.” They give each spouse the freedom to spend as they choose.
- Create a business and give ownership. A business is a separate legal entity that can have whatever ownership structure you want. One way to create more equality is to give a greater percentage of ownership to the spouse who earns less or doesn't earn at all. Not only does this show good faith, but a higher ownership structure might also motivate the spouse to work hard at building the business.
- Contribute extra to their retirement accounts. If one spouse has less in his or her retirement accounts, the other spouse can contribute more to create more balance. Given you can't contribute to someone else's 401(k), it's best to help build your spouse's after-tax investment accounts. You can, however, elect to contribute more to your child's 529 plan.
- Pay down their debt. Paying down one spouse's credit card and/or student loan debt upon first entering a marriage is a very strong gesture. Even if there continues to be an income imbalance, the spouse whose debt was paid off will feel incredibly liberated and appreciative.
- Assign an income to the SAH parent. If one spouse works and another spouse is a stay at home parent, then assign an income amount for the stay at home parent. No job is more important than taking care of a child. Therefore, the stay at home parent should be paid top dollar. Do an honest assessment of the number of hours the SAH parent works in a 24-hour period. A six-figure income for a SAH parent is completely reasonable, especially if the household lives in a high cost of living area.
- Make sure your kids are financially taken care of. Even if your marriage doesn't make it, it's important for your children to always be taken care of. This means funding a 529 college savings plan, opening up a custodial Roth IRA, writing a will, creating a death file, and potentially setting up a revocable living trust. Your spouse becomes becomes more financial independent when they no longer have to worry about their children.
- Create A SLAT (Spousal Lifetime Access Trust). A SLAT is an irrevocable trust where one spouse makes a gift into a trust to benefit the other spouse (and potentially other family members) while removing the assets from their combined estates. All appreciation of transferred assets are not subject to estate taxes.
Love Your Spouse: Set Your Partner Free
I've seen too many divorces where the wife ended up in financial turmoil because she had sacrificed her career for her husband and family. Then they broke up. Being out of the workforce for years makes finding work difficult.
By helping make your spouse independently wealthy, no matter what happens to your relationship, your spouse will always be fine. This is true love. Besides, marrying your equal is better than marrying rich. It's better to come from nothing and build your wealth together.
The key is to be selfless and think about the bigger picture. Don't be that rich, miserly, ex-husband as one reader described above. Having millions of dollars but nobody to spend it with is sad.
Financial freedom is a wonderful gift to give. When I helped my wife negotiate a severance in 2015, I was thrilled for her. Before 2015, she was so focused on climbing the corporate ladder. But she was passed over for a promotion one year and it crushed her spirit. When she finally left, it was the most incredible feeling for both of us.
If you seek financial independence, then you must also give financial independence. Strive for equality every day. This is the best way to love your spouse.
Love Your Spouse And Keep Track Of Your Finances
The best way to build financial harmony is by tracking your finances together. To do so, sign up with Empower, the best free financial tool online. I've used Empower with my wife to track our finances since 2012 and it has been a huge help.
Before Empower we had to log into eight different systems to track 35 different accounts. Now we can just log into Empower to see how my stock accounts are doing. I can easily track my net worth and spending as well.
Empower's 401(k) Fee Analyzer tool is saving me over $1,700 a year in fees. Finally, there is a fantastic Retirement Planning Calculator to help you manage your financial future.
Love your spouse and track your finances together!
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The Average Net Worth For The Above Average Couple (net worth targets to shoot for)
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