If you’re remarried or living with a loved one in your 40s, managing your money together may seem different than when you were younger.
When you get married for the first time and start out in adulthood, you usually grow up and develop financial habits, creating wealth over the years. This round, however, you are more likely to be two established financial beings merging your moola.
How can you best achieve your goals and avoid both financial infidelity and money fights? Here are five mistakes to avoid:
Mistake # 1: not sharing your money history with each other
“If we look at middle-aged people, they usually have a long history with their own finances at this point,” says Jamie Hopkins, director of retirement research at Carson Group, an Omaha-based financial services company, Neb.
Thus, each should know what has been the financial experience of the other. “It’s important because if you’re going to move forward with a new relationship, you have to understand how you used to function. These experiences will color your future experiences, ”says Hopkins.
Have an informal conversation where the two of you share your financial story. You could say things like, “This is how I saved – or not. It’s also safe to discuss how your family handled money when you were a child.
After this conversation, talk about your financial expectations. Explain whether or not you like or dislike handling day-to-day bills, investments, and insurance. Discuss how you plan to work with financial advisors and handle estate planning issues.
Then divide the financial tasks accordingly or tackle them together, if that makes sense.
Mistake # 2: Keeping Financial Secrets
In a February 2020 Creditcards.com survey of 2,501 adult couples, 44% of respondents said they were hiding a bank, savings or credit card account from their partner; have secret debts or spend more than their partner thinks. Broken down by generations, 37% of baby boomers, 45% of Gen Xers and 57% of millennials have cheated on their partners financially, according to the survey.
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When exposed, financial infidelity, Hopkins says, is fodder for fights and the eventual ruin of relationships. “It can be bad for relationships when you find out someone has debt they never told you about,” he says.
Make a no-secret financial pact and stick to it. It doesn’t mean that you need to have access to the other person’s accounts. Only that you know what accounts and debts he or she has, and a general understanding of where the two of you are.
A 2015 TD Bank Love & Money study surveyed 1,339 Americans and found that couples who talk about money openly and regularly are happier together.
Mistake # 3: skipping an emergency mutual fund
The creation of a shared emergency fund for family and joint crises is beneficial and extremely important. “When you reunite two families, start this process immediately,” says David Hryck, New York-based personal finance expert and partner at Reed Smith, an international law firm.
Hryck recommends setting up automatic distributions from each partner’s paycheck to help build an emergency fund. It’s an easy way to protect your future.
A working paper written by three university professors (at UCLA, Notre Dame and University College London) found that long-term engaged couples who pool their money in joint bank accounts were happier in their relationships. than those who did not.
Mistake # 4: Not writing a pre-nup or cohabitation agreement
When you get married in your 40s, you probably bring more assets into the marriage than when you get married in your 20s or 30s. So, if you are in a new marriage in your 40s, you and your sweetheart will want to protect what you own.
“Prepare yourself by having a clearly stated agreement that identifies your assets, liabilities and the agreed terms regarding those assets and liabilities,” says Dannell Stuart, CFP, director of business development for Santa Barbara, Calif. Mission Wealth, a financial management company.
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It is not enough to have a verbal agreement.
Work with a lawyer to create a document that respectfully identifies the financial situation of both partners and how future marital assets will be treated. If you are not married, you can enter into a contract that determines who owns what percentage of the house in the event of a split or death.
Mistake # 5: neglecting common financial goals
Just because each of you has personal savings, retirement, and financial goals doesn’t mean you should neglect your shared goals.
“Setting financial goals together should be a priority,” Hryck says. You and your new partner should make a plan for retirement living, vacation spending, estate planning, and other big common goals.
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Take the time to review life insurance, investments and estate planning together. Hopkins says that once you’re in a new relationship, the two of you may want a trust (a fiduciary arrangement that allows a trustee to hold assets on behalf of beneficiaries); a willingness to grab things outside the trust, such as personal items and jewelry, and updated beneficiary designations.
Avoid these five mistakes and you will likely help put yourself on the path to financial happiness.