In 2012, researchers at the Kansas State University investigated the relationship between financial issues and divorce. They followed 4574 married couples for more than 10 years to examine how financial well-being and financial disagreements affected their chances of divorce.
They found out that fights over financial issues was the top predictor of divorce, having a greater effect compared to parenting stresses, sex, and even relationships with in-law parents. In addition, fights over financial issues tended to have a deep and long lasting impact than fights over other issues. Arguments over money increase the chances of divorce regardless of how much individuals made, or the value of their assets.
In Singapore, the divorce rate has been increasing steadily. 84 per cent of couples who married in 2003 remained married 10 years later in 2013. In comparison, 91 per cent of couples who married in 1987 remained married 10 years later in 1997.
The effects of divorce are well documented. Compared to adults in a stable marriage, divorced adults are less happy, more susceptible to depression, and more likely to suffer from serious illness.
If the terms of divorce are not peacefully settled, lawyers may be involved, resulting in large legal fees. Assets may also have to be split, affecting the standard of living of divorcing individuals. Divorce hits women especially hard - in the United States, about 1 in 5 women descend into poverty as a result of divorce.
How then, can we avoid fights over the family finances? We offer four ways: communication, transparency, understanding your spouse's money personality, and understanding your spouses' history.
Couples need to clearly communicate their financial goals and priorities to make sure that resources are being properly allocated and planned for. For example, are children desired? If so, both parties in the relationship need to commit to setting aside funds for however many number of children that are planned.
Couples also need to ask each other important questions such as: where do we see ourselves financially in 5-10 years time, what kind of lifestyle will we have, and when do we plan to retire?
Communication on big-ticket items, such as property and cars, is especially important. For example, if a couple wishes to upgrade to a condominium or landed property in the future, a financial plan needs to be set in place. This requires clear communication of financial commitment and responsibilities from both parties.
Both parties need to have a clear idea of how much they need to save, and by when a savings amount needs to be reached. Couples should set a recurring date to communicate about finances, and make sure that financial goals and priorities previously set are still realistic.
In order to avoid money disputes, couples should be as mutually transparent as possible about significant expenditures. Conspicuous consumption is common in Singapore - women enjoy purchasing luxury handbags, and men enjoy purchasing expensive timepieces. Couples need to make sure their significant other is made aware of large expenditures, so that trust in the relationship is preserved.
Debt is another item that couples need to be transparent about in a relationship. If a spouse runs up significant bills on a credit card, his or her significant other should be informed. That being said, not all debt is created equal. Debt from graduate school fees is not the same as credit card debt.
Understand your spouse's money personality
Is your spouse a spender or saver? Opposites attract, and savers often find themselves married to spenders. Spenders prefer to dine out, while savers prefer to eat at home. Spenders may also prefer to spend money on status enhancing items, while savers prefer security.
Understanding your spouse's money personality can make it easier to reach a financial common ground. If you know how your partner feels about a situation, differences in money personalities can become less polarised.
Understand your spouse's history
Mr Daniel Tay, a fee-based financial consultant, writes about Jane (not her real name), whose father gambled. Jane's father frequently borrowed from family members including Jane, to fuel his gambling addiction. Jane loved her father very much, and so did not refuse him whenever he approached.
Jane didn't like lending her father money to gamble though, so she developed a habit of spending all her money.
By understanding your spouse's family history, you can gain a deeper understanding of the factors that drive your spouse's spending habits. Such insights can be helpful in bridging the gap during discussions on family finances.
Mr Tay says that "to avoid issues about money, it is imperative that the couple communicate deeply with each other about their feelings about money. Each person must also listen to their partner without passing judgement on them and allow their partner to feel loved and accepted."
When this is done properly, "the problems about money tend to disappear", he adds.