Joint Finances & Prenups
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If you’d like to explore the idea of joint finances and/or crafting a prenup, this episode is for you. For many, these are touchy topics, but they don’t have to be. Even if you decide not to combine your finances or get a prenup, I urge you to at least discuss these topics with your partner. The idea is to eliminate any taboo and create a safe space to openly discuss money with our partners.
First, let’s dive into joint finances.
This is my hot take: Keep your finances separate until you have a reason to combine them. “I’m getting married” isn’t a reason in itself, though it could be the start of finding one. Being intentional will help you combine your money in a way that makes sense. Saying that you aren’t sure where to start is a sign that you should sit down with your partner and find your why. Is it because you want there to be transparency in your spending? Is it so you can jointly save to welcome a baby or buy a home? Is it to eliminate imbalances that you might feel when one earns more than the other?
When I started asking people this question, my friend Megan told me she combined finances with her partner because “they liked the idea of creating wealth together and having open communication on goals for future purchases.” I love this answer because having a common goal with your partner keeps you both working as a team, not against one another. Furthermore, having a joint goal can be a huge motivator if that goal lights you up and gets you excited for your future. Imagine having a joint goal to buy a second home in Italy so you can spend your summers there. Just the thought of being able to paint by the sea while sipping Chianti might be enough to get you both working on the same team.
Let the answer guide the process. If you want to save for a house together, you could open a joint brokerage account. To cover household expenses or pay for vacations, you might get a joint bank account to which you both contribute. The goal is to support one another and create inspiring financial goals together.
When Diego and I started having this conversation, we couldn’t find a good reason to join our finances, at least for the time being. However, we loved the idea of creating the joint goal of reaching 1M in investments. So, we decided to open an investment account in which we’re both aiming to invest 80% of our income. I know, this seems like a massive percentage. However, we don’t have debt, a mortgage, car payments, or kids, and we currently live between Mexico and Argentina where our expenses are a fraction of what they would be in the US, so this is very realistic for us. We want to reach “financial independence” in our 40s and now we have a game plan for how to do it. As we discussed in episode 2, “financial independence” is when your investments pay for your life in perpetuity so you never have to work again if you don’t want to. We both realized that saving your way to financial independence is not feasible and that while the stock market as a concept looks and feels risky, it’s actually a safer—and smarter—saving strategy.
So, start talking with your partner to find your “WHY.”
Now for a more touchy topic: prenuptial agreements, aka “prenups.”
Marriage is a legal contract with significant financial ramifications, and keeping your money separate doesn’t mean it’s protected in divorce. A prenup is an agreement on assets that were accumulated before the marriage, not what’s jointly accumulated during the marriage. Furthermore, a prenup is a smart way to get legal advice on how to combine your finances, avoid triggering tax bills when merging investment accounts, and set the terms for a potential divorce. Sorry, that got dark at the end.
That last part is the reason so many couples avoid this topic like the plague. Discussing divorce before you even get married doesn’t conjure warm fuzzy feelings and your partner might not understand why you’re bringing it up in the first place. This is how I approached the conversation with my partner, Diego. First, I reassured him I loved him and I didn’t think the marriage would end. Second, I told him why I thought it was a good idea in our situation, particularly because we both own businesses and we’re both coming into the marriage with a substantial amount of investments (his in land, mine in stocks). I focused on maintaining a caring and loving attitude rather than the tactics or numbers.
Ramit Sethi, the author of I Will Teach You To Be Rich, says the following on the topic of prenups: “Most people don’t need one because they come into a marriage with relatively similar assets. However, it starts to make sense when you own things like a house, have a large inheritance, or own a business or intellectual property.” He goes on, “If you do decide to proceed with one, put the numbers aside, and talk carefully about what money means to each of you. If you go in with a spreadsheet you want to discuss, you’ve taken a wrong turn. I should have talked more about meaning, fears, and hopes about money as opposed to the numbers.” He ends by saying, “For every major purchase in your life and every major decision, spend the time. Most of us should spend less time on most decisions and A LOT more time on a few key decisions. I realized that in most other parts of life, we plan ahead: our investments, buying a house, where we want to live, and getting a raise at work. But somehow, magically, when it comes to our relationships, we’re told that planning ahead is “unromantic.”
This is so true. When it comes to our relationships, society tells us that planning ahead is unromantic. Disney movies sway us into thinking falling in love should be serendipitous, magical, and even mystical. We all have friends that tell us, “The right relationship should just feel easy! If it’s THAT much work, it’s not the right fit.” But this is complete hogwash. Relationships are made up of two people each with their own traumas and imperfections, and it takes a lot of work to combine the lives of two imperfect humans. I truly believe that the way to heal our past is through relationships. Being in a relationship is like holding a mirror up to yourself. It shows you your weaknesses, vulnerabilities, and triggers. As relationship coach Dan Smith puts it, “Being triggered in a relationship is a healthy and biologically predictable response based on your unique life history. It’s what happens afterward that can be problematic. Make friends with the uncomfortable sensation in your body when triggered, it’s seeking your attention, it’s trying to teach you something, and your freedom awaits.” A relationship is the best opportunity to do “the work” on yourself.
Sorry for the digression. Back to prenups.
For those curious about the process, it’s relatively straightforward. Ideally, one partner has a lawyer that writes the prenup, and the other partner has a lawyer that reviews it. This is the most legally enforceable way. In New York City, the cost could range from $2,000 to $3,000. You could also opt for a DIY approach, just keep in mind, that this type of agreement would be less enforceable in court. Furthermore, a prenup isn’t the only option. If you’re not getting married but you’re living together, you can look into a cohabitation agreement. And if you’re already married without a prenup, you can look into a postnup or postnuptial agreement.
It’s important to be informed and make a conscious decision about how you want to enter into this legally binding contract with your partner. It’s a big decision, and just like any other big decision in life, there should be a plan for the best and worst-case scenarios. In other areas of life, we plan ahead: entering into a specific career, buying a home, or moving to a new city. But when it comes to our relationships, society tells us that planning ahead is unromantic, however, this is so far from the truth. We must consciously decide what we want in our relationships and go after it. I hope I have made my case and at least have gotten you to think about your options.
Alright, my friends, that’s all for this episode. I will see you in the next and final episode where we’ll discuss the importance of money dates and how to create joint money goals. See you then!
Listen to this series via the Date Smart podcast. Episodes are released weekly!
The Date Smart podcast is hosted by Ambiance Matchmaking’s cofounder Taylor Wade. Twenty years ago, Taylor cofounded Ambiance Matchmaking, an exclusive matchmaking agency that has helped over 100,000 singles master their dating lives. In this podcast, she shares the same tactics and techniques with you. Mastering your dating life is easier than you think –– it’s just a matter of science and a little know-how.
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