The Smart Woman's Guide to Second Marriage Finance
26 Aug 2008 9:14 PM by Sachin Gupta
I don't mean just in the general sense, I mean in every sense. We all know to keep a car key between our first and second finger when we walk through a dark parking lot alone. We know that someone who is aggressive on a first date should not get a second. We know not to give money to someone who claims to have a bridge to sell us. We do not know, however, how to say no to someone we love. We are generous to a fault most of the time, putting our assets and resources at their fingertips because we believe we are making a family.
My friend Anne spent $65,000 in less than 6 months and there is nothing anyone can do about it. Because she voluntarily sold her house, voluntarily paid for things for the man she married, voluntarily paid the down payment for their house, voluntarily paid for their honeymoon and wedding, voluntarily paid off her husband's credit card, she has no legal recourse for repayment. Unless her husband, who she is now divorcing, feels like reimbursing her for what she and he spent, Anne will spend the better part of her 40s working two jobs and trying to save as much as she can before her daughter starts college in 2012. Her attorney, a shark who has the reputation for making other attorneys cry and settle, told her that it is throwing good money after bad to even try. Anne has voluntarily-ed herself into near bankruptcy, and is left with a mortgage she cannot afford and a lot of debt she will struggle to pay, while her husband can walk away with his life intact and exactly the same. He doesn't have to reimburse her for anything, not even the credit card debt Anne paid off, because there was no agreement that he would ever repay her.
Common sense would tell us that when we go into business with someone else, we make sure that our assets are protected and our best interests guarded from the start. A second marriage is no different. Our men have prior financial obligations to ex-wives and children from their first marriages. Many are carrying marital debt from a marriage that ended before the last presidential administration. We wouldn't invest in a company that had a history of being irresponsible, why should we invest in a man who is irresponsible? Child support is a moral obligation, of course, but a man who puts himself 8K in debt for GI Joe dolls and Subway sandwiches should be avoided like the plague. Or like COBRA.
There are many ways to make a new family out of 2. Some couples combine money from the start and don't mind that one person contributes more. Some couples keep separate accounts their entire marriage. True story, one of my friends from high school has been married for 15 years to the same man. She and her husband keep their finances separate and always have. He has no ex-wives, no children other than the children Renee gave birth to and they still keep their money separate because, in Renee's words, "It is one less thing for us to fight about." That wisdom has stuck with me through my first and second marriages and it has been the best advice I ever have had about finance.
With more and more marriages being second marriages, we have to be smarter about our money. Here are some tips for protecting YOUR assets.
* A smart woman will not acquiesce to unreasonable requests from their partner.
If you have to move 30 minutes further from work, sell your home and live in their home for no reason other than they don't want to move, even to a new home, chances are it is a red flag for the relationship. In marriage, most things are up for discussion and compromise. If he will not compromise before marriage, chances are he will also not compromise after.
* Agree on a budget before you even move in.
Don't promise to pay half when you don't even know what half means. Spell it out clearly. You will pay half utilities and mortgage, but his 4 wheeler payment is not in the deal. You will pay your own car payment and he will pay his. His generosity to his children will come from his savings and not household funds. Or maybe you don't really care. Either way, know what you are getting into before you get into it.
* Women sometimes make less money than men on the surface.
However, when you deduct child support, alimony and mandatory life insurance payments, the second wife may find that she is kicking in more than her partner. Make a budget with all deductions (child support, past marriage debts, etc) so you BOTH know how much you have to work with. Know exactly what his obligations are before you marry him so you will know what you can live with.
* Child support that you receive for your child is just that... For your child.
Do not use it to finance a home. It isn't household income beyond your ex-husband's portion of what it costs to raise the child you share. It isn't to pay your husband's child support or to pay for a boat he has to have. It is for YOUR child, not his. Resist the urge to pay his support for him or give more to your stepchildren to try to level the playing field based on an increase you get for your children. They have two parents, too. If you don't "need" the money for your children, put it in the bank for their college education. That will come sooner than you might think.
* Do not empty YOUR child's college fund to pay for anything short of a major medical emergency.
If your partner promises to help the child with school if you just let him use the money you have saved for college to buy a truck for him or foot the bill for his older child's college education, tell them they can help most by honoring your request that the money not be spent at all. It isn't your partner's money, it isn't your money. It is your child's money and should be protected. If you feel you cannot say no to your partner, put the money into a certificate of deposit or into a trust for your child that prohibits withdrawal for any reason but college expenses. If you cannot say no to your partner, he is probably also the wrong man for you.
* Look before you leap when it comes to having more children.
If your dream is to be a SAHM to your children, be aware that your husband's financial obligation to his first family may very well mean that your 8 week old infant is in daycare because you have to work full time, while your husband's ex-wife is sitting at home when her kids are in school. Oh, and YOU have to pay all the costs for your child, because your husband doesn't make enough to pay his part of household bills and child support/alimony. If your husband is overpaying child support because he agreed that he wanted his kids's mother to be able to stay home with them, you will pay for that choice. And so will your child. In many states, having another child doesn't affect an existing child support order.
* When you combine assets, you give your husband's ex-wife access to your financial information.
You may black your name off the tax return that she requests at a child support review, but if she knows that your husband made 50K last year and your tax return is for a total amount of 150K, she will know that you are earning a 6 figure income. If that is not acceptable to you, make sure money never combines until the day child support ends. A clear division of money has saved many men from an unfair child support increase.
* Do not buy a home with someone to whom you are not married, particularly if they are still married to their first wife.
His wife, though she has contributed NOTHING to your home, can be granted a portion of the equity in your home because it becomes a marital asset in her marriage to your SO. Many women have found themselves in the not-so-unique position of a nasty breakup with a SO and found that the only right they have is as a co-owner of the property, not as a partner, even if they have lived with their partner for a decade. Many women have also found that they must take a HELOC or refinance a property to pay off the first wife. Don't put yourself in that position.
* If you pay off his debts, get a signed contract stating that he will repay you, that he acknowledges it was a loan and has a stated schedule for repayment.
If he will not sign, do not give him the money. Do not fall for tears, manipulation or threats that he will break up with you because "you don't trust him." Nor should you. Someone who has no intention of repaying you, very often will resort to manipulation. And we women fall for it. We don't think like loan sharks and sometimes, sadly, we need to.
* If you have sold your home to invest in his or to buy a home together, make sure your investment is protected with an agreement that states in the event of a divorce, you get your initial down payment back, plus half the equity in the home.
If you make improvements to his home, insist you be added to the deed. You do not need to refinance in many states to do this. Keep careful track of what you spend and make sure that YOUR name is on work orders and materials purchases. Pay for those improvements out of your account as well. If possible, make him sign a promissary note for each improvement so that it is acknowledged that YOU paid for it.
* When you are planning your retirement, make sure that your IRA and any investments prior to the marriage remain in your name only.
Any inheritance from your family should remain in your name alone. And make sure you have a will that clearly and concisely states what you wish to be done not just with your grandmother's ruby ring, but with your assets. While you may be fine with everything going to your husband, trusting him to make sure that upon his death your children receive their share of your estate, his heirs may very well feel differently. And if you have no will, you have no say. There are options, such as leaving property to your partner and a life insurance policy equaling your share of the property to your children, but you must speak to an attorney in your state to know what your state will require. No will is a recipe for disaster.
* What you buy for your partner's children is a gift.
You will not get it back, you may not even be thanked for it. Cashing out your retirement, mortgaging your home or selling a vacation property to pay for a stepchild's college education, first car or wedding is likely to not result in anything but you being less a cabin by the lake. If your partner throws a fit because you don't feel like refinancing the house to pay for his daughter's wedding, your partner is taking advantage of your love for him. Their desire to provide generously for their children is a good thing, but it should not come at the expense of your own future.
And for the love of G-d, ladies, remember that NO is not a dirty word. If you cannot afford it, you feel you are being taken advantage of, you see that your husband or boyfriend is spending you into oblivion... Speak up and say no. Don't wait, as my friend Anne did, until the day you notice that your child's college fund is drained and the money you got from the sale of your home is spent. While it is "only" money, it is only YOUR money.