This Is the Reason Most Adults Get Divorced
Learning to manage your money is difficult enough when you only have one income to think about. If the studies about millennials’ lack of financial know-how tell us anything, even the savviest savers among us still have a long way to go. Throw in the added pressure of joint accounts with your S.O. — especially a spouse, who legally shares your possessions — and the business of dollars and cents can get emotional and tricky. A recent survey from Experian about the link between finances and divorce shows that money and marriage can often be a dangerous mix.
According to Experian’s report, 59 percent of recently divorced adults attributed their divorce (at least in part) to financial issues. Of those participants, 54 percent said that the specific point of contention in their marriage was their former partner’s excessive spending. In fact, 56 percent of participants said that their former spouses had gone on such serious spending sprees that they were no longer able to pay back their other creditors. Whoa. That’s a lot of shoes or man cave supplies.
Couples also have a concerning lack of knowledge of each other’s financial situation prior to their wedding day. Most people surveyed said they hadn’t been aware of their ex’s bill payment history, student loan debt, credit score, and long-term financial goals prior to their marriage. And divorcees definitely paid for that lack of info. Nearly half of divorcees reported that their credit took a dive while they were wed.
Since divorce itself can almost always cause another hit to your bank accounts (not to mention your heart), it’s best to consider these statistics as a cautionary tale before tying the knot. According to Experian’s experts, you can avoid making similar mistakes by being smart and communicative about your money prior to marriage.
“It’s important for couples to discuss finances before saying ‘I do,’ and to communicate frequently,” says Rod Griffin, Experian’s director of public education. “Individually, each partner should make sure to be engaged with the household finances so they can protect themselves and their assets if the relationship ends.” The survey notes that any level of communication is helpful, but it’s actually in-depth, quality conversation about money that set happy couples apart.
In order to maximize the odds that our relationships don’t end — at least not because of financial disagreements — we asked Experian for more specific tips on how to deal with money in a marriage.
6 Tips for Avoiding Financial Disagreements
1. Communicate about money, in depth. From the day you say “I do” (and preferably before that), you and your spouse should be open with each other about your finances: your goals, your debts, your challenges, and even those embarrassing spending habits that you’d prefer not to share. While some of these deets may make for uncomfortable conversation now, we can pretty much guarantee that it will be even more awkward down the road when your financial disagreements come to a head and divorce is on the table.
2. Set household goals. Once you and your partner have gotten comfortable discussing your finances, it’s time to start talking about what you’d like to be able to achieve together with your money. This should be the fun part! Do you want to save money to buy a house? Are you going to commit some of your income to a travel fund for an exciting annual vacation? Dream big! Setting some exciting goals as a couple, especially goals that require a financial commitment, will help you remember that you and your spouse are a team.
3. Remember that everyone handles money differently. Finances are a very personal matter, and while the goal is for you and your partner to be able to think about your cash as shared, it may take some time to adjust to that cooperative mindset. We’re all raised with different models of money management and we all develop our own unique methods of dealing with our income when we’re single, so it may require some compromising for you and your bae to figure out how to deal with your household accounts.
4. Discuss a budget. Remember those fun joint goals we mentioned above? Working with your spouse to settle on a reasonable spending limit (especially when it comes to money you’re spending without the other) that you can both uphold will go a long way toward making those goals happen. Even more importantly, committing to a budget — and sticking to it — will ensure that both you and your sweetie are sacrificing luxuries in support of your future plans. You’ll be less likely to fight about money later when you’ve been actively working together to save up over time.
5. Consider establishing “Finance Fridays.” Rather than going out for a pricey date night, the pros at Experian suggest you spend the occasional Friday night at home with your spouse reviewing your bank accounts, credit card bills, and credit report. Finance Fridays would also be a great time to check in on the progress you’re making toward your savings goals. If you’re both sticking to your budget, who says you can’t order in some take-out to add a little fun to a low-key evening of spreadsheets and bills?
6. Get educated as a couple. To ensure that you and your spouse are developing good financial habits that will limit additional stress on your relationship later on, work together to learn more about personal finance, budgeting, and investing. If you’re doing the research with your partner, you’ll be more likely to come up with spending philosophies and savings goals that you can agree on, and you’ll have plenty of opportunities for discussion and compromise along the way.
How do you and your spouse prevent finances from damaging your marriage? Tweet us @BritandCo!
(Photos via Getty)
Welcome to Selfmade Finance School, our new money series with Block Advisors to help small business owners with their tax, bookkeeping, and payroll needs year-round. This week, we explore the tax implications of bringing family members into your business.
The question for today is this: Does hiring your family members make sense for your business? Let me be clear. This is not a piece about whether hiring your family members makes sense for your relationships with those family members. As someone who is part of a family business, I could fill up a lot more than 600 words on my opinions about that. For today's purposes, we focus on whether it makes sense from an overall "good business and tax implication" perspective. As it turns out, there is a decent amount of tax nuance when it comes to employing your family. Let's break it down based on relationship to the employee:
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Spouses Who Are In Business Together
Personally, if I had to be in business with my husband, it would not go well. However, many couples build viable, strong businesses together and I say, good for them! Depending on how you have your business entity structured, it will make a big difference on the tax treatment of you and your spouse working as partners. Because a business jointly owned and operated by a married couple is generally treated as a partnership for Federal tax purposes, the spouses must comply with filing and record keeping requirements imposed on partnerships and their partners. The election to file two Schedule C (Form 1040) forms, (one for each spouse) permits certain married co-owners to avoid filing partnership returns, provided that each spouse separately reports a share of all the businesses' items of income, gain, loss, deduction, and credit. Under the election, both spouses will be subject to self-employment tax and on net earnings from self-employment and receive credit for Social Security earnings.
One Spouse Employs Another
If you have a dynamic where your spouse is an employee of your business, then your spouse's wages are subject to income tax withholding, Social Security and Medicare taxes. If you are self-employed (not a corporation or a partnership), your spouse's pay does not have to be included in your federal unemployment tax account (FUTA) contributions and payments. However, if your business is a corporation or a partnership you must include that spouse's pay in your unemployment tax contribution calculation.
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You Employ Your Child
First, let's be clear. I work in my family business, but I am an adult, so I am treated just like a normal employee. However, if you, for example, run a family restaurant and want to hire your children under 18 to work for you, there are some tax benefits. But first, you should check with your state for rules on how many hours minors can work (in non-agricultural jobs) and reference the Fair Labor Standards Act for information on limitations on the kinds of work children can perform.
"This is an often overlooked or under-utilized strategy. Paying your children for true services they provide in your business can be a powerful tax-saving tool," says Cathi Reed, Block Advisors Regional Director. "If you are a sole-proprietorship or single member LLC, and the child is less than 18 years of age, the business is not required to withhold FICA or payroll taxes. The child can use his or her standard deduction against income you pay."
You Hire Your Parent
Oh dear. If you are brave enough to do this, know that you will need to pay Social Security and Medicare taxes on your parent's wages and make the appropriate withholdings, but you don't have to pay unemployment taxes. Now all you have to do is convince your parent that you are the boss. Have fun with that!
Is Hiring Family Members Worth It For The Tax Benefits?
"There are some positive tax advantages to hiring family members. It's important to treat a family member like any other employee. Hiring your children can result in substantial savings for businesses. Make sure your child has real, age-appropriate work to do and a reasonable pay rate, comparable to other employees. Consult with a Block Advisors small business certified tax pro to ensure that you are complying with all requirements," advises Reed. "Block Advisors, a team within H&R Block, is dedicated to meeting the tax, bookkeeping and payroll needs of small business owners year-round. To start working with the tax experts at Block Advisors, visit blockadvisors.com."
In my opinion, you should not hire a family member solely because of the tax benefits. You should always hire based on whether that person is right for the job and keep in mind how this hire could materially impact your relationship with that person and others in your family. Finally, as I mentioned, make sure you have a tax professional on your team when making these determinations. As you can see, things can get a little tricky!
*All details were sourced from IRS.gov and blockadvisors.com