Managing Money in Sin

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By Dayana Yochim (TMF School)
July 30, 2002

As the saying about living together before getting married goes, why marry the cow if you can get the milk for free? (Or something like that.)  Well, it appears the finger-waggers are right. A recent study confirms the long-standing rumor and admonition of worried parents -- those who live together before marriage are more likely to divorce.

The National Survey of Family Growth -- a survey of 11,000 women (one of the most detailed studies on cohabitation, marriage, and divorce ever produced) -- found that 70% of those who lived together for at least five years did eventually tie the knot. But those marriages were also more likely to break up. After 10 years, 40% of couples that had lived together before marriage had broken up. That compares with 31% of those who did not cohabit first.

But there are even more sour issues for non-hitched lovers than the study reveals. Simply put, marriage has its financial perks. Forget cows, cohabitation studies, and the Saturday Night Live Church Lady for a moment ("Sinners!"). From a purely financial perspective, co-mingling your finances before marriage is rife with complications.

Without the legal bond of marriage, things like ownership, bill responsibilities, taxes, and general co-accounting issues become stickier. Adding to the confusion, legal rights vary state by state, depending on the length of cohabitation before the law considers a couple common-law husband and wife. And we haven't even mentioned the complications faced by same-sex couples.

The "widowed fianc�s" of Sept. 11 are the most high-profile example of the problems faced by non-married couples. Many found themselves suddenly shut out -- with no right to insurance money, personal belongings, or even a say in their loved ones' burials.

Here are some tips for co-mingling your finances -- even if the only aisle you've walked down together is at the local Piggly Wiggly.

  • Update your beneficiary information. You don't want your retirement kitty going to your ex, do you? There's a good chance it will, unless you make a conscious note to make your wishes clear. Update your beneficiary information after any life event (birth, death, divorce, bad haircut).

  • Reel 'em in. If one-half of your pair isn't interested in talking money, lure them in. Set some joint goals. A vacation sounds good, right? (Get more tips on having good money conversations on our Investing for Couples discussion board.)

  • Split up... your financial tasks, that is. Managing your money relationship is a two-person job. Take equal responsibility for keeping your joint finances on track. The math whiz in the couple can balance the checkbook, while the daydreamer can gather and organize those ATM and grocery store receipts you put in the fishbowl by the front door every day. Aren't finances romantic?

  • Schedule a summit. The financial world is fond of quarterly reports -- go ahead and schedule one with your honey (and don't forget to serve refreshments). Your State of the Union address should cover: 1) the amount of money you currently have together; 2) the percentage change from the previous quarter; 3) any transactions (buying, selling, saving, over-spending, getting a puppy).

  • Enlist the help of a neutral third party. Hey! How about us? Get input from a handful of Fool couples in our Couples & Cash Online Seminar. Read their excellent advice, eavesdrop on their messiest money arguments, and then put their best tips into practice.

  • And finally, just put the toilet seat down, for cryin' out loud. 'Nuff said.

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