A Guide to Couples Financial Therapy

In this episode of Motley Fool Answers, the cast dives deeper into their discussion of the intersection between relationships and money. Serving as their expert guide is author and money coach Olivia Mellan, who offers her advice for how to best navigate those difficult conversations. Tune in to learn more.

A full transcript follows the video.

This podcast was recorded on Feb. 21, 2017.

Alison Southwick: This is Motley Fool Answers. I'm Alison Southwick and I'm joined, as always, by Robert Brokamp, personal finance expert here at The Motley Fool. He's also the advisor on Motley Fool's Rule Your Retirement newsletter.

Robert Brokamp: Hi, Alison.

Southwick: People don't get to see the faces that you make as I do that spiel introducing you.

Brokamp: Well, that's uncomfortable. You're talking about me.

Southwick: No, it's all true!

Brokamp: It is true, I guess.

Southwick: All right. So we've been talking a lot about love and relationships this month, so what better way to close out the month than by talking about how to navigate the waters of love when they are stirred up by the storms of money troubles.

Brokamp: I think that was a line from Shakespeare, wasn't it?

Southwick: Yeah, I'm sure, yeah. Couples and money expert Olivia Mellan joins us to talk about maintaining money harmony with your schmoopie. We'll also answer your question about how to avoid the common pitfalls around gaining an inheritance. All that and more on this week's episode of Motley Fool Answers.

It's time for Answers, Answers and today it comes from Chris. Chris (who writes from Canada, by the way) says: "I have a specific question I hope you can help me with. My sister and I have recently (sadly) inherited some money. I am hoping you can provide some tips on common mistakes people make when inheriting money and some advice on how to inherit money well and put it to good use."

Brokamp: Hello, Chris. First of all, we're sorry for you and your sister's loss. Unfortunately, the loss of a loved one is often accompanied by a veneer (at least a perceived need) to make big decisions with an inheritance.

Southwick: Immediately.

Brokamp: Immediately.

Southwick: Like right now!

Brokamp: Right. So to answer your question, one of the big mistakes people make is that they feel like they have this urgency, because they come into this big sum of money and they feel they have to make a decision with it.

So I would caution you to relax. There's no need to make a big decision. Often when we lose a loved one there's a lot of grief. There might be some upheaval. There might be some family tension about the inheritance. So wait until all that subsides before you make a big decision.

Now once you feel like you're ready to make some sort of decision, here are the priorities you consider, and these priorities you would consider for anyone who's come into money, whether it's an inheritance, you sold a business ...

Southwick: Lottery?

Brokamp: The lottery.

Southwick: It happens, I guess.

Brokamp: Something like that, right. And this is all the typical, boring stuff. Basically, the first thing you want to focus on is getting rid of high-interest consumer debt. Credit card debt that's charging you like 15% to 20%. The next thing would be to look at your retirement. Have you saved enough for retirement? If you haven't, devote a lot of that to your retirement savings.

Next on the priority list would be high single-digit debt. We're talking like student loan debt. Maybe car loans or something like that. If you have kids and you haven't saved enough for college that would be the next place I'd look. And then, if you've taken care of all of that and you have a mortgage, you might want to consider something like paying off some of the mortgage. That's all the boring stuff.

And I do think it's important, when you come into money like that, to do something you enjoy. Something fun with it. There are guidelines. People will say you set aside 10% -- maybe even as high as 20% -- to spend on something that you enjoy. It could be something like a trip. It could be something like new furniture. But you should give yourself permission to splurge a little bit with it.

Another thing to consider is a way you could spend the money to honor the legacy of the person who left you the money. So it could be donating to a charity that they supported. It could be doing something like funding a genealogy project that you create and then you give copies to everyone else in the family. Maybe you got the money from your parents, and when you were younger, they took you on family vacations to a certain place every year, but you've never taken your kids there. So now you have the money to do that.

But whatever you do, you don't want to squander the whole thing. Probably those people worked hard to get the money you inherited. They took the legal steps necessary to make sure you inherited it. So while it's OK to splurge some of it, you don't want to squander it.

And finally more boring stuff -- and this is tax law. I know that you're from Canada, so this doesn't apply to you. But for Americans who inherit money, if you inherit money in a retirement account ... an IRA or 401(k) ... you can't just leave it alone until you retire. You actually have to start taking distributions out eventually. So look into those rules.

And if you inherit investments outside of a retirement account, you get what is called a "stepped-up cost basis." Let's say your dad bought a stock at $10. It grows to $50. It's $50 on the day he dies. Your cost basis is now $50. You could sell that stock and there's no tax consequences whatsoever. So it's actually a good time, once you feel like you're ready, to look at any inherited investments to make decisions about it, because if you sell them relatively soon, you don't have to worry about any of the tax consequences.

Southwick: But bottom line, you don't have to do something right away.

Brokamp: That's true.

Southwick: Well, Olivia Mellan joins us today. She's a speaker, author, and money coach in the field of couples communication, stress management, and conflict resolution. Olivia was named to Investment Advisor's 2013 Top 25. It's a select list of the most influential individuals in and around the advisor's profession. You were even on Oprah! Is that correct?

Olivia Mellan: Oh, many times. I've been on Oprah four times, Today Show 10 times, and 20/20 twice.

Southwick: Wow.

Brokamp: Wow.

Mellan: I always say my 15 minutes of fame has been extended to 45 minutes.

Southwick: Well deserved, and we want to thank you for joining us today. This month we've been focusing a bit on love, couples, and money so today we're going to focus on what you do when money turns into a pain point. And you actually have spent your career helping couples work out their money issues.

Mellan: Yes. That's been a very large component of my money work. I was a regular, old couples' therapist before I was a money therapist, and then it turns out that couples and money, as a stress point, has been on the top two list of marital discontent for the last 20 or 30 years. The other items change, but money is always the second one or the first one. Several years ago, the Wall Street Journal said it was the first one, again.

Southwick: What brings most couples to you? What are they struggling with?

Mellan: Well, I've been saying this so long [that] people call it "Mellan's Law." So Mellan's Law of couples polarization says if opposites don't attract right off the bat -- and they usually do attract right off the bat -- then they'll end up opposite eventually, anyway, and money is no exception. Usually there's one spender married to a saver (or in a relationship with a saver), and one worrier married to an avoider. Those are the top two. And actually, most spenders are avoiders, and most savers are worriers. That double-whammy marriage is incredibly common.

Brokamp: So when people come to you, how much of the discussion is actual financial advice? When you say to someone who is an overspender -- and if I understand your history, that was your inclination, at least way back when ...

Mellan: Yes. I'm a recovering overspender.

Brokamp: ... do you get to the point where you tell people some actual nuts and bolts financial advice?

Mellan: Well, sort of, but long before that I teach them tools of good, empathetic, respectful couples communication, and I explore with them what money was like in their childhood to see what loads they're carrying into the present day about their life with money. So they don't negotiate with each other about the hard facts of their money until they've done some work with me first.

Southwick: We always talk on this show that when you're arguing about money, you're really arguing about deeper values ...

Mellan: Exactly. Exactly. I call it "money myths." Money equals love, power, security, control, self-worth, freedom, security in old age, self-esteem. If it just was money -- dollars and cents, a tool to accomplish some of life's goals -- people would not be fighting about it like this.

Southwick: So the first step is to help your couples communicate better and understand where they learned their relationship with money. What are some tips for getting that conversation going?

Mellan: I teach them empathetic communication structure, so they start out with an appreciation of one another, ideally about money. You know, hoarders are money savers. They secretly admire a spender's ability to be generous, to give, to not worry so much, but they won't tell them that, because they're afraid the spender will spend more wildly. And spenders secretly admire a hoarder's ability to set priorities, plan, budget, and prioritize. Even though spenders hate the word budget, they still respect the discipline that's involved in budgeting. They won't tell them that because they're afraid the hoarder will rein them in more tightly.

But when there's any goodwill in a marriage, and you start telling each other what you secretly envy and appreciate about one another, everybody all of a sudden feels safe enough to admit their own issues and start working on themselves. So I always teach that first -- the power of appreciation.

Southwick: What do you think are some of the biggest mistakes that couples make that gets them to this place where they need professional help?

Mellan: First of all, money is still the last taboo. People will talk about anything else first. Not talking about money -- and not talking about it in a successful, proactive, non-attacking way -- is the biggest mistake they make. And I also think merging all the money, and having money secrets from the past, are two big no-no's as well. I think all women need some separate money, and I think men like to have a little separate money, too.

After years of doing this work, I never recommend people merge all their money. I'm fine with them merging even most of their money for joint expenses, joint retirement, an emergency fund and savings, but I want them to keep the rest of it, because I think women have a psychological need (often unconscious) about having some separate money.

Brokamp: Well, logistically that can be difficult in terms of you get to the nuts and bolts of it and I say, "OK, we're going to have some separate money, some joint money," but who pays for the groceries and who pays for the mortgage?

Mellan: Well, everybody pays for all of that, because that's on the joint list, but the question is, what do you kick into the joint fund? I think you kick into the joint fund proportional to assets or income. And I think women who stay home to watch kids should get a salary from the family for doing that.

Southwick: Because Lord knows it's hard work.

Brokamp: Oh, man. It's hard work. And you don't get to clock out at five o'clock.

Mellan: And if society doesn't validate it, at least the family should.

Southwick: Right. So that gets to some of the core relationships that we have with money. What about the little money spats in the day-to-day life where you're not sitting down in front of a professional, but you're just fuming over something in the home? What's the best way to deal with those little itty-bitty fights?

Mellan: I think my solution about having some separate money will alleviate some of those fights. Let's say everybody has a hobby that the other one thinks is impractical and a money pit. You spend your own separate money on that, and then you don't have to discuss it with your spouse. I think that's a very good solution for the little niggling things.

And also, I think people should have regular money talks once every other week (one a month at the least or weekly), and they should reward themselves for having these talks if they go well.

Southwick: And what are some of the things that they should cover in this money talk before they get rewarded?

Mellan: I think for the first money talk, they should talk about how money was handled in their family of origin and what money messages they might be carrying into the present from the past. And then also, I give couples a goal-setting exercise. I have them agree, in advance, what sort of term it is going to be. Like six months, or a year, or two to three months. Midterm and long term.

Then they go away, separately, and they generate a list of financial and other goals, and they do this at least three times to see which items come up again and again. Which are the items they can trust. Then they share the list and they harmonize the list. And they agree to certain ones of the lists that are going to be short, medium, and long-term goals. Then they can plan together for how they're going to meet especially some of the medium and long-term goals. That's very important.

Southwick: So at what point should a couple in their relationship decide that they do need to bring in a professional? What are some signs that the problem's too big?

Mellan: You can't come too soon. If you have any conflict over money, you should be seeing a professional who's good at this stuff.

Brokamp: Anecdotally, from what I've seen when couples have troubles, a lot of it comes down to focus on a certain time horizon where one person really wants to focus on making a really good life now. Taking good vacations. Having a nice house for the kids. All worthy intentions. And the other person is more focused on the long term, thinking, "Yes, but we have to also save for retirement, and we have to save for college." How do you get them to meet in the middle somewhere?

Mellan: Well, this empathetic communication exercise that I train people in, which I borrowed from Harville Hendrix (it's my version of his mirroring empathetic feedback exercise), has people sitting in each other's shoes. You experience what it's like to be like your partner.

And the second step of this exercise is called "validation". After you've played back what the person said as close to verbatim as possible, you say what makes sense about it from their perspective, and what else they might also be feeling. When you learn to sit in each other's shoes (I call it "walk a half mile in your partner's moccasins"), everything changes, and everything is possible.

Brokamp: Do you ever have the temptation, when you're speaking with a spouse, to just say, "You know, you're absolutely wrong?" I mean something that they're doing so egregiously bad with the couple's finances [that at some] point you say, "No, you're wrong."

Mellan: Well, here's the secret. First of all, my own personal style is a very vulnerable, sharing style. They know I'm a recovering overspender. They know [I've had a] successful marriage for 30 years. That wasn't always easy, but now it's really wonderful because we've worked on our communication so hard. So I share a lot from my own experience.

But sometimes I meet with people separately so I don't shame the other person, because nobody wants to be the identified patient. Nobody wants that. So I can say to people, "Look, I feel about this that you have more baggage from the past and this is more loaded for you. This other thing is more loaded for your spouse." So I always have something to say about the spouse so nobody is targeted alone.

And also, I give these very powerful self-meditation therapy exercises called "the money dialogue", and everybody has to do them. And this is writing out a conversation between you and your money about how the relationship is going. Making believe that money is a person with whom you've been having a lifelong relationship.

So once your write out this first conversation, you have at least three voices in your head comment on the dialogue you just generated: your mother in your head, your father in your head, your spouse, the ex-spouse, the nun at school, the rabbi. And the final voice of the dialogue is God (if you believe in God), a higher power, or your voice of inner wisdom. The money dialogue functions like self-therapy about money, and it's amazing what people will come up with.

Brokamp: You describe yourself as a recovering overspender. What was it that turned your life around?

Mellan: Well, doing this work with others and feeling like I had to walk my talk. And ending my first seven-year marriage and knowing we were both slight overspenders. I had credit card debt. My present husband is the sanest person about money I ever met and he said to me, "Honey, you should really pay off your credit cards every month, and if you can't, just talk to me about it." He said it in a way that was not shaming and not judgmental, and I was ready to hear it, so ever since then I did that.

You know the therapist light bulb joke? How many therapists does it take to change a light bulb? Only one, but the light bulb has to really want to change.

Brokamp: I know you're a member of the Financial Therapy Association and I'm actually working on my graduate certificate in financial therapy ...

Mellan: Oh, wow!

Brokamp: ... and it's interesting to see. It's a relatively new field ...

Mellan: Totally new, yes.

Brokamp: And to a certain degree, I question why that is, because it's so obvious when you think about it.

Mellan: Well, because I think therapists were so money phobic and money avoiders that they really didn't take it on. When I started doing this work in 1982, I said money was the last taboo. A friend of mine had said this. He was a lawyer, and he was my first partner. He said, "Let's do public workshops about money, because money is the last taboo. It's harder to talk about money than sex or childhood trauma," and I felt like he hit me with a thunderbolt. I said, "Oh, that is so true. When money problems come into therapy, it's like there are ghosts of family members sitting all around the room (my ghost and the clients' ghosts) and absolutely nobody is talking about it. Somebody should create a safe place to talk about this." So that's what we did with Money Harmony.

Southwick: Olivia, thank you so much for joining us today.

Mellan: You're welcome.

Southwick: If you, our listeners, want any more advice about maintaining a relationship and money, you can check out her website, moneyharmony.com.

Yeah, yeah, yeah. Communication is important, but what other factors can serve as a barometer to getting a divorce? Well, we have a Cosmo-esque, probably not that helpful quiz that we're going to take.

Brokamp: Outstanding!

Southwick: So some researchers out of Emory in 2014 looked at 3,000 ever-married people in the United States, and they came up with the study, "A Diamond Is Forever and Other Fairy Tales: The Relationship between Wedding Expenses and Marriage Duration."

Brokamp: Wow!

Southwick: So I have some questions to ask you about your wedding and courtship, and then we're going to figure out who's the most likely and least likely to get divorced. All right, let's go. The first thing they looked at is how many years you dated before you got engaged.

Brokamp: I would say, I guess, three.

Rick Engdahl: Are you asking me?

Southwick: Yeah.

Engdahl: I think maybe a year and a half. Maybe two. Call it two.

Southwick: Call it two. That's a good idea, to call it two.

Brokamp: Is longer better? Is that what you're saying? Sounds like it, and we'll find out.

Southwick: Hold on! Hold on! So they looked at the reference point of dating for less than one year, and they found that if you dated one to two years, you were 20% less likely to get divorced, and if you had been dating for three-plus years, you were 39% less likely to get divorced.

Brokamp: Good news. Good news.

Southwick: So Alison and Bro, we get 39% in our favor and Rick gets 20%. Next question. Did looks or wealth matter when you got married? So did you care that your partner looked handsome, beautiful, or was wealthy?

Brokamp: Well, neither of us were wealthy, so I guess it had to be our outstanding looks.

Southwick: No, but in your partner.

Brokamp: Yeah.

Southwick: Yeah.

Engdahl: I'm with Bro on that. He looks beautiful.

Brokamp: Thank you!

Southwick: I married an architect, so that tells you how much wealth mattered to me.

Engdahl: Just about as much as my preschool music teacher?

Southwick: Just about. Just about. So using the reference point of neither partners' looks nor wealth are important, they found that you're 18% more likely to get divorced if wealth was important ...

Brokamp: Hm.

Southwick: ... and you're 40% more likely to get divorced if looks are important, because we all know which way looks go. Downhill.

Brokamp: Except for you two, of course.

Southwick: All right, next question. How big was your wedding, by which I mean how many people attended it?

Brokamp: I'm going to say about 100, I think. Is that big?

Engdahl: It sounds a lot like I married Bro, because I think we were right around 100, also.

Brokamp: Well, you are a handsome man. I have to say.

Southwick: We had about 100, too, so apparently we all had the same wedding.

Engdahl: But we were very, very low budget. Everything DIY.

Southwick: All right, hold on. We'll get to that. We'll get to that.

Brokamp: That's the next one.

Southwick: So they asked how big your wedding was, and using the reference point of the only couple. So there you are, standing at the justice of the peace. If you had one to 10 people at your wedding, you are 35% less likely to get divorced. Eleven to 50 people -- 56% less likely. For us, we are in the 100 to 200 range. We are 84% less likely to get divorced than people where it was only the couple.

Brokamp: So a bigger wedding is better.

Southwick: Having more people is better. All right, let's move on to how much you spent at your wedding. So how much do you think you spent?

Brokamp: Well, this will give you an idea. I wrote an article about our wedding, and I entitled it, "My Big, Fat Cheap Wedding," so I think we spent about $8,000 to $9,000.

Southwick: OK. All right. That was the reference point. How about you?

Engdahl: Once again, I married Bro. I think ours was actually cheaper even.

Brokamp: Did you also have square dancing at your wedding, because that's what we had at our wedding.

Engdahl: No, we had an open mic.

Brokamp: So did we! After the square dancing. We must have gotten married. You look familiar.

Southwick: So maybe $1,000 to $5,000 for your wedding?

Engdahl: Sure.

Southwick: All right.

Brokamp: What about you?

Southwick: Uh, we spent over $30,000.

Brokamp: Oh, my goodness gracious.

Southwick: We had a big, expensive wedding, and it was the best day ever ...

Brokamp: I'm sure.

Southwick: ... by the way.

Brokamp: I'm sure it was.

Southwick: We did not have a cheap wedding. So using the reference point of $5,000 to $10,000, it sounds like Rick, you were maybe $1,000 to $5,000?

Engdahl: Yeah, something in there.

Southwick: So you are 18% less likely to get divorced. Bro, you're the reference point. Whereas how much Ron and I spent on our wedding, we are 46% more likely to get divorced.

Brokamp: More likely! Wow!

Southwick: So that one maybe sunk us. Last question. Did you go on a honeymoon?

Brokamp: I was hired by The Motley Fool a month before my wedding. I did not feel comfortable going on a huge honeymoon, so we went on a hike the next day and we called it our "minimoon" and then the following summer we went on a real one and we called that our "maximoon". So I'd say we did, but it just was not your traditional one.

Southwick: Rick?

Engdahl: Scotland!

Southwick: Oh!

Brokamp: Nice!

Engdahl: Oh, it was nice when we hit lots ... everybody ...

Southwick: You're like, "Eh, my Scottish accent is done."

Brokamp: It is done. Done!

Engdahl: It was bleep brilliant, all right? One thing I'll say. If you ever go have a honeymoon in Scotland, make sure you tell everybody that you're there on your honeymoon, because they'll all buy you whiskey.

Southwick: Oh! That's sweet. We did a honeymoon. We did just a short, little one to Bermuda. So congratulations to all of us for going on a honeymoon, because that makes us 41% less likely to get divorced than those who didn't go on a honeymoon.

So the bottom line is, have a huge wedding. Have a lot of people. But don't spend a lot of money. Don't worry about looks or wealth. Spend a lot of time dating before you get engaged, and, of course, go on a honeymoon.

Brokamp: Of course.

Southwick: Of course.

Brokamp: My parents went on a honeymoon to Bermuda, by the way.

Southwick: It was nice.

Brokamp: They got divorced.

Southwick: Oh! Oh, man!

Engdahl: Bro just mooned his honey.

Southwick: He would. It's really easy to get to Bermuda. It's like a direct flight from National.

Brokamp: Yeah.

Southwick: It's awesome. I highly recommend it. I was going to try to do the math on this, but then I just got bored with that, so you know what? I think all three of us are in pretty sound, good marriages, so I'm not worried about any of us getting divorced anytime soon.

Brokamp: I think so. I think you're right.

Southwick: Well, that's the show. It is edited profanely... Rick dropped an F-bomb in today's episode in front of Bro's daughter.

Engdahl: I was quoting Scotsmen.

Brokamp: Quoting!

Southwick: Our email is [email protected]. For Robert Brokamp, I'm Alison Southwick. Stay Foolish, everybody!