The New Love Deal: What You Must Know Before Marrying, Moving In, And Moving On

Steve Pomeranz: People can talk about love, people can talk about money; the really hard thing is to talk about the two topics together, especially when getting married or moving in together.

So says my next guest and coauthor of The New Love Deal: Everything You Must Know Before Marrying, Moving In, and Moving On.  Cleverly, the book gives the perspectives of three well-regarded experts, Gemma Allen a prominent family attorney, Judge Michele Lowrance, a long-time judge in divorce division, and Terry Savage, the famed financial writer and money advisor who is with me right now.  Welcome back to the show, Terry.

Terry Savage: Delighted to be back.

Steve Pomeranz: It’s a great concept, looking at this phenomenon from three separate directions.  The implied marriage contract is changing, in what ways is it changing?

Terry Savage: Well, we come to marriage at a different stage, at many different stages now than what your parents, or maybe if you’re younger, what your grandparents did. They were young, they got married, they planned to live happily ever after, it didn’t always work out, but it was an era of perhaps of more of a     sense of responsibility to stay together and stick it out until at least the kids were out of the house.  Now we look at marriage and living together completely differently, I mean there’s no more concept of living in sin because people routinely move in together, even if they’re not just planning a wedding next month and decided to move in now.

People come to relationships with more; they already have jobs; they might have savings or assets build up and both parties are more likely to have income.  Some have obligations like child support from a previous relationship or marriage or student loans.  How you handle your money and how open you are with your partner is going to have a big impact on how successful your relationship will be.

Steve Pomeranz: There are legal guidelines for all these things, have the legal guidelines kept pace with these changes?

Terry Savage: It’s very interesting, some of the myths that we had around agreements like prenuptial agreements, a wealthy older guy and a young gold digger signing away her future life, that’s not the case anymore.  Now we have prenuptial agreements signed by people who might have decisions like, “Well, we’re not going to pay child support out of our joint household money,” or, “We are going to save together but each one has a different income so we’re going to do this proportionately.”

These are the kinds of issues that come up in a marriage, and if you’re older, it’s just like, “I love you, Dear, but I have two grown children, I want to take care of you as long as I can, but I want to make sure my kids, adult kids aren’t waiting around for you die before they get my estate.” The adult kids are happy to hear that there’s an agreement like that too.  Then there’s just people living together, that’s a different kind of agreement.

Steve Pomeranz: Yeah, but you make it sound so natural, that it’s an easy discussion to have, but I think you know as well as I do that actually sitting down and starting to talk about money issues is a very difficult thing to do, it’s a bit of a taboo, especially for the older generation.

Terry Savage: That is exactly why we wrote The New Love Deal.  It is there, the first part of it explains how you get this discussion started, and it can start with opening the book to the chapter on “Starting To Talk About It”.  First of all, let’s dispel this myth that being honest and open and loving and discussing financial issues is a romance buzz-buster.  The fact is it is the essence of true love and romance because if you love this person enough to share not only your finances, your assets and liabilities, but your emotional concern, your fears—if you’re a woman maybe about being a bag lady because you watched your mother in that situation.  Your fears if you’re a man because your younger brother got divorced and his wife took him for everything.  If you’re willing to share those concerns, and then work on a plan together that respects each other’s feelings, then you can come to the nuts and bolts of an agreement that you need lawyers for, but it’s first the discussion.

Steve Pomeranz: It’s the art of communication really and how you frame things.  Here’s a line that you wrote, “One way to start the conversation is to swap credit reports, preferably over a nice bottle of wine.” I don’t think there’s any amount of wine I could drink where I would really feel good about swapping my credit report.

Terry Savage: Well, if you want to just jump in, now there’s people who tiptoe in and for that we have candlelit dinners and a suggested list of basic emotional feeler questions and ways to respond.  If you’re one of those people that will really just jump off the diving board and land right in the pool, I think it’s a great idea.  It’s so easy, you cannot get a loved one’s credit report because there are a lot of questions that even you don’t know about his or her past purchases and so forth, that require to identify you online, but you can go online and each pull your own credit report.  If you’re unwilling to share that with the person that you care about, what else is he or she unwilling to share with you?

It doesn’t tell everything you own, but it does show your payment history, it shows if you’ve had financial problems and credit problems in the past.  You’re marrying, especially if you’re marrying, this person’s credit report as well as her beautiful blue eyes or his strong shoulders, and this is going to impact your life together.  How sad when people find out that, “Okay, we’re happily married, let’s go get a house?  I’m sorry, Susie had declared bankruptcy and had all these bad credit reports.” Her name can’t be on the title; she can’t be on the mortgage.

Steve Pomeranz: The book is The New Love Deal: Everything You Must Know Before Marrying, Moving In, or Moving On.  My guest, of course, is Terry Savage, well-known author and investment specialist.  We’re talking about the discussion before marriage, but so many people are cohabitating these days, they’re living together.  Is the conversation any different?

Terry Savage: The results are different, the conversation isn’t necessarily that different.  For a prenup to be valid, when you make this agreement each has to be separately represented and must make full disclosure of all assets and liabilities, that makes a prenup valid. If it ever does have to get litigated or resolved in divorce at some point in the future, that’s done in family court or whatever your state labels that court.  Now just living together brings up a host of different issues, they’re mostly revolved around money.  I mean you’re moving into her condo and you’re contributing half the money every month, if your name isn’t on the mortgage, you don’t retitle it.  Then you wind up with receipts for electric bills and she’s building up the equity value in the condo.  You need a civil agreement, a cohabitation agreement, and it would be if ever litigated in civil courts without some of the protections of the family court, but just merely the discussion about how you’re going to share your money.  It’s her condo, her mortgage, does she pay more, does she make the mortgage payment?  You make the electric bills, what happens to your credit if something happens with the condo?  There are a lot of things and we have a whole list of them to discuss that are covered by a cohabitation agreement.  You can do that with one attorney because it doesn’t require separate attorneys, but it probably would be better, so that you can, if you go to court over it in the future, you can have your own defense.

Steve Pomeranz: Well, we mentioned marriage, we’re talking basically between heterosexual couples, and then we mentioned cohabitation, but we really haven’t gotten into the relationship for same-sex couples.  Is there any difference there?

Terry Savage: Yes, and we updated this book till the very moments when it went to press because this is a constantly changing aspect of the law.  We have a website by the way called thenewlovedeal.com where we have a blog, people can post questions, and we update you on the laws.  The state laws govern in some regards for marriage, but federal law also governs some same sex partners.

For example, now same-sex marriages are recognized by Social Security, and in the Federal estate tax laws which allow you to leave an unlimited amount of assets to a spouse free of any estate tax.  However, your state, if it doesn’t recognize same-sex marriage, may not, in fact, if you got married in a state that does recognize same-sex marriage, but you live in a state that doesn’t and one of the partners dies, then the state may not recognize the estate tax laws for example.

Steve Pomeranz: That’s important to know.

Terry Savage: We have some very specifics in a chapter for same-sex cohabitants or those who manage to marry, and it is constantly evolving law.

Steve Pomeranz: Let’s say the arrangement, the agreements are set, years go by and as always, situations change, and I don’t mean the relationship but maybe one person makes more money or experiences an inheritance, some kind of windfall, or some kind of a loss, is there a point in time when these agreements should be re-collaborated?

Terry Savage: Yeah, that may often happen.  Now just so we’re clear, part of your question you mentioned an inheritance and an inheritance, no matter what your prenup, unless you specifically put the money from your inheritance in joint name, in a house together, you buy a vacation home together, an inheritance always by law remains the property of the beneficiary, the person who inherited the money.  You can waive that by, as I say, by saying, “Oh, great, Grandpa just left me two hundred fifty thousand.  We can buy the cottage on the lake.” Put it in joint name, now it’s a marital property.  Again state laws apply how marital property is divided.  To the point, if things change, sure, someone might decide to stay home, and a lot of times it’s men these days, to raise the children.  You can readjust and have a post-nuptial agreement, we explain about those.  Maybe you want to cover things like, “Well, Joe’s staying home with the baby because Sally’s got a great job moving right up the executive ranks, but Sally ought to be contributing to a spousal IRA for Joe who’s home with the kids.” Those IRA’s remain individual property, but the money that you make as a couple, you have to decide how you’re going to spend it, how you’re going to save it, how you’re going to invest it, and, believe me, there are two kinds of people in the world, the savers and the spenders.  For better or for worse, they tend to marry each other and right away you have problems if you don’t discuss it, and then come up with an automatic plan that avoids the fights, and then adjust the plan as your life circumstances change.

Steve Pomeranz: Yeah, so let’s talk about the plan.  There’s the day to day issues, “Who’s going to handle the daily living expenses, the bank accounts?  How is property going to be titled?” Let’s get into some of the details there.  What are some of these day to day and longer term considerations that we need to talk about?

Terry Savage: What we hope is that parents who’ve learned these lessons the hard way, will be giving The New Love Deal to their 20-somethings who are now getting married or moving in together for the first time because that’s the most difficult step to organize, and you both have incomes. The question is, first of all, “Are you going to share everything, put all your money in the same checking account and the same savings account?” That may or may not work.

Maybe you each get a direct deposit of your paycheck into your own checking account and at the same time, the next day you’re paid on the 1st and the 15th, one of those days, an automatic transfer into the joint checking account, out of which you pay your electric bills and cellphone bills and rent or mortgage, out of that joint account.  Leaving you with money of your own, so he doesn’t know that you spent that much on the dress, or she doesn’t know that what you paid for the birthday present.

Steve Pomeranz: Are you a saver or a spender?  From that last statement, I’m not sure anymore.

Terry Savage: Well, the point is by the time you reach the stage in life where you’re ready to tie yourself to another person in a love relationship, whichever you are, nobody can change.  It’s hard enough to change yourself much less your partner.

Steve Pomeranz: Yeah, that’s true.  That’s true.

Terry Savage: I’m a mix, I’ve learned over the years to set up the discipline of having the money taken out automatically before you see it and spend it.  Take a look at your paycheck, there’s a big box marked FICA, Social Security, it stands for Federal Insurance Contributions Act.  I always thought a contribution was voluntary.  I guarantee you can’t go up into the HR department and say, “I have a lot of bills this month, I don’t think I can afford to make that contribution to FICA, so give me that now.”

I think every individual should automatically have an amount of at least fifty percent of FICA, that’s a lot of money, taken out and put automatically into the 401K, get the match or an IRA.  If you set up these systems so that you don’t have to debate, it’s just gone, if you don’t see it, you can’t spend it, then you don’t have to have the discussion and the emotional agony.  Same thing in a marriage, set up a plan and make sure it happens automatically, and you don’t have to deal with it every month.

Steve Pomeranz: The book is the The New Love Deal: Everything You Must Know Before Marrying, Moving In and Moving On, the co-author is Terry Savage, who you’ve just been listening to and she also has two other authors, a judge, and a divorce attorney, and they all mix their ideas together and give you a comprehensive look at things that you should and should not be doing.  Terry, once again thank you so much for joining us.

Terry Savage: I thank you for having us on and I hope everybody finds something of interest in The New Love Deal.

Steve Pomeranz: The New Love Deal.  Thank you, Terry.