You don’t normally associate “divorce” in a family with an “excellent lesson in personal finance education.”
Most children of divorced parents will probably agree that divorce in a family is a terrible, emotionally unpleasant time—particularly where money is concerned.
While I agree that it can be a miserable time, emotionally and financially, I also credit my parents’ divorce with some of the most important financial lessons I have learned, and in part for making me the financially educated adult I am today.
I grew up in a middle class neighborhood in Hawaii, in a safe and mass affluent suburb often with families consisting of two working parents with college expectations for their kids. I was raised by two parents with college degrees, and went to an excellent public school (go Trojans!) alongside other kids in similar situations. For much of my childhood, my family lived comfortably...or at least it seemed that way. My sisters and I didn’t have to really worry about shopping for school supplies or getting the clothes we wanted or having money to go traveling.
When I was a teenager, my parents got separated and then divorced. It was a messy, unpleasant period in our lives, and not worth recounting here. But as unpleasant as the experience was, I consider it one of the best things that could have happened to me. The divorce helped to financially educate me. While my friends were going about their youth unconcerned, suddenly I had to learn relatively quickly what it meant to have a handle on your money—and your life.
Through it all, here are some key lessons I learned:
From mortgage loans to car loans, credit cards to gambling habits, most people come to the marriage with some sort of financial baggage. If one partner has more debt than the other—or if one partner is debt free—there can be issues when discussions about income, spending, and debt servicing come up.
Debts that are brought into a marriage stay with the person who incurred them and are not extended to a spouse. However, if you choose to help your spouse by refinancing that debt in a marriage, it will become the responsibility of both parties. That said, in most states (ones that operate under what is called common law) debts incurred after marriage (jointly) are owed by both spouses.
Needs Are Expensive
After the divorce, my siblings and I stayed in our house and school district. My mother's desire to make sure we weren’t totally uprooted from our lives, regardless of finances, meant that we needed to cut back and budget for all of those financial incidentals I had always received from my parents.
While my mother was concerned with getting food on the table, paying for the mortgage, and worrying about college; I soon learned what all of those teenage “needs” cost, and how giving in to them affected the family budget.
From gas for our old Honda, to movie tickets, I learned the difference between needs and wants. During the summer my sister and I got jobs and worked to save for our own spending money the relieve the burden from my mother.
When I first moved out on my own in college, I realized that I became more independent than many of my peers at an early age. I used my own money to buy clothes or take trips, while many friends were still fully supported by their parents. Resisting spending on non-essentials early on definitely helped shape my habits as an adult and understand the difference between a want and a need.
Money Power Play
A money power plays in a marriage often occur in one of these four scenarios: when one partner has a paid job and the other doesn't; when both partners would like to be working but one is unemployed; when one spouse earns considerably more than the other; or when one partner comes from a family that has money and the other doesn't.
When these situations are present, the money earner (or the one who makes or has the most money) often wants to dictate the couple's spending priorities. Although there may be some rationale behind this idea, it is still important that both partners cooperate as a team. Keep in mind that while a joint account offers greater transparency and access, it is not in itself a solution to an unbalanced power/money dynamic in a marriage.
Good and honest communication before and after tying the knot can lead to honest exchanges about each partner's money history, habits, skeletons in the closet, and expectations. If you're thinking about entering into what you hope is a lifelong relationship, you owe each other a discussion.
I personally saw in my parents that a lack of communication can be the source of many marital issues. I have learned in my own marriage, that the best way to be sure you and your spouse are on the same page with your joint finances is to talk about them regularly, honestly, and without judgment. Some couples may even find it helpful to schedule a time once a month, once a quarter, or once a year to check in on short- and long-term goals. You may even want to enlist the help of a financial advisor or planner for impartial advice.
Post divorce, my family is in a much better place, financially and emotionally, than during those years during and after the divorce. I wouldn’t wish that kind of steep financial learning curve that I had to go through on other teenagers.
But while divorce can seem like the worst thing to happen to a family, what we went through turned me into a more responsible adult than I might otherwise have been, and for that I’m incredibly grateful.