Cary Carbonara, a Managing Director for United Capital and author of The Money Queens’ Guide discusses with Steve the profound, life-changing importance of having a cold, hard “Money Talk” well before your wedding day. Not only is it estimated that over 55% of all couples fight about money, but money is often a leading cause for divorce. So Cary shares ideas on why and how couples can broach this sensitive subject amidst all the romance of engagement and marriage.
Cary tells us why it’s very important for couples to lay their financial cards on the table – the good, the bad and the ugly – and to discuss feelings and philosophies on money so that couples can better plan home purchases, vacations, retirement savings, etc.
It’s important to have this conversation in the presence of an objective, non-judgmental financial advisor (who likely has seen hundreds of different money personalities) in order for the conversation to stay objective and not take an ugly turn. Sometimes conflicts about money between couples arise over money, not so much because of compulsive behaviors (although that, too, can happen) but simply because one or both of the couple has not had the benefit of a basic education on money and finances. It’s vitally important that each partner understands where the other is coming from on attitudes towards money and spending.
Cary gives couples advice on how to handle pre-marriage debts, personal credit, money in divorce and other matters that occur when one goes from being single to being married, which could not only save you money but can also protect your marriage and financial future.
Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital. Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances. The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.
Steve Pomeranz: We cover the waterfront in our search for important topics on this show and because getting married is one of the most important decisions a person will ever make, we want to cover that, too. As my next guest says, in the midst of discussing cake flavors, picking dress colors, and considering honeymoon destination is one more talk that couples need to have before their wedding day—the money talk. Cary is the managing director for United Capital, and she’s a colleague of mine. She’s located in New York, and she writes and advises extensively as teacher, therapist, and all around financial advocate. Welcome to the show, Cary.
Cary Carbonaro: Thank you so much for having me. Happy to be here.
Steve Pomeranz: Thank you. Getting married. That’s a very magical time when you’re in that engagement period. It’s very romantic. You’re doing a lot of planning. Is discussing money at this stage that appropriate? It seems like a cold dose of reality in this time of magic.
Cary Carbonaro: It is a cold dose of reality, but it is the most important thing to talk about because if you are going to get married and you are going to merge your finances, you better be talking about it before the wedding. 65% of couples fight about money. That’s one of the main causes of financial distress and arguments between a couple, and it’s also a divorce predictor, so unless you want to just go through life with blinders on, if you’re going to plan a wedding and a honeymoon, you better be planning your financial future.
Steve Pomeranz: And divorces can be financially devastating as well. Just to kind of recap this idea, you have 65% of couples fight about money, and fighting a lot about money is a predictor of divorce, and divorce can financially wreck you. You take it from there.
Carrie Carbonaro: Exactly. Every couple should be going to a money counselor, a CFP, a financial planner before they get married, in my opinion. I think instead of … in my religion, it’s Pre-Cana. Before you get married, you have to go through Pre-Cana. You should be going … sitting down with a financial counselor before you get married. The thing is, it’s nice to have an objective third-party who’s going to sit down with you and lay out your assets, your liabilities, your net worth, your budget, how you feel about money, if you’re on the same page. You might be exactly the same. You might be completely different. You might have different views, and that is going to affect the relationship from this moment to the rest of your life, so the sooner you address these issues, the better.
Steve Pomeranz: Okay, so here’s an issue that I see. I can kind of see this in my mind’s eye. One person is a financial disaster. They’ve built up a lot of debt, and they’re just not handling their finances well. The other person is in decent shape. Maybe not a genius when it comes to money but kind of watches the bottom line. I’m not sure that the disaster party really wants the other party to know at this time that, “Hey, look, here’s the real me,” in a sense, financially. What can you say to that person?
Cary Carbonaro: Well, that person, more than anybody, has to be up front and full disclosure with what they have and what they’ve done in the past.
Steve Pomeranz: Take me as I am.
Cary Carbonaro: Yeah. I mean, the marrying party who’s the responsible … or has the good money habits, really needs to know what they’re getting into, and they also really need some sort of counseling because the behavior just doesn’t change overnight. It actually could get worse when they get within the marriage, so it’s part therapist, part psychological, part why do they do what they do. Why are they a binge spender or maybe they were never taught the correct money procedures or matters or even just basic compounding interest in financing and debt. If you actually sit down and the couple gets on the same page and says, “Look, if we want to do x, y, z.” If they want to plan for retirement … I mean, I know this is way in the future, but plan for retirement. They want to go on a vacation, they want to have a house or whatever goals that they have jointly, if they don’t sign up right on the spot for the two of them to have their joint collaborative goals, it’s not going to work because then they’re not going to be able to do all the things that they want to do with their life.
Steve Pomeranz: I’m speaking with Cary Carbonaro. She’s a managing director for United Capital in New York. When they sit down, I think part of the problem is that people are untrained. They’re uneducated as to the language of how to talk to each other about money, and I know one thing that we talk about here— I’ve held many workshops and seminars—is something called the Money Mind.
Caru Carbonaro: Yeah.
Steve Pomeranz: Knowing what your attitudes are and how you think about money. Take us through those steps and relate it to this young couple that’s just going for counseling and starting this process of learning about each other with regards to their finances.
Cary Carbonaro: Absolutely. Well, in United Capital we use the honest conversations, which is part of our toolbox of sitting down and covering or uncovering goals and clarifications for what each individual wants and then what they want as a couple together. So when we go down and we do the card tool exercise, and it’s actually—I would say it’s fun—but if I were sitting on the other side of the table, I don’t know. I think that they would say it’s fun. And then we go through and they pick the cards that mean the most to them, and why, and what speaks to them, and then from there we actually can determine are they a happiness, are they a fear, or are they a commitment money mind? And what does that mean?
Steve Pomeranz: What does it mean?
Cary Carbonaro: For example, let’s talk about our fiscally irresponsible person, spouse, that we were just talking about. The one who maybe spends too much or has crazy debt. I would say, without knowing them, that they might be a happiness.
Steve Pomeranz: Happiness meaning that they’re just spending without a care as to what the future consequences might be.
Cary Carbonaro: Correct.
Steve Pomeranz: Not that having happiness is a bad thing. It’s just that any one of these three money minds, if they go to an extreme, can have negative consequences.
Cary Carbonaro: Exactly. That’s exactly right, and it also would help … Now, let’s see our fiscally responsible person. Let’s say that they’re a fear, and they want to hoard money because they’re afraid something bad is going to happen or all their decisions are coming from a place of fear. If you put a fear and a happiness together, it’s interesting because they are going to be polar opposites there. You’ll have the happiness person spending all the money, which is going to create the fear in the other person who wants to save all the money, and then the happiness person is going to feel like they’re being denied.
Steve Pomeranz: Right.
Cary Carbonaro: It’s kind of an interesting cycle there of what’s going to happen, but I think even the fact that you know that your spouse is the opposite and what’s motivating their decisions and if you can come to some common ground, you are in a better place to start than anybody else who doesn’t have the conversation.
Steve Pomeranz: Yeah. If you’re a happiness person, and you’re getting ready to marry someone who’s a fear-based person, it’s good to know what is the basis of their fear, if it is a fear perhaps of not being able to protect their lifestyle or running out of money or ending up on the streets somewhere. Some of that fear may be realistic. Some of it may be unfounded. It may be just based on a childhood experience or experiences. It’s good for that happiness person to say, “It’s not like you’re cheap.”
Cary Carbonaro: Right.
Steve Pomeranz: It’s not like this person’s just acting in a..just a cheap. There’s a reason for the fear, and understanding that can help bring them together. Now, on the fear-based person’s side, dealing with someone on the happiness level, as long as they’re talking, and he can be assured or she can be assured that their spouse is, at least, understanding and coming to the middle and compromising, that’s a platform for discussion and may help them to avoid a lot of the stress and anxiety and the fighting that we talked about before.
Cary Carbonaro: Absolutely. Absolutely. The common ground and the understanding and shining the light on any type of financial situation, good, bad or ugly, you’re already ahead of the game.
Steve Pomeranz: Cary, let’s change the subject here. We were talking about young couples or couples being married for the first time. Is this conversation any different for a second marriage than it was for the first?
Cary Carbonaro: I think it’s more important for the second marriage because you’ve already been around the block, and that could mean that you’ve already been divorced, widowed. You’re already been there, done that, and now you’re trying it again, so you’re hopefully older and wiser, and you don’t want to make the same mistakes. You want to learn from what happened in the past and use that. Now you’re older. I’m assuming you’re older on the second marriage, and you are then trying to then still figure out, “Well, where is my goals? What do we want out of our life for the second phase of our life? Let’s try this again.” It’s like a reset button.
Steve Pomeranz: And also trying to find the way to communicate these ideas to that other person. That’s the big problem that I see is people don’t know what they’re feeling, they haven’t been able to verbalize what they’re thinking-
Cary Carbonaro: Right.
Steve Pomeranz: And it’s important to kind of get the terminology, the lexicon down, so you can have these reasonable discussions. Cary, a lot of the things that we’ve talked about today are general in nature. Are there any specific points or pieces of advice that you can give us right now with regard to kind of specific things, whether it’s assuming someone else’s debt or creating a joint line of credit. Give us some specific ideas to help us right now.
Cary Carbonaro: Sure. Absolutely. Well, one thought is I think everybody should have their own credit in their own name and not do joint credit cards.
Steve Pomeranz: Not combine your credit.
Cary Carbonaro: No. I think everybody should have their own credit in their own name, no matter what.
Steve Pomeranz: Why is that?
Cary Carbonaro: Because it helps you strengthen your own credit. You don’t need the other person’s credit. You’re responsible. Let’s just say I’ve seen so many situations where the marriage starts to go south and the other person charges up like crazy, and then it doesn’t matter if they’re living together or not. The other person’s still liable.
Steve Pomeranz: Yeah.
Cary Carbonaro: I’ve seen people come out of divorces …let’s say they were separated for … I know this one case, for example. They were separated for four years. He did not even know that she had credit cards that he was responsible for because she had been taking them out for years and hiding them in the desk drawer, and getting the mail before he came home because she was a stay-at-home mom. Well, he, during the divorce decree, they said, “You’re responsible for the debt,” and he says, “Okay,” not even knowing … Turns out he didn’t even know he had a $250,000 unsecured debt-
Steve Pomeranz: Oh, my God.
Cary Carbonaro: From four years of being separated.
Steve Pomeranz: And I hear that these kinds of situations happen a lot, where one person will run up a lot of debt, and then the other person is a co-owner of that debt and has to pay.
Cary Carbonaro: Right. Right.
Steve Pomeranz: There’s an idea right there, right now, that everybody can think about, is that keep your debt separate in the case of marriage, right?
Cary Carbonaro: Yes, and I also believe that the one spouse should not be responsible for the debts before marriage. For example, you come into the marriage with student loan debt. Unless you agree to jointly pay that off, then that’s the responsibility of the party who had it before they got married.
Steve Pomeranz: Okay, very good. My guest, Cary Carbonaro, is a managing director for United Capital, located in New York. Thank you so much for joining us, Cary.
Cary Carbonaro: Thank you so much, Steve, for having me.