Ron Lieber writes the excellent “Your Money” column for The New York Times. Last week, he shared a list of four money talks to have before marriage. Lieber writes:

Divorce tends to be emotionally gut-wrenching for the people who go through it (not to mention those around them). But most couples don’t realize that divorce can also be among the most ruinous financial moves anyone can make.

This article struck home for me. No, Kris and I are in no danger of getting a divorce (I love my wife!), but we’re at that stage in life where the people around us are passing through rocky stages of their marriage. Some are even getting divorced.

On Monday I spoke with a friend — let’s call him Mike — whose marriage is floundering. Mike and his wife are wrestling with a variety of issues. The acute crisis was caused by infidelity, but the chronic crisis — the ongoing problem — involves a conflict over money.

Mike and Kathy
Mike and Kathy didn’t talk about money before they got married. They were young, both had jobs, and both spent most of what they made. After they married, they joined finances, as most people do. (For a discussion of this subject see: Which should you choose: Joint or separate accounts?)

Things were fine for a while. But then Mike noticed that Kathy seemed to have a problem. She was a shopaholic, a compulsive spender. Plus, their lifestyle expanded so that they were living paycheck-to-paycheck instead of having a bit of a surplus.

Time passed. Mike and Kathy bought a home. They had two children. Finances continued to be a sore spot — they fought about them often. They never seemed to have enough money to get ahead. It burned Mike up to open the bedroom closet and see Kathy’s wardrobe: dozens of expensive items, many still with the tags. Once, he opened the trunk of the car to discover more expensive items that Kathy hadn’t even bothered to carry into the house.

Slowly but surely, Mike and Kathy fell into debt. They got into trouble on their mortgage. Mike had always handled the couple’s finances, but to “teach Kathy a lesson”, he gave her the checkbook and asked her to pay the bills. It didn’t help. Indeed, their financial crisis accelerated. Their debt soared. Their home went into foreclosure. Creditors began to call. Earlier this year, they actually lost their home.

Things came to a head in September. Other cracks in the marriage forced Kathy to move out, leaving Mike to care for his two sons. “But you know what?” he told me on Monday. “Financially, this has been a real eye-opener. With Kathy gone, I’ve been doing the accounts again. I expected us to lose money, like we do every month. But we had a $1500 surplus last month. $1500!.”

Mike says maybe he shouldn’t have tried to teach Kathy a lesson. It backfired on him.

Four money talks
Mike and Kathy may or may not get a divorce. But one thing’s certain: Until they address their financial issues, they’re going to continue to have problems. But the real time to tackle these issues was before they tied the knot, not ten years into the marriage.

In Ron Lieber’s recent article, he lists four financial issues that ought to be discussed before marriage:

  • Ancestry. What is your money blueprint like? What did your parents teach you about money? How your family models money plays an enormous role in your own relationship with the stuff.
  • Credit. Even though it’s not romantic, some experts recommend that prospective partners pull their credit reports (and scores) together and discuss the results. On an earlier episode of The Personal Finance Hour, Andy shared that he asked his girlfriend to pull her credit score on their third date! (And as he’ll share in a guest post this afternoon, they also signed a prenuptial agreement.)
  • Control. Before you get married, decide who is responsible for which portion of the household accounts. Decide the family financial structure. Know what your budget will be like, and how much each parter is allowed to spend freely.
  • Affluence. Finally (and to my mind, most importantly), discuss your financial goals. How wealthy do you, as a couple, want to be? What are you willing to sacrifice to get there? For my upcoming book (Your Money: The Missing Manual), I interviewed my accountant. When they were first married, he and his wife lived like paupers for five years so that they could pay off all of their student loans and set up a solid financial base for the future. They worked together toward a shared financial goal.

Obviously, disagreements over money don’t always have to end in divorce. I spoke to another friend last week whose husband has always been something of a spendthrift. They don’t make a lot of money, but he certainly knows how to spend plenty of it. His bad money habits had caused cracks to form in the marriage. But with some guidance from a church pastor, he’s changed his ways. My friend is optimistic about their future — financial and otherwise.

For more on this subject, check out:

More than usual, I’m curious to hear the experiences of GRS readers. Did you and your partner discuss money before making things permanent? How do you handle your finances? Is it effective? Have you been through a divorce? How has it changed your outlook on money — especially when it comes to shared household finances?