Editor: Crass Cash
If you didn't know that fights over money and money problems were the #1 or #2 cause for divorce, then I'm telling you now. It constantly changes places with infidelity for the one and two spot. I don't know about infidelity, I'll let somebody else handle that, but as for the money problem, that's completely fixable.
Some of the biggest areas of concern are frivolous purchases, household budget, debt, size of the emergency funds, and insufficient retirement savings. So lets take a look at these one by one.
Frivolous purchases: Many couples usually make one of two decisions on how to handle this. They set a limit on how much the other can spend without consulting the other. So in other words if something is over $100 they have to convince the other that they "need" it. There are exclusions to this like grocery story purchases. The other way is to split up a slush fund equally or based upon income ratio. That way both can spend however they want until the money runs out. Note this is a highly contentious issues because almost always there are spenders and savers in a relationship. Opposites attract as they say.
Household budget: How much should you spend on a house (size, neighborhood, luxuries, etc.)? I don't care what you "want" you should never spend more than 33% of your take home pay on a house. This is after you've put down 25%! Some more extreme advocates, like Dave Ramsey, advocate no more than 25% of take home pay after you put down 25% and you also have to get a 15 year fixed mortgage. I actually agree with this as long as you don't end up living in an unsafe 'hood. However, the idea that your home is an "investment" needs to be banished from ones mind. It's simply a place for you to live and a means of forced savings. That's it!
Debt: ALL DEBTS SHOULD BE DISCLOSED PRIOR TO MARRIAGE! After that's done, then both of you should work tirelessly to get rid of that debt. Whether it be auto loans, student loans, CC debt, you name it. It needs to be gone ASAP and it needs to be done together.
Emergency Fund: This can range from a few weeks to a year's worth of expenses. Let me show you the extremes. A DINK (double income no kids) who both hold professional degrees (think 2 doctors) who have no debt and who also have a strong amount of investments that could become cash if needed. On the other end you have a construction worker with no high school degree, 2 kids, debt up to his asshole, rents, and his wife stays at home with the kids. This guy might need more than a year's worth of expenses!
Retirement: Not being able to provide adequately enough for retirement is a major issue that is confronting an entire generation of Americans, the baby boomers. What you need is different for everybody, but as a general rule you're going to need 25-33 times your expected retirement income. Note that this isn't how much you're making now, but rather how much do you expect to spend when you retire. For extreme savers like myself this could be a very different number!
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