You wouldn't think a divorce lawyer would be the first person to dole out advice on how best to prevent a breakup, but then, Laura Wasser isn't your average divorce lawyer. She's one of the most prominent divorce attorneys in the country, having handled countless high-profile splits (think: Hollywood A-listers, tech giants, professional athletes)--so many, in fact that TMZ dubbed her the "disso-queen" (it's short for "dissolution of marriage," get it?)
Having spent years acting for clients whose marriages have gone south (Britney Spears, Angelina Jolie, Stevie Wonder, and Kiefer Sutherland, to name a few), and advising on prenuptial agreements to ensure all hell won't break loose if they do, Wasser has learned a few lessons about how (and how not) to deal with finances as a couple--an issue that, if not dealt with properly, can lead to the demise of even the most solid relationship.
Wasser shared her best financial advice recently on the phone from the Los Angeles headquarters of her firm Wasser, Cooperman and Carter. No, it's not "sexy," as Wasser says, but it just might keep your relationship intact for the long haul.
When is the best time to begin talking seriously about finances with a significant other?
At two points in a relationship. The first is when you decide to move in together and blend households, and the second is if and when you merge finances. I would literally make a list of things that are financially-centered that should be discussed, starting with what kind of fabric softener you buy going all the way to whether you're going to redecorate your home. These are conversations that should be had. Also, do it when things are good! Don't do it when things are starting to get crappy and you're already bickering about money. When things are good, you sit down and have this conversation, because that will engender feelings of love and trust.
But this is really sticky stuff. How do you broach the subject in a tactful way?
You need to say, 'Look, I think it's so fantastic that we're taking this step, and it's so romantic and wonderful, and now I need to raise something that may not be as romantic but it may go a long way to keeping us together and keeping our relationship evolving, moving forward and maturing rather than stagnating. Do you think we can set a time where we can sit down, just the two of us, to go through a list of our financial expectations and expenses?'
Hopefully the person says, 'Yes I'm very much open to that.' And then maybe you open up a nice bottle of wine--not too much, you don't want to get drunk--but if you can do it calmly and relaxed, and it's also very important to be very honest. You can't sit down at a table with someone and say, 'Oh, I only spend this much on clothing' when that's absolutely not true. You can certainly say, 'This is an issue I have and I want to work with it,' but you need to be very upfront and honest about what your expectations are and what your proclivities are in terms of spending.
Okay, so what specifically should be discussed?
Shopping. I still know women who have been married for years, but when they come home from a shopping trip they hide their bags in the car until their husband has gone out, and then they kind of bring them in piecemeal, and unwrap them and take tags off because they don't want their husbands to know what they've been purchasing. So shopping--what's the expectation?
Hobbies. What about if he is a golfer and he goes on these extremely expensive golf trips and her hobby is painting and she buys a few oil paints every 3 years. I mean, those are the kind of things that need to be discussed.
Travel. I mean, obviously if you guys have been dating for a while, you're going to know what each of you likes--is he a backpacker? Are you a spa girl? But at the same time, there's plenty of people who say, 'look, I'm 40 years old, I don't ever want to fly anything but business class again.' That should be discussed.
Entertaining and Entertainment. If you're going to have his work people over, your work people over, are you going to cater? Cook? If you have children, what are their birthday parties going to be like? Is he going to be offended if you want to have the birthday party catered or valet parking? And what are the expectations for spending on entertainment outside the home--concerts, movies, theater, that sort of thing?
Charitable contributions. This is a big one. People like to be able to do what they want to do with their money. Many people have very strong feelings about what kind of charitable contributions they make. It's important to have a conversation about how much of your income is going be put in there.
Family. How much time and money are you going to want to spend on existing family? Do we want to start our own?
Meals. Are you going to cook at home or eat out most nights? If you're going out, which caliber (and price range) of restaurant? Are you taking packed lunches to work versus doing expensive work lunches or lunches with the girls?
Savings and investments. How much of your income do you want to put away each year? If one person is spending all of their income on clothes, travel, hobbies, and entertaining, and one person is saving it, that may not be quite fair if and when you guys split up, depending on what the law is and what you decided to do.
Estate planning issues. Wills, life insurance policies. This is definitely more a marriage one--something to talk about a little further down the line. Maybe earlier on, you may want to deal with insurance, like auto and health. You don't want to move in with someone and find out that they don't have auto or health insurance. That's a rude awakening.
Gifts. How much are you spending on gifts?
Home décor and home remodeling. Again, what's the expectation?
So you'd advise taking this list and going through it, just as you would with a financial planner?
Absolutely. Why wouldn't you have this conversation with someone you're sharing your life with instead of with the person who is just getting paid to take care of you? This is the person you're casting your lot with. You're hoping you're going to be with them for an extended period of time, so why wouldn't you trust them enough to just put it out there?
Why are these conversations important to have at the outset of a relationship?
You'd be amazed sitting from where I sit at the things I hear from people regarding the arguments that they've gotten into about finances. I had a client that said 'If I had known when I married him that it was a really big deal that everything was always going to have to be generic, I might have thought differently. I like buying brands I like.' That was an issue apparently. Bottom line, these are things that you don't want to have resentment about later because they haven't been discussed.
Have you ever heard of a time when this conversation does the opposite--sparks feelings of resentment?
I have seen that this conversation can be an eye-opener, but I can't think of a time when someone said, 'well that's it, I'm out of here. We're breaking up.' I think what definitely happens is that the expectations get put out on the table. And that might be a time when you both say, 'Okay, we are just so vastly different in what we want and what we spend and what we have, that maybe we should just step away from this now.'
Should men and women be looking out for different things during these conversations?
A woman--even if she is the primary breadwinner--really needs to keep in mind that at some point, she may have a diminished earning capacity because of the fact that she will bear children. Of course, this is case by case. I had two kids and it didn't really slow me down at all. But because the guy is not the one who is going on maternity leave or whose hormones will be bouncing all over the place or who is going to have to make a decision at some point about whether or not to go back to work, it's the woman that I need to tell, 'Whatever you think is going to happen, you may be surprised. There's just no way of knowing until it actually happens.' So gender does make a difference.
If it were me, I would prefer to put money into a household account and then we each keep our own and do what we want with it, and then you don't have to answer to anyone. But that's because I earn my own living. Some people are blending their finances earlier on in life, or there's a discrepancy on what the income levels are. If it's a female client coming in and saying, 'He makes 2 million a year, I make 300k, what do you think I should do?' Well, looking at it strategically, it's probably better that all her money goes into one pot, but that being said, she may not want to be beholden to him. Maybe you keep your $250k, put $50k into the pot, and you take it from there. And if he's going to be the one that springs for travel, entertaining, or expensive gifts, then great.
In California, the money your spouse earns is community property [and therefore subject to equal division], but only if you get divorced. But if you're married and your husband gives you an allowance, unless you decide you want to get divorced, you're somewhat powerless. That's why it's good to have the conversation about, 'what is your expectation about what I'm going to spend on the house, the children, etcetera.' It would be terrible to get married and then have that conversation and find out that he was a complete jerk. And people think they know these things, but until you have a very upfront and honest conversation about it, they don't.
What if financial circumstances change during the course of the relationship?
You have to constantly reevaluate. Check in either on a quarterly or annual basis. It's interesting to me to see couples who have been married for a very long time and when and if they split, one of them says 'I just had no idea that the situation was so dire!' Whether things go up in terms of household economy or down, if you're in it for the long haul, then you would tighten your belts together, and if things are good, you splurge together. You'd be amazed how many people come in here and usually they are women saying, 'I'm so embarrassed but you'd have no idea what we spend, I have no idea what my husband makes. I just don't know. I never worried about it.' One thing I hear from the male-earning spouses is that they feel somewhat resentful that they are out there earning this money and their partner isn't even aware of what's going on. Now some might say, 'I don't want her to be aware, I don't want her in my finances--it's none of her business.' And that seems problematic to me as well. I think if you're going to be in a relationship with someone, you need to be able to share the responsibility, the knowledge, the worry. It's not like it was when our parents or their parents were having lives where the mom just baked bread and the husband worried about it and the wife didn't know there was any problem. I mean, you should both be aware of what's going on.
Are there any reactions to look out for during this conversation that point to bigger problems within the relationship--red flags?
Yes I think red flags would be unwillingness to have the conversation. Or disdain. People say, 'ugh I don't want to talk about money.' I'm like, how could you not want to talk about money? It may seem terribly pedestrian and un-romantic to discuss it but the fact is, all of the things I just mentioned are going to come up in any relationship. You're going to have to talk about what kind of clothing your children wear and what kind of school they go to and how you shop and how you decorate the house. I knew a woman that spent an ungodly amount every month for fresh flowers in their home and it was a big issue for her husband. She said, 'I don't understand why this is such an issue for you--you make millions of dollars!' This wasn't the only reason they were splitting up, obviously, but it was one of these little things that irked him so much. Had they discussed luxury items, they maybe wouldn't have ended up in my office. You need luxuries in a relationship. The question is, how much are you going to be spending on them?
Okay so is the next step after having this financial conversation getting a prenup?
A prenup very much depends on the financial standing of the parties. The initial conversations will let you know whether a prenup is necessary. I think it's important to talk to either a family law professional or a business manager to find out. Some people come rushing in here and they think they need a prenup but if they have their accounts set up in a certain way and they want to combine their incomes once they get married, you may not need a prenup. If you have a business manager, you know at least in California that anything either one of you brings in during the marriage or you inherit during the marriage or is gifted during the marriage is going to be separate property. So, all these people that come in who are heirs to fortunes, it's kind of irrelevant--because anything you inherit is going to be separate property anyway in California. You have to keep it separate--you can't co-mingle it with the community money, but if you keep it separate, it is separate. I often turn people away and say, 'you don't really need a prenup.'
So let's assume it is appropriate. How and when do you bring up the issue of getting one?
Do it somewhere calm, not right before the wedding. You need to do it in advance of the wedding, you need to do it probably even before your Save the Date cards go out so no one can say they're under duress. You should do it far enough in advance of the wedding so you can sign it, put it in a drawer and never think about it. Don't do it immediately before the wedding for a multitude of reasons, not the least of which is, you don't want to have a bad taste in your mouth in terms of negotiating what may happen if you get divorced the day before your wedding.
Can just asking for a prenup drive a wedge in a relationship?
Yes it can, absolutely, but better to know now. You really do see a lot of a person's true colors and what their expectations are. It's very interesting to hear what people's ideas are of how the relationship is going to work. And when you really do take a cold hard look at how it's going to be, that is when you start seeing what could be problems in a relationship.
Okay, so prenup or not, can you sum up why it's so important to have this financial talk in a relationship?
It's not sexy. It's not comfortable. It's not fun. We talk about so many things in our relationships nowadays, but people still don't want to talk about money. It's taboo. But the fact is that once you have put it out there, your chances of survival in the relationship exponentially increase.