Finance problems are one of the leading causes of divorce. Zilennial finance expert Haley Sacks (@MrsDowJones) joins Wealth! to discuss how to navigate money and relationships.
When it comes to combining finances, Sacks outlines three strategies: percentage-based splits, the wealthier partner “paying for everything,” or the “Dwayne Wade-Gabrielle Union split” (50-50).“A prenup is right for everyone,” Sacks adds. She views the legal arrangement as a way for Americans to audit their finances and bring transparency to their partnerships.
Lending money to friends and loved ones can be another source of interpersonal financial discomfort. “Whenever you lend someone money, you have to basically assume you’re not going to get it back,” Sacks says. For this reason, it’s important to take time to review your finances and devise a contract with the loved one seeking funds, she explains.
For more expert insight and the latest market action, click here to watch this full episode of Wealth!
Editor’s note: This article was written by Gabriel Roy
Video Transcript
BRAD SMITH: J.Lo once said, my love don't cost a thing-- you thought I was going to sing it for you. And while you can't buy love, money can interfere with the matters of the heart. Finance problems are still one of the leading causes of divorce. So how can you navigate money and love, hearts? Joining me now is Haley Sacks, a.k.a. Mrs. Dow Jones, Zilennial finance expert and founder of Finance Is Cool. Haley, good to have you here with us in studio.
HALEY SACKS: Thank you so much for having me.
BRAD SMITH: Absolutely. So let's take a look at this in a deep dive. Looking at money and marriage, should people combine finances after they tie the knot.
HALEY SACKS: Wow. Whoa.
BRAD SMITH: Throw that to you.
HALEY SACKS: So basically, when it comes to combining finances after you've tied the knot, there are three main ways to do it, and you got to choose which one works for you and your partner. So the first one is a percentage-based split. So you would take both of your incomes and look at how much you make and how much you're spending, and do it with that.
The second one is you can just go with the richer partner pays for everything, which I mean for a lot of people sounds pretty good. Just let them take care of it, or you take care of it, whatever works. And then the third is, I like to call the "Dwyane Wade-Gabrielle Union split."
BRAD SMITH: What is this?
HALEY SACKS: That's the 50/50.
BRAD SMITH: OK.
HALEY SACKS: Because they've got different net worths, different incomes, but it doesn't matter. No matter what, they're going down the middle. And when they admitted this, it was actually very controversial, but that's what works for them as a couple.
BRAD SMITH: Yeah, and you have to decide what does work for you. So how do you know as well if a prenup is right for you.
HALEY SACKS: I mean, personally, I think a prenup is right for everyone, just because it makes you go through your finances and be super open with who you're marrying about what you're bringing into the marriage, because marriage is a contract. So you know, the same way that people have health insurance or car insurance, a prenup is just marriage insurance. And seeing as 50% of marriages end in divorce, it sounds like something that we should all have.
BRAD SMITH: All right. If we haven't stepped on toes yet, we're about to step on toes with this next one. How do you navigate lending money to friends and/or significant others as well?
HALEY SACKS: So you know, if someone asks you for money, that can be very stressful thing, especially if it's someone that you're close with. But I always say take a second, when they ask you, don't respond right away. Not so great negotiating tactic--
BRAD SMITH: Why is that?
HALEY SACKS: --just in general. Because you don't want to say yes or no in the moment, because you might agree to something that you're actually not that comfortable with. You know, so if you say, OK, let me think about this, then you can come back and actually figure out, is this something that I can afford to do?
Because whenever you lend someone money, you have to basically assume that you're not going to get it back. You have to. It has to be money that you're OK with losing. So don't be afraid-- don't ever loan money that you really need. Loan money that you're comfortable taking a risk with.
And then the other thing about lending money is that you really want to make sure that you have a term of agreement. You've got to have a contract with them, because otherwise, they just think, oh, they're giving me money, whatever, I can go and do whatever with this. But if you make it a bit more official, then it does make the whole partnership feel more official and they will then respond in that way and hopefully pay you back.
BRAD SMITH: You mentioned Dwyane Wade-Gabrielle, I'm just wondering, what is the most fascinating financial kind of couplehood, or marriage, or partnership that you've heard of, that you've come across and said, oh my gosh, that's really striking that that's how they decided to go about things?
HALEY SACKS: Well, I mean, every couple, of course, is different. And most of them are pretty close lipped about it. But I do like that 50/50 split for Dwyane Wade and Gabrielle Union. Trying to think about another couple that did it really cool.
BRAD SMITH: And it's really interesting too. I'll add this on top of it because even in a lot of Pro athletes management of their finances as well, they say, OK, we're only going to live off of perhaps what my earnings from playing the sport are. And then endorsements, that's what we're going to be able to put away and make sure that we're saving correctly.
I mean, that's been an interesting way that we've seen a lot of people who have high net worth, high income be able to really navigate a windfall of cash that they might be coming into but wanting to be responsible on top of that too.
HALEY SACKS: Of course, and especially when you're in a high-earning season, where you have a lot of money coming in but it might not last forever, it's so important to just allocate a little bit of money for your living expenses, but then be putting the rest away for the future for those years that you're not a Pro athlete. There aren't endorsements rolling in, and things are a bit quieter, but then you still have that nest egg to rely on.
BRAD SMITH: Right. Absolutely. All right. We're going to continue to have more of these conversations. Thanks so much for joining me, Haley Sacks.
HALEY SACKS: Thanks for having me.