Since this blog is about doing finances as part of a committed relationship, I wanted to talk about how a healthy marriage can impact your bottom line. Now, mind you there are lots of reasons why it is very important to have a happy marriage. Happy marriages are associated with longer life, better job performance and improved physical and emotional health. But – and you’ve probably figured this out already – marriage also has a ton of financial benefits as well. In fact, married households have way more wealth than unmarried households – averaging at least twice as much net worth according to some analyses: $544,200 vs. $218,000 (1). Why? Well, there are a number of reasons:
1) Marriages benefit from dual incomes and joining of assets: This is pretty obvious, but if you have two wage earners in a family, your earning power and flexibility is a lot stronger than if you have one earner. There is just more. More cash, more stocks, more earning power, more assets, more labor. More of everything.
2) Economies of scale: Married couples are able to do things more efficiently than singles. This means buying food and clothes in bulk, as well as some degree of task specialization when managing money. One partner may be better at investing, when the other might be more of a budget guru. Spouses can also provide assistance with housework, pet care, transportation, and other services that may allow both partners to better manage work and family responsibilities. Other key costs like child care or in home care are also less expensive. The bottom line is that married couples have more resources to throw at financial independence and its cheaper to live when you are married because of economies of scale.
3) Increased disposable income: As a general rule married couples have more disposable income, which they may be used for larger mortgage payments, for additional real estate purchases and acquiring financial investments (e.g., savings and checking accounts, stocks, retirement accounts). More disposable income also means greater flexibility in the event of financial problems – like an increased property tax bill or a period of unemployment.
4) Second, married households benefit from asset acquisition: Think about it for a second. A normal part of life in the U.S. is getting married and buying a house. When you think about asking someone what they are going to do after they get married its usually well…lets buy and house and have a couple of kids. This isn’t always the case for single households or couples that just live together. Since home ownership has traditionally been a big driver of wealth in America, it makes sense that marriage fuels asset acquisition.
5) The longer you stay married the richer you get: This is because of all of the processes we’ve discussed and because of time value of money. Basically, if you have two people hustling the same financial goals, progress tends to accumulate rapidly over time. More investments yield more cash which yields more investments, which yields more cash, which yields more investments etc. etc. The converse of this is also true. If you get divorced, its a ticket to the poor house. This is because of lawyers fees, splitting your assets, reductions in wealth building efficiency, emotional wear and tear or the like.
6) Marriage means more social support: Social support is really important for achieving long term financial goals. If you are a typical wage earner, it can take months to get a reasonable amount of cash together. For example if you saved $500 a month it would take you 5 years to save $30,000, about as much as you’d need for a decent house or a enough to start a small business. Five years is a total demotiavator. Lets face it, scrimping and saving every buck you can to become financially free kinda sucks. This is a lot easier if you have someone who loves you and supports you in your savings goal. You can also keep each other fired up, positive and feeling good.
Whats more awesome about marriage is that all six of these processes compound. Married people get the benefits of dual incomes, economies of scale, improved asset accumulation, a juiced up time value of money and they can provide emotional support to each other.
Folks, the bottom line is if you want to get rich: Get and stay married. Nurture a happy, healthy relationship with your spouse. Your pocketbook will thank you.
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