A new WSJ article (“Money Can Break a Marriage, Even Getting More of It”) discussed the counterintuitive finding that receiving a positive financial windfall can actually harm a marriage. While we know that financial strain can increase the likelihood of divorce, the research underlying this article finds the opposite: more income can hurt marriages as well. As a Financial Professional it is incredibly important to understand the dynamics across a household--not just the primary financial decision-maker--so that you can help members of a household navigate financial shocks and expectations together.
The effects of financial strain and unexpected expenses are well-documented—as income rises, the likelihood of divorce decreases (Killewald et al., 2023). More recently, it has been found that this also holds for wealth (net worth)—an increase in wealth reduces the probability of a divorce. The most significant effect is seen when transitioning from a net worth of $0 to $40,000.
It would seem to follow, then, that making more money would reduce financial strain and, thus, strengthen the marriage. And it does, in general. However, a closer look at the data shows that these findings are significantly dependent on who in the marriage makes more money and receives the monetary windfall. Specifically, if it is the husband, all effects, short- and long-term, are positive; if it is the wife, however, the effects are negative (Becker et al., 1977; Cesarini et al., 2023). When it comes to unexpected wealth (e.g., winning a large lottery), the short-term negative effect for wives is especially pronounced. If the husband receives a windfall of $140,000, the probability of divorce decreases by 40% in the short-run; if the wife receives the same windfall, the probability of divorce doubles.
Who in a marriage makes more money or receives a monetary windfall is a significant factor in potential marital strain.
While this effect can be attributed to strong gender norms about who should earn the most income in a marriage, it can also come down to ineffective communication, misaligned goals, and how financial responsibilities are shared among couples. For example, if a wife wins the lottery and the husband was, historically, in charge of household finances, the income shock may increase the wife’s interest in how the money is used. This shift in financial responsibility can expose weaknesses in the relationship and potentially lead to divorce. Overall, ineffective communication about finances and unequally distributed financial decision-making responsibility has led to increased rates of marriage dissolution (Olson & Rick, 2022; Ward & Lynch, 2019).
Financial Professionals (FPs) have a large value-add when it comes to marital finances. Knowing that effective communication, aligned financial goals, and shared financial decision-making has a positive effect on relationships and financial well-being, FPs should encourage both parties in the marriage to participate in meaningful and effectual financial conversations. If one partner feels less qualified to make financial decisions or takes a more passive role in such decision-making, FPs should encourage participation from this member and make them feel more involved in the process. Not only does this solidify the relationship between the FP and quieter partner, but it also leads to more financial stability and greater wealth over time as the marriage continues.
So, how can FPs achieve this? At Atlas Point we have several tools to help you facilitate conversations both between yourself and the less active partner, as well as between married couples. Our Financial VirtuesTM survey identifies different personas, blind spots, and sweet spots for each person in a partnership. This can help you communicate with each member of the marriage in a way that is most valuable to them—forming a deeper relationship with both partners. In addition to the survey results, you can access a Household Report that highlights the overlapping personas of the two individuals. This report is especially important in facilitating communication between couples. It will show you sweet spots and blind spots for the couple together, helping you to guide the couple in communicating about their finances in a manner that is tailored to their needs.
In the Household Report above, you can see that the overlap has to do with an appreciation for structured thinking (Orange Bull) and an inclusion of different perspectives (Blue Bull). Areas that could cause tension revolve around having too many people involved in the decision (Orange Bull) or getting hung up on details (Blue Bull). One way to avoid issues would be to have the Orange Bull build a precise plan before the meeting and then you, as their FP, can create a summary of that plan for the Blue Bull. This involves an additional perspective in the conversation (you) and allows the Orange Bull to be as precise as they want without overwhelming the Blue Bull (since you are summarizing the main points for them). From there, you can integrate your experience and expertise to make specific recommendations based on the plan and what goals both would like to achieve.
Receiving buy-in and encouraging engagement from all members of a household can increase your value as an FP. It can also help households better understand and achieve their financial goals. A true understanding of not just each individual within a household, but also the overlap and areas of tension when it comes to financial strengths and weaknesses across the household, can set you apart as an FP and increase loyalty and retention via deeper, more meaningful client conversations.