Over here, Boxer gave this warning to the unmarried brothers:
Johnny Depp has millions of dollars and plenty of free time at his disposal, with which to defend himself…If this happened to one of us, we wouldn’t have access to the resources to give us a fair chance. This is why I encourage brothers to not get married, or at least to vet a potential wife very carefully.
You are not Johnny Depp. So while Boxer continues to warn against getting married, I’ll recommend ways to have a successful marriage. Of course you should vet your potential wife carefully, but you should also implement a financial plan. This not only protects you in the event of a divorce, it also keeps you and your wife’s spending disciplined. This leads to a happier marriage and greater financial security.
Aim for a minimum personal yearly income of $50,000. Pick an appropriate career. Avoid taking on a lot of debt if possible. Avoid getting married until you have financial stability. The more you make the easier the plan will be, but it’s not a strict requirement.
50% of your income goes to the spending budget. You will live off of this. Make a budget and do not exceed it. 20% of your income is saved and 30% is put into savings for a house down-payment or to paying down the principal on existing student or mortgage debt. Any income she makes goes straight into savings or debt reduction, split according to the 2:3 ratio. After combining your income, total general family spending should be no more than 50% of your income alone.
You’ll eventually have a lot of savings, but its primary use is for real emergencies, like divorce, and for spending when you are older. Yet, even if you do not get married, you won’t regret it. It wouldn’t be so bad if you end up being the rich person nobody knows about.
Eventually you’ll have enough money to buy a house. Consider waiting to buy until your down-payment is at least 20% to avoid throwing money away on private mortgage insurance. Make it a sensible house: your monthly payment should come out of your general spending budget. Set aside enough money out of the 30% debt budget for 2 emergency mortgage payments. Choose a maximum of a 15-year mortgage. If you make more money than the minimum, consider choosing a shorter-term mortgage to get a better interest rate. The goal is to pay down the principle.
You want to get as close to full ownership of your house as possible before you hit 7 years of marriage, when the odds of divorce are the highest. Once you fully own your home, continue to live frugally. Save your money. Start a family. Owning your home means much less marital stress, especially as you add children.
Drive a smaller used car, ideally with a more reliable manual transmission. Pay cash for it. The only loans you should ever get are school loans or a mortgage. You can tap your home equity in a true emergency. Hopefully you will never need to do this.
Move out of the high tax states: California, New York, Oregon, Minnesota, Iowa, New Jersey, Vermont, and D.C. You can move to one of the 7 states that have no income tax or those with low taxes: North Dakota, Pennsylvania, or Indiana. If you live in a location with high taxes or a very high cost of living, you may need a greater income.
You will teach yourself—and her—how to live frugally. This improves self-discipline. Be thrifty. Reuse things. Use used things, and get free stuff. Don’t buy the latest fashions. By forcing you and your wife to live within tight means, you’ll filter out any women who can’t live with such constraints. Don’t marry them. If you are not sure, implement this financial plan during your engagement period (manage her bills and bank account for her).
Keep your standard of living reasonable. If you get a divorce, you don’t want to have to pay to keep her living at an unsustainable living standard. Establish a standard of living in the marriage that you can afford in divorce, while planning to get additionally screwed over. A judge may give away 60% (or more) of your income and wealth in some situations. If you’ve followed this plan, you’ll be able to live comfortably on 25% of your income and have some reasonable savings.
Your wife is most likely to divorce you in years 5-9, which is also when you are going to be hit by the the largest alimony payments. You want to live as frugally as possible until you pass the danger zone. By your 15th to 20th year of marriage, you’ll have saved up a sizable sum of money and can start to live more comfortably. This is perfect for your midlife crisis.
During our first year of marriage, my wife and I were both unemployed and going to college. We had no savings and almost no income. We lived off the money from our student loans. We used free cast-away furniture, bought our groceries in bulk, and got free dial-up internet by cycling through AOL and Earthlink CDs. We had one used beater car and utilized public transportation whenever possible. Where did we do this? In a one-bedroom apartment in Philadelphia city, where taxes and cost of living were high.
Eventually I got a job, but we continued to live simply (e.g. our next used car cost less than $2000, inflation adjusted). We were not well off, but we were able to pay all of our monthly bills with some money left for savings. In about 3 years we were able to buy our first house.
We waited 7 years to have children. We married young, so this wasn’t a big deal. After this many years of following our financial plan, we could afford children. The financial flexibility allowed us to adopt from China on three separate occasions. This was important because, in addition to the expense of adoption, our children have significant physical needs requiring many surgeries (with more to come).
We now have 5 children, so we have to buy more expensive used, high-mileage, 7-seat minivans, but we still live well within our means. We were married almost a decade-and-a-half before we got cable TV and cell phones.
There are various alternatives to the plan I described.
You may want to adjust the plan according to your personal risk profile. For example, you could push the monthly mortgage payment out of the general spending budget and into the debt reduction portion of income. This provides a lot more general spending flexibility. You may need to do this if you have a career that pays close to the minimum regardless of years of experience.
Consider changing the savings/debt reduction percentages from 20%/30% to 25%/25%. The goal is to save as much cash as you have equity in your home. In the event of a divorce, one of you can keep the house and the other can take the cash. This potentially avoids a financial loss from a forced home sale or her just taking the house outright with no compensation—or maybe she’ll get 100% of the home and 50% of the cash.
If your wife does not divorce you or cheat on you, congratulations on having the kind of marriage that up to half of married men experience. Enjoy your quality wife and family along with your acquired wealth.
Keep in mind that these are just suggestions. Having a financial plan is just one piece. None of these plans are sure things. You must do your due diligence and there is always risk. Consider talking to a certified financial planner.
Article text and photo by Derek L. Ramsey is licensed under a CC-BY-SA 4.0 License.