Treat your marriage like a business

My artist husband likes to say that if I were in charge of our spending, we’d be sitting on milk crates instead of furniture and that if he were in charge, we’d have no retirement accounts.

The fact that we have both nice furniture and retirement funds is a testament to compromise — and the wealth-building power of marriage.

Married people are significantly wealthier than single people in every age group, and the gap tends to widen as people approach retirement age. Married couples age 55 to 64 had a median net worth, excluding home equity, of $108,607 in 2011, the latest available Census Bureau figures show. By contrast, single men in the same age bracket were worth a median $14,226 and single women $11,481.

Income and education also contribute heavily to wealth — and to the likelihood that people will marry. But a 15-year study of 9,000 people found that even after controlling for those and other factors, marriage itself contributed to a 4 percent annual increase in net worth. The same study found that wealth typically began to drop four years before a divorce, which reduced people’s wealth by 77 percent.

Because marital status is so powerfully associated with financial status, people would be smart to view marriage as a business arrangement in addition to a romantic one. Taking a few pages from the business world has certainly made our 19-year marriage stronger as well as wealthier.

Here’s what works for us:

CONDUCT DUE DILIGENCE

Before a “merger of equals,” companies can spend millions of dollars and countless hours scrutinizing each other’s financial details, performance and prospects. You don’t need to hire a fleet of lawyers and accountants, but knowing what each person owns and owes before marriage can prevent unpleasant surprises later.

CREATE FINANCIAL STATEMENTS

You need two: a balance sheet showing your net worth as a couple — your assets minus your debts — and a cash flow statement, which shows your current incomes and expenses. Use these documents to judge your financial health, spot potential problems, such as spending more than you make, and track your wealth-building progress.

DRAFT YOUR BUSINESS PLAN

Successful businesses have to set priorities and decide where to concentrate their resources. So do couples, who have to figure out how to save for the future (with retirement, emergency and college funds, for example), pay off the past (mortgages, student loans, credit card debts) and live their lives in the present (paying the bills and having some fun). You’re likely to have more goals than money to achieve them, so you will need to decide together which are the most important and how to divvy up your income among them.

APPOINT A CHIEF FINANCIAL OFFICER

Chances are one of you is better at the day-to-day financial details, such as paying bills and monitoring financial accounts. Having one person take responsibility for these chores helps make sure they get done. The CFO also might be the person who researches large purchases, does the tax returns, shops for insurance and rebalances the investment accounts. The CFO does not, however, make financial decisions unilaterally. In the business world, the CFO is responsible to the board of directors. In a marriage, the partners are responsible to each other and should be making the big decisions together.

COMMIT TO FULL DISCLOSURE

Publicly traded companies have to keep their shareholders informed with quarterly financial statements, audited annual reports and announcements of major events.

Couples don’t have to keep to a federally mandated schedule, but regular meetings to review the finances are a good idea.

Disclosure is key if you’re going to make sound financial decisions together. Unfortunately, a recent Harris poll for NerdWallet found that 1 in 5 Americans in a relationship with a partner who is saving for retirement have no idea how much their partner has saved.

A similar proportion of those saving for retirement haven’t disclosed the amounts to their partners. That’s bad enough, but what’s worse than lack of disclosure is deliberate dishonesty. Hiding debts, concealing purchases and having secret accounts all undermine intimacy and trust. That doesn’t mean you can’t have separate accounts or “no questions asked” spending money to reduce conflict.

But you shouldn’t conceal or lie about your financial situation to avoid a fight. That’s a red flag that there’s something you two should be discussing.

LOWER YOUR STUDENT LOAN PAYMENT

Affording your student loan bills should be your priority because the consequences of default can be severe. When you default, the government, for instance, has the power to withhold your pay or seize tax refunds to collect your unpaid federal loan debt.

If you’re having trouble making your payment, switch to an incomedriven repayment plan. These options can reduce your monthly repayment to 10 percent or 15 percent of your income. Check whether you’re eligible for student loan forgiveness, too: Public Service Loan Forgiveness will make your remaining loan balance disappear after 120 on-time payments if you work for a nonprofit or government agency.

Refinancing can also help you manage your student loans. A private lender will pay off your current debt and issue you a new loan at a lower interest rate. You must qualify based on your income, credit score and job history, so it’s best for those who aren’t in danger of falling behind on payments. You’ll also lose certain benefits if you refinance your federal loans.