In case you haven't noticed, those thick-as-a-phone-book wedding magazines do not generally have headlines that shout, "What To Do About That Humongous Credit Card Debt He Didn't Tell You About Until Last Week, That Weasel!" and "Six Easy Steps to Writing Your Pre-Nup!" True, these wedding tomes do talk about young couples' money, but it's usually in a context that's far more Martha Stewart than Muriel Siebert: "Slash Your Wedding Budget by Making Favors Yourself!" To be fair, ModernBride.com does contain a few blurbs about financial planning for couples. But given that they're sandwiched between such weighty topics as "Choosing the Right Wineglasses" and "Monogramming Your Linens" ("For a traditional look, choose a script font; for a super-fun twist, go for bold colors in a way-cool contrast!"), you can't help but wonder how many readers actually read them, much less take them seriously.
Anybody who's ever planned a wedding knows that an engaged couple is surrounded by people telling them what to do with their money--why they must opt for the horse-drawn carriage, the diamond-encrusted jewelry, the giant bouquets of rare Australian orchids. If financial planner Mary Ellen Baldwin had her way, however, starry-eyed brides and grooms would spend more time planning their long-term financial futures than picking out floral arrangements. By talking with soon-to-be-married and newlywed couples about such unromantic matters as taxes, insurance, budgeting, purchasing a home, and the time value of money, Baldwin hopes she can set them on the path to a very tangible kind of happily ever after. That's the place where nobody has to fight about finances and there's enough money to fund both partners' dreams.
The Beginning of a Beautiful Friendship
Sounds great--except you can practically hear the business consultants shrieking about why the wedding-bell crowd is a crummy target clientele. First, most young couples aren't rolling in investable assets; often their greatest assets are their college diplomas, the pursuit of which has also put them into enormous debt. Many don't have the resources to pay for a full-service financial planning relationship, and can only afford a few hourly engagements now and then. And most can't be counted on to reel in moneybags-laden referrals, either.
Baldwin, 48, isn't blind to these drawbacks. In fact, it is because of them that she hasn't devoted her entire practice to young couples. "I think it would be impossible, short of doing this pro bono, to have a large clientele of newlyweds," says the Melbourne, Florida-based planner. A significant percentage of her clientele consists of retirees and small-business owners with an average net worth of $1 million and a minimum of $500,000 in investable assets, and these clients pay a flat annual retainer fee equal to about 1% of assets under management.
Yet there are reasons Baldwin makes an effort to make time for the lovebirds. For one thing, she likes them--the couples are young and energetic, not to mention the fact that they're more likely to share her own hobbies of roller-blading, scuba diving, and kayaking than are her retiree clients. In addition, working with engaged or newlywed couples is often a great way to strengthen relationships with current clients. "A lot of times I've done a good job for Mom and Dad, and they say, 'Oh, by the way, Pam's thinking about getting married. Will you see her on an hourly basis?'" Whether or not Pam turns out to be a long-term client, the fact that Baldwin now knows the daughter personally provides her with another brick in the foundation of her relationship with the parents.
But perhaps the best reason for working with engaged and newlywed couples is the opportunity to make a significant difference, and one that is generally disproportional to the time and effort put forth. Just as a tiny change in the angle at which the baseball leaves the bat can mean the difference between a pop-up and a home run, so, too, a slight change in the money habits a young couple learns early on can have a significant effect years down the road. "You can make a huge difference in their world by talking to them about charge cards, and the time value of money, and investing for retirement, and postponing gratification, and communicating with each other about finances," says Baldwin. "In these kinds of cases, I'm not sure that frequency [of client meetings] is relative to the success rate." After every meeting, she gives them what she calls the "lifeline." "Here's my card," Baldwin tells them. "If you need me, I'm here."
Even the fact that she can only feasibly see the couples by charging hourly, a payment structure she generally dislikes, isn't enough to put her off. "As a rule, I don't really like working on an hourly basis, because it's stressful," she says. "I don't want to overlook anything, and when people are paying you hourly, you know they're watching the clock and saying, 'Well, I don't want to take the time to tell her this and this,' and often, the important things only come out in conversation." For newlyweds, however, an appointment paid for by the hour is often the only structure that makes sense; it's both affordable enough for the couples while adequately compensating Baldwin for her time.
As an example of her place in these couples' lives, Baldwin tells a story. The young man had had it. His new bride was racking up debt at a staggering rate, and though he didn't begrudge her goal--earning a Ph.D.--he did begrudge her the speed with which the bills were piling up. Why wasn't she holding down a job and studying part-time at night? Why couldn't she skip a semester, just to give them time to pay off some of the loans? Six percent interest isn't horrible, but on $50,000? Come on! The numbers mounted, and finally he snapped. He packed his bags and left.
When the young bride called Baldwin the next day, the planner invited the couple into the office for a meeting. She didn't mince words: "Postpone the Ph.D.!"
"I told them, 'Don't give up on the goal of the Ph.D., but don't overwhelm yourselves with debt at this point in your lives,'" she recalls. The advice might have been different for a different couple, she adds, since another husband might not have been as freaked out by the debt or had a higher-paying job to offset it; another wife might have needed the doctorate right away in order to land a lucrative position or had the degree paid for by a corporation. "But in this case, his eyes were glazing over [in the face of all the debt], and he was saying, 'I can't do this.'"
As this story illustrates, advising newlyweds on financial matters can often be as much or more about life choices than expense ratios and fund selection. Should we get a graduate degree now or later? It depends, and here's the spreadsheet explaining why. When should we buy a house? That depends, too, particularly if you're expecting to be transferred. Should we buy a Porsche? No. (No spreadsheet needed.) Should we finish our college degrees? Yes! On this last one, Baldwin is crystal clear: "Invest in yourselves!" she cries. "That $2,000 put toward your tuition bill is far more valuable than hiding it in an IRA."
As with the doctoral candidate, it's not so much about trying to change or manipulate what the couple wants to do, it's advising them on when to do it: Don't skip the Ph.D., just wait a bit. Don't give up on your dream job, even if it doesn't provide health benefits or great pay; just hold out until it makes more financial sense. "I tell them, 'Don't give up on that dream. Just because you're working for a big corporation now, if you're dream is to be a photographer, go get all the credentials, go get all the experience--just do it as a part-time hobby,'" she says. "'Then, down the road, when you want to go full-time, you'll already have the experience and credentials, and we can figure out what to do about your health insurance.'" Baldwin herself followed that advice, earning her CFP in 1988 while working as a marketing analyst at a large corporation, Harris Semiconductor. From 1991 to 1994, she served as business administrator and part owner of a medical clinic, and it wasn't until 1995 that she opened her own planning practice, a firm funded in large part by the proceeds from the sale of the clinic.
For one of the client couple's most important life decisions, however, it's not about timing, it's about prevention. "One of my favorite lines is, 'You want to know how to retire early? Don't get divorced! Do you want to see a financial plan ruined? Watch it get divided in half,'" says Baldwin, who knows what she's talking about, having gone through a divorce herself in 1996. "Think about it: They work all their lives, they've got 401(k)s, profit-sharing. And then all of a sudden, they cut it in two, their living expenses double--it's ugly." Top that off with the attorneys' fees and two mid-life-crisis cars in candy-apple red, and now that spreadsheet is really ugly. Brides in particular would do well to consider the consequences, since the average woman experiences a 27% decrease in her standard of living following a divorce, while the average man's standard of living increases 10%, according to a study archived at Radcliffe College's Murray Research Center. Says Baldwin: "That's why I tell them: Stay married!"
Enter the Marriage Planner
Most brides and grooms, particularly those referred by their parents, are not falling over themselves to talk about budgeting and credit card debt. "When you're in love, you don't want to go looking for issues," says Baldwin. "They're like, 'Don't go bringing up that stuff! Let's talk about the cake and flowers!'" Couples entering their second marriages, however, are often more likely to come to her on their own: "Amazing how that experience makes a difference!" But in either case, Baldwin doesn't cut anybody any slack, starting right off with compiling net-worth statements as she would with any other client.
For each partner, she makes a list of savings accounts, money market assets, investments, credit card debt, car loans, student loans, and what each partner earns in income. She notes which accounts are in which partners' names, and double-checks that each person has named the retirement plan and life insurance beneficiaries they wish. If anything needs changing, she explains how to do it. She's very up-front about the implications of these decisions; with second-marriage couples, "I'll look right at them and say, 'Okay, if you're choosing the children [as your only beneficiaries], you're making a big statement there,'" she says. "'You love this person enough to marry them, but you're not going to take care of them after you die?'" Wary second-time-around spouses may initially balk, but usually they come around. "It helps if you point out that it's not that you've given [the spouse] your IRA money; you have to be dead for them to get it!" she laughs.
With young couples, Baldwin then moves on to a lesson in decision-making, to find out how each will respond to a future financial choice. "I'll say, 'Okay, let's fast-forward a few years, and say that you need a new car. What are you going to do?'" The wife, for instance, may suggest financing the car, while the husband may respond that he's always pinched pennies and then paid cash. "It's clear what conflict is going to crop up here, so you just approach them with, 'What's the difference here?'" and begin walking them through the math, she says. "'If you're saving and getting 2% on your savings account, and she finances it and pays 7% interest, she'll end up paying thousands more. Which do you think is better in the long run? And think how many cars you're going to buy over the years.'" The same type of example can also be used to start a discussion about credit card debt.
The next item of interest is typically the question of an investment versus an expenditure, a distinction that, to Baldwin's frustration, at least one of her newlywed couples has yet to master. "I have one couple who seems to be having a contest [over who can spend more]," she says. "He's buying Harley Davidsons, he's got a racecar, plus the trailer to pull it on--you name it." In turn, the wife's philosophy is, "Heck, if he can spend all that money, what difference does it make if I go out and buy some Ralph Lauren clothes?" She's got a point, says Baldwin, "and yet, from my perspective, what I see is: high wage earners, no savings, no equity. Just stuff. If they were buying rental properties, that would be different. But racecars?" Baldwin is continuing to try to counsel the couple, but admits that some personality traits are hard to overcome. "I don't always do so well with the big spenders," she admits. "But when they're both cheap--that's perfect. That's wonderful!"
One of her favorite financial planning tasks, she notes, is when a retired couple, both long-time savers, have enough funds that she can "refuse" to invest part of their portfolio and threaten to make them take a vacation. "You get to tease them: 'You're just going to have to figure out what you're going to do with this money, because I'm not going to invest it. So, where're you going? Hmmm?'" she laughs. "It's a riot, and they always come back saying, 'Thank you! We didn't know how much fun that would be!'" Her goal is that all her newlywed clients may someday be in the same situation.
Baldwin doesn't have a simple answer for young couples wondering whether to merge their accounts or keep them separate, but the answer usually has a lot to do with each partner's spending personality. For two savers, there's no need for separate accounts; besides, she says, who needs to balance two checkbooks? For partners coming into the marriage with different spending patterns and amounts of debt, separate finances can make sense, either two separate accounts (his and hers) or three (his, hers, and theirs).
Baldwin has one client couple in which the bride came to the marriage laden with credit card debt, and the groom brought $1 million in an equity portfolio. The young man did generously pay off his new wife's debt, but they established three accounts for future use. "She needed a budget, and I felt it would be better for her to maintain her own account," says Baldwin. "They chose an amount that was appropriate for the two of them to live on [to keep in a joint account], and then she got her own checking account and her own charge cards, and she's responsible for them." (The husband got his own personal account, too.) An older, engaged, client couple have chosen to make an even stronger statement about spending and personal accountability. He will not be paying off her significant charge card debt; instead, next year, when she turns 591&Mac218;2, she will dip into her 401(k) to pay off the debt and start the marriage with a clean slate. "He's worked too hard to get where he is to write the checks for her," says Baldwin, noting that such decisions must be a balance between reducing high-interest debt (and protecting retirement savings) on the one hand, and keeping partners accountable for their spending on the other.
Advising engaged couples and newlyweds may not sound ideal to all planners--they're not often rich, they're not connected, they can't pony up hefty ongoing fees. But for Mary Baldwin, faced with an opportunity to make a difference in the lives of young couples making their start in the world, it seems to be a match made in heaven.