Monday, July 16, 2012

Is marriage a wealth-draining institution?

I’ve mentioned the Boglehead forums here before – a place where disciples of Jack Bogle can gather and discuss life and their shared passion for low-cost index funds. On the forums you can find perspectives on almost anything related to personal finance, and one particular thread on the economics of marriage caught my eye.  This was a few months back, and I unfortunately can’t find the exact thread, but the poster wanted to discuss the net benefits and net losses of entering into marriage.  Honestly, my first thought was “wow, what a weirdo”, but it’s actually an interesting question.  On a side note – I do have a friend who’s generally uninterested in getting married for love, but would consider it as a business arrangement.  Certainly, it’s been done many times throughout history, and plenty of people are benefiting financially from their unions.

The majority opinions on the thread, which seemed to be made up of bitter men lamenting the loss of 50% of their savings due to divorce, was that marriage was a risky gamble – A 50% chance of losing 50% of your assets?  Even if the other 50% chance involves equally excessive gains, that sucks.  We’re risk-averse, and the pleasure of gaining $X isn’t felt as powerfully as an $X loss.  Of course, that logic is of dubious usefulness – your statistical odds of divorce go down with age and education.  But as I’m constantly reiterating to clients – a test involving many people/stores/restaurants can be read with high statistical significance given the action has an impact on whatever you’re measuring, and there is a large enough sample size.  Yet as soon as you take a look at any individual – all bets are off.  Any number of things can occur at an individual level.
So the consensus among the Venn diagram intersection of divorced people and practical/frugal/internet-dwelling peoples is that marriage is a risky proposition.  At the same time, choosing a partner for life is undoubtedly one of the biggest financial decisions you’ll make, and the value of the right person is astronomically high.  Warren Buffett’s friendship with Bill Gates is chronicled with some detail in a biography I recently read- the unlikely beginning, the progression, Buffett’s pledge to give a substantial portion of his money to the Bill and Melinda Gates foundation.  At one point, Gates proposes to his then-girlfriend Melinda French, secretly flies her to Omaha where they pick out a ring at Buffett’s Helzberg Diamonds, and then everyone plays poker.  And Buffett notes that he thinks Bill and Melinda getting married is fantastic – it’s a smart choice, because Melinda is smart and fantastic.  Buffett, a man who understand the value of money, understood that a choice in partner contributes significantly to your financial health. 

The moral of the story?  If you ain’t to punk, holla we want prenup!  But really, isn’t it crazy how hard it is to unpack big life decisions and decouple them from money?  And now, I’m going to throw out a really terrible analogy that will make you question my humanity.  If investing in specific companies, you want to go for a business that has high-value underlying assets, with a great vision/idea and an intelligent workforce, one that you expect will create value for the world, and get noticed.  Shouldn’t you be with someone who you expect great things from, and who will push you to get the best returns on your investment in yourself?


  1. "Shouldn’t you be with someone who you expect great things from, and who will push you to get the best returns on your investment in yourself?"

    And yet, lots of people don't marry for money. Men, especially, often fall for other qualities in their partners :)

    I do think that money does play some role in choosing a partner. The details depend on cultural standards, personalities, etc.

    This reminds me of a lovely saying: "don't marry a man because he is rich, but look for a husband among rich men".

    1. Interesting quote. Definitely agree that so much depends on cultural standards. From my vantage point, there's nothing necessarily wrong with marrying for money (except for my hesitation that I could have a truly equal partnership given such an imbalance). But on the other hand -- I feel really confident in my ability to provide for myself (assuming good health, knock on wood). So that means in some ways, I'm lucky that money's not the central narrative. =)