PODCAST: Love and Money with Mari Adam

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published 24 February 2021

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David Muhlbaum: Talking about money can be a tough topic for couples, but it’s a conversation that needs to happen. Certified Financial Planner Mari Adam joins us to talk about the techniques she’s learned and shared in decades of advising. Also, an update on tax twists for this year’s filings, and gadgets you’ll need if the power goes out. That’s all coming up on this episode of Your Money’s Worth. Stick around.

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Sandy Block: Well, a whole lot more people collected unemployment benefits last year, and many of them got unemployment benefits for the first time. And a lot of those people didn’t realize that unemployment benefits are taxable, just like a regular paycheck. And you know, it’s not fun to pay them. If you’ve got unemployment benefits last year, then in addition to forms from your employer or employers, you’ll get a 1099-G form from your state.

Sandy Block: Now, when you file for unemployment benefits, you can elect to have 10% of those benefit payments withheld for your federal taxes, but hardly anybody ever does that, because they need the money or they don’t understand that the benefits are taxable. And so, depending on your situation, where, as an employed person, you might’ve been due a refund, now, having been unemployed, you may actually owe tax. As in, you need to write a check by April 15th.

David Muhlbaum: Ouch. Yeah. Well, given that unemployment benefits were, for a while there at the beginning of the pandemic, much more generous than usual — that extra $600 a week from the federal government. I mean, that could have given some people’s income a solid kick for the year. That was the point, right? Stimulate the economy by getting more money into it, but for the individual who owes taxes on a boost, well, yeah. That’s not fun now.

Sandy Block: Right. And I think a lot of people who get into trouble are people who maybe collected unemployment for a few weeks or a couple of months, and then go back to work, because then they’ve got those untaxed benefits on top of their regular income. And don’t forget the states. A handful of states, including some biggies like California, Pennsylvania, and Wisconsin, exempt unemployment benefits from taxes, state taxes, but otherwise, if your state has an income tax, it’s going to want its share too.

Sandy Block: Well, obviously, if this is going to be a problem for you, you want to look for every tax break that you can claim on your tax return to reduce your income. And this year, there’s a little extra boost. Everyone can deduct up to $300 in charitable contributions, whether you itemize or not. Obviously it’s too late to make a 2020 charitable contribution, but if you have historically been someone who takes the standard deduction rather than itemizing, and you’ve just been giving because you’re a good person, you can do good and lower your tax bill at least a little bit.

David Muhlbaum: Okay. And here’s another 2020 special: What about people who took a hardship withdrawal from their retirement funds? I mean, I know the cares act spared people the usual 10% early withdrawal penalty, but tax is still due, right? I don’t even know: Is withholding a thing here, or is that accounting up to the individual? Let’s say someone dug into their account because they needed the money. I should hope they didn’t spend it all, right?

Sandy Block: Within three years. Within three years. But you can do it at any time. If you took a pandemic withdrawal last year, you have two choices, assuming you just can’t pay it back. You can pay the entire tax bill when you file your 2020 tax return, or pay one third of the balance in 2020, 2021, and 2022. And if at any time you roll back the amount that you took out, even after you’ve paid taxes on it, you can file an amended return, and get a refund.

David Muhlbaum: And we’re going to come out and say that it’s no accident that we chose to have you on now. We actually wanted a guest to talk about couples and money around the time of Valentine’s Day. Actually, after Valentine’s Day, which in my humble opinion is kind of a fraught holiday. Like what if you don’t have a honey to buy flowers or whatever for on this specific day, which I would note is named for the patron saint of beekeepers, who got whacked by a Roman emperor.

Mari Adam: I think we should, because what we do know is that money is probably the number one thing that couples argue about. We know it is a leading cause of divorce. It is very important in a couples relationship, because whether you have money or not really governs whether you can buy a house together, you can send your kids to college, you can even retire. And all too frequently, couples don’t start having this conversation until it’s way too late.

Mari Adam: It would be good if they’ve done it already. This is something you should do as early as possible when your relationship starts becoming serious, or definitely when you’re moving in together, or something like that. So better late than never. So if you are deciding to tie the knot, it is definitely the time now to sit down and start having, not the conversation, but probably a series of conversations where you can make sure you’re really compatible when it comes to money.

Mari Adam: Firstly, I think it’s a good idea. And I know women in particular who will not get into a serious relationship without really doing some research into someone’s credit, but it is a good idea. I think when you are serious and you’re sitting down to have this discussion, it’s a great idea to exchange information about your income, your assets, what you want out of life, and also your credit score, because that is going to determine whether or not you can move ahead on some of your plans. So I don’t think it’s invasive. I think it’s very important information that, when you’re entering into a lifelong relationship with someone, or hopefully lifelong, you have this information at hand.

Mari Adam: Well, I think the most important thing is you want to have a candid conversation. You want to be totally transparent. This is not about making someone feel good or bad, or shaming them. It’s really just to exchange information, so you understand how that person handles money, what they want out of life, and really try to set aside a structure that, if you live together or end up getting married, you can see eye to eye and have a good money relationship with shared values.

Mari Adam: Well, things have really changed. I think back when I got married, and I’m probably a typical baby boomer, the typical structure was that when you got married, you totally pooled your finances, so you had one joint account and you shared that. That has really fallen by the wayside. So your typical couple now does things a little differently. It’s what I call the yours, mine, and ours. So you have your account. I have mine. Usually, we both contribute into some kind of joint pot, where we pay the major bills out of, like our mortgage, our car payments, and things like that. And we each use our personal accounts for smaller, personal expenditures. That seems to work better for millennial couples, and even baby boomers who are mirroring for the second or third time, it really works better. That way, you have some joint projects together, joint responsibilities, but you also conserve your independence.

Mari Adam: And so, it’s not 50-50, where you’re each putting in the same dollar amount, because clearly that’s not fair when you have somebody who’s making a lot or maybe somebody who’s not working at all. If you have a stay-at-home partner, they may not be contributing to that pot, but I do feel it’s important for the couple to protect that stay-at-home partner by making contributions to their retirement account, and sometimes even a personal investment account, so they have some money they can use without always going and asking for permission.

David Muhlbaum: I really like those terms that you used, yours, mine, ours, in part, because I feel like one of the struggles that couples face is finding the terms, the language to use for how to define how they do this with their money. They’ve hopefully gained an idea of how to manage their own money, figuring out how to manage money jointly requires a new set of terms, and there’s a learning curve there.

Mari Adam: Right. It’s really all about shared values and respect. You do not have to have the same money personality. You don’t have to be identical. Maybe you have one person who’s better at money than the other, but you have to respect the other person, and not make this about control. And I think way too often, in traditional marriages, you see this element of control, where if I’m the one who’s making the money, I get to make all the decisions, and I get more votes at the dining room table. And that is probably the best way to destroy a marriage than any of us have ever seen. So it’s all about this mutual respect, knowing what each partner wants, and protecting them for the future.

Mari Adam: Yes. And not everyone does prenups. You don’t have to, but generally we would strongly recommend doing a prenup, when you are coming into maybe a second or third marriage, when you already have children, or responsibilities that are your own, or when you’re bringing in a substantial amount of assets, or making contributions to joint projects. Like for example, if you’re buying a house together, and you are the one putting in all the money for a down payment, you might want to do a prenup, just to recognize that you’ve had unequal contributions.

Mari Adam: But getting back to why they’re important. People look at a prenup as not romantic, or being selfish, and it’s really not about that at all. It’s protecting the person you love in the relationship, and it could be children as well. So it’s respecting commitments to each other, and trying to protect them. And I don’t want to go off the subject here, but it’s really important to note that there is a huge wealth inequality between men and women. So women in general have about 30 cents saved to every dollar that men have saved. And a prenup is really important to try to protect what you do have, if you’re bringing it into some kind of relationship, and make sure that, usually the woman, although it could equally be the man is protected if that relationship doesn’t work. So they have the ability to retire, put a roof over their kids’ head. Without a prenup, sometimes it’s very difficult to do that if the relationship does not last.

David Muhlbaum: Prenups are a lot about protecting existing assets, but I’m thinking back to something you mentioned earlier about the couple, where you have a non-working spouse, and you need to make sure that that person is essentially protected going forward, by funding their retirement accounts, even if they’re not the one contributing. So that in theory could be a look-ahead thing put into a prenup maybe.

Mari Adam: And it’s a great idea, because first of all, not all relationships are recognized through marriage. So we have more and more people now who buy houses together, have kids together, and they’re not married. So if you’re not married, it’s even more important to have some kind of contractual agreement, because at least marriage gives you some protections depending on the state you’re in, but if you’re not married, you don’t have those protections at all. So then it’s very important to do a prenup. And I think we are concerned about the partner who makes significantly less, who does not work, or like many women, who drops out of the workforce, who opts out, looking in COVID, to take care of children, to provide those childcare responsibilities. And you can see that with COVID, what it has done to the financial welfare of women is truly devastating, where women are dropping out of the workforce to take care of children.

Mari Adam: So it’s very important to provide protection as much as possible. So if you decide you’re going to be a stay-at-home partner, we don’t want you to end up when you’re 55 with nothing. And of course, looking at all the divorce cases out there, they don’t always end up fairly. They don’t always go in your favor. They’re not always probably even-handed. So it is very important to take steps to protect that stay-at-home spouse, or the partner who drops out of the workforce to take care of kids. Otherwise, it just may not happen.

Sandy Block: I did an article a few years ago about older couples deciding not to get married at all because it’s just too complicated. And you know, the societal view of living together has sort of changed, but the other thing, and I think you addressed this in our interview too, is that if the couple isn’t married, and one owns the house and the other doesn’t, and the relationship ends, one of the partners could end up homeless, and you mentioned the importance of having an agreement in that kind of situation too.

Mari Adam: Right. And I guess a good example for most people, let’s say you’re going to build a house. You will undoubtedly have a written contract with that home builder about exactly what you want and when it should be ready, and how much it’s going to cost you, and how they’re going to do the work. It would probably never occur to you to go build a house, buy a house without a written contract, right? Yet people go into lifetime relationships where they perhaps give up their ability to earn a living and rely on someone else without written documentation. And you get back to why you need a prenup or why you need an agreement, if you’re living together or buying a home together, because it’s a complex relationship. It may last, 10, 20, 30, 40, 50 years. So it’s very important to put into writing what those protections are, what those agreements are, if at all possible, because it really does protect you.

Mari Adam: But yes, your example is very good. If you’re in a home together, someone may die prematurely. There may not be life insurance. If that happens, you could be asked to leave the home if you do not own it. So we take all this for granted, but it’s really important to look at what could happen and protect yourself. And that’s also the job of your financial advisor, if you have one, to raise some of these issues and have a talk with both partners to come to a good understanding of what you both want to have happen.

Mari Adam: They have kids of their own and grandkids of their own sometime, and we’re busy setting up college plans for some of these grandkids as they’re born. What’s the biggest shift? I think there’s a big difference between baby boomers and millennials. One of the differences is you’re seeing less of the formalized getting married when you’re buying a house or having kids. That’s just a huge change that we’ve seen, where you don’t always have the protection of law nowadays that you would have in a baby boom generation. The other thing is you’re seeing some mixing up of these gender relationships, less of the nuclear family, where the husband goes to work and the wife stays home, although you still do see a lot of that. And the one thing I think that’s noteworthy is that the millennial generation, very broadly, people in their 20s up to 40 or so, they tend to be a little less financially literate than the baby boomers.

So even though financial lives are getting much more complex now, due to student debt, and healthcare issues, and all these complex issues you didn’t have to deal with maybe when I was leaving college, you have more complex questions at a lower level of financial literacy am ong the millennials. And that is somewhat of concern because they’re being called upon to make really important decisions, like borrowing tens of thousands of dollars to pay for education, without understanding how that is going to affect them for the next 40 years or, getting back to our topic, how it’s going to affect their future spouse or their future partner. And they have a really tough job ahead of them, trying to make the right decisions and making it all work with their partners.

David Muhlbaum: To follow up on that, I wonder if you’re seeing any change coming from social media, and I’m thinking in particular of how, in Venmo, the default setting is that everyone can see what you’re spending money on. Many people obviously turn that off, but yet there does seem to be a change in sensibility about people’s privacy about their money. Does that have any bearing on how couples view each other?

Mari Adam: Well, I think the one thing we’ve noticed about social media, as much as we all love social media, it is perhaps not having a very positive impact on finances. And we do hear reports, especially from millennials and younger clients, that they feel pressured to spend money and kind of live large in a way that baby boomers would not have. So it does lead people to spend more and consume more very publicly. And I think that’s hard for them to keep themselves on track because of that.

Sandy Block: So Mari, going to the other end of the generational spending. In Florida, I’m sure you talked to a lot of retired couples, and I wonder how retired couples manage spending, and their expectation of spending, because all of a sudden, you’re not pulling down a paycheck. Maybe you’re living off your savings, but you have all this time. Can’t go anywhere now, but eventually we will. So do you have any particular recommendations or thoughts on that?

Mari Adam: We meet with a lot of our retired couples. Sometimes they’re married. Sometimes they’re just living together. But a really positive example we see as they’ll come to us as the impartial person and say, “Hey, you know what we both own. You know what we need to spend. Tell us how to divvy this up to make it fair, because we’re going to listen to you and trust your advice.” Which is very gratifying to hear that, but most of them show good discipline in their spending. They stay within budget. The market has been very good to people over the years.

Mari Adam: So I think many of the couples we work with are in a much better situation than they ever thought they’d be, which is wonderful, but getting back to why it’s important, especially for women to be engaged and not outsource money management to a partner, there’s always a risk when there’s two of you making decisions, that you outsource or leave that decision up to your partner, and they may not make good decisions. Something may happen to them. They may have family influences. You never know. So it’s really important, whatever your age, to make sure you’re engaged, make sure you know what’s going on. You know where those accounts are, you know what the spending is. So you don’t get blindsided, because we unfortunately do see that happen sometimes with older and younger couples. So women, make sure you stay engaged and financial decision making is not something you want to outsource easily. Keep your finger on the pulse always.

David Muhlbaum: Well, as I’ve mentioned over the past month or so, I’ve voluntarily taken myself off the grid for a bit. That was deliberate. A form of vacation actually, but it does give me a better appreciation for the misery that’s going down in Texas and other places in the middle of the country right now. No heat, no coffee is a lousy way to start your morning. And when that stretches into days, it’s obviously not just an inconvenience, but potentially life-threatening.

David Muhlbaum: Maybe both? But no joke, a lot of people are in a pickle, I want to bring this back to as an item I helped update recently called 14 Must Have Items for Your Home Emergency Kit. Now, obviously this is a list of stuff you’re supposed to get ahead of catastrophe. So if you want to help people in Texas right now, find a qualified charity and claim that deduction we talked about, but if you’re not currently iced in, and instead are looking on and thinking, “yeesh,” remember, there are any number of things that could take out your power or infrastructure. I mean, those threats are somewhat regional usually. You know, tornadoes in the midwest, wildfire in California and the mountain west, hurricanes along the Atlantic, and people plan for those accordingly. But as we see today, sometimes there’s a change up.

David Muhlbaum: Well, actually, yes and no. We, we definitely acknowledged the potential of a generator, and that’s the first go-to for many people, but they have their downsides. They require fuel that you have to keep fresh. They make a lot of exhaust that you have to deal with safely. Can’t run the thing indoors. And, they’re pretty pricey. The first step that we recommend is what’s called a power station, which is not actually something with smokestacks. It’s essentially a big old battery with an inverter built in, and thanks to lithium-ion technology, the price for performance of these has been coming down.

David Muhlbaum: Let me come back to the battery. I just realized that, actually, when I say I was off the grid, I wasn’t always, and in part it was because the little off-the-grid cabin I was staying in had just one of these power generators. So I was able to keep my laptop up, and my phone up, and when I had service, use it. So it wasn’t an emergency situation, but it did come in handy that way. And I’m going to use that as another selling point for one of these. The thing is reasonably portable. So if you want it to take it with you camping, that’s another good use for it. Anyway, to answer your question, what is another thing?

David Muhlbaum: We talked about connectivity, and one of the problems with connectivity is, if things are bad enough that infrastructure is affected, that cell towers are down, your ability to rely on the internet, and even your cell phone for internet service can be compromised. And when that’s the case, the sure thing of getting information about important stuff about news and weather is a windup emergency radio, and that’s on our list too.

David Muhlbaum: You can crank it up, you can put it in the sun, you can crack it up by hand and top it up. And you can basically get your traditional AM and FM, which cover huge distances, or AM does, and NOAA weather radio, including the weather alerts that come in, like, “BRAAAAAP!” something’s coming. So that is another key item, if you think, well, not, if you think catastrophe is coming, in case catastrophe is coming. And I encourage people to look at the other items, because they can help keep you safe. And for you all down in Texas and whatnot, I hope it gets better soon.

David Muhlbaum: And that will just about do it for this episode of Your Money’s Worth. If you like what you heard, please sign up for more at Apple Podcasts or wherever you get your content. When you do, please give us a rating and review about how fabulous we are, and if you’ve already subscribed, thank you and feel free to go back and add a rating as well. To see the links we’ve mentioned on our show, along with more great Kiplinger content on the topics we’ve discussed, go to kiplinger.com/podcast. The episodes, transcripts, and links are all in there by date. And if you’re still here because you want to give us a piece of your mind, you can stay connected with us on Twitter, Facebook, Instagram, or by emailing us directly at podcast@kiplinger.com. Thanks for listening.

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Block joined Kiplinger in June 2012 from USA Today, where she was a reporter and personal finance columnist for more than 15 years. Prior to that, she worked for the Akron Beacon-Journal and Dow Jones Newswires. In 1993, she was a Knight-Bagehot fellow in economics and business journalism at the Columbia University Graduate School of Journalism. She has a BA in communications from Bethany College in Bethany, W.Va.