Investment Risk Levels Can Cause Divorce?
Money is often quoted as the number one reason for divorce. Many different aspects of money could create disharmony in marriage and lead to its demise. I came across a study conducted by researchers from the University of California - San Diego. The article came to an interesting conclusion.
Their study of 5300 couples found that differences in financial risk preferences are a significant driver of divorce. Individual risk levels matter. If you and your significant other don’t see eye to eye on how much financial risk is acceptable, according to these calculations, your marriage is twice as likely to end in Divorce.
When it comes to investments, individual risk preferences are very personal. We all take risks for different reasons and avoid risks for other reasons. It comes down to how a person handles loss. Strong feelings may be associated with taking risks as well as not taking risks. Financial loss and greed are at opposite ends of the economic spectrum. It definitely could disrupt harmony in a marriage. If those feelings are strong enough and husband and wife aren’t willing to compromise, one spouse often gives in out of frustration allowing the other spouse to have full authority of the investment and risk decision-making.
As a result, if things don’t go as planned, animosity could build over time and ultimately become a marital problem. I think that most people don’t realize the pitfalls of different risk levels. Further, I don’t believe that people see risk levels as a potential cause for divorce. Once again, one’s level of risk can be filled with emotion. The mixture of money, emotion, and disagreement can be a toxic mess in a marriage.
So how do you make sure that this doesn’t become a problem?
It is essential to realize that there are three risk levels at play. There is the risk level of the husband. There is the risk level of the wife. Finally, there is the risk level of the marriage. It comes down to blending two risk levels into one
acceptable level of risk that both spouses can accept. Most importantly, that risk level needs to tie into future financial goals as a couple. If both husband and wife can focus on attaining future goals, the risk level becomes easier to manage.
The financial planning process is so crucial because everything ties together. Unfortunately, studies show that most husbands and wives don’t go through the process. It is no wonder why money is so complicated when it comes to marriage. Marital financial success is about eliminating the potential problems ahead of time versus creating financial roadblocks that might be difficult to overcome.
Need a second opinion about money and investment issues? Just ASK BOB! Bob is available and always happy to share his views.
Bob Brooks is a Financial Adviser and host of The Prudent Money Radio Show, aired daily at 3 PM CST on 91.3 FM, 97.5 FM, and 99.9 FM in the Dallas Forth Worth metroplex. Listen online at www,prudentmoney.com/radio-show. You can reach Bob at 972-386-0384 and online at firstname.lastname@example.org.