While student loans are a painful, long-term expense, they are also an investment in one’s career and earnings prospects. But what does lavish spending on a wedding provide?
It can lead to divorce, according to a study by Emory University researchers Andrew Francis and Hugo Mialon. More interesting, they suggest that the stress that comes with wedding debt might be the underlying cause for the unhappy outcomes.
Weddings, which peak in early summer and surge again in the fall, have become more elaborate over the years. Engagement rings usually have diamonds – that wasn’t always the case. The average expense for a wedding and reception in this country is now $30,000.
But the researchers found that women who spend more than $20,000 on a wedding were nearly four times more likely to become divorced than women who spend under $10,000. In the case of men, buying a more expensive engagement ring was linked to a higher divorce rate.
They based these findings on data from their own random survey asking 3,151 adults about their wedding costs and current marital status.They controlled for education, household income, whether the person was employed and other things that play a role in whether a couple stays married.
Stress may be the undercurrent that explains their findings: couples who spend more money are also more likely to report being “stressed about wedding-related debt,” the researchers found.
The links between marriage and money are a perennial topic in academic literature. Other studies have shown that divorce creates financial problems, particularly for people closing in on retirement. It just might be that excessive spending on a wedding – usually a couple’s first major expenditure – gets a marriage off to a bad start.Learn More
Karen James and John Kingrey remember very clearly breaking the news to their Millennial son that they would no longer support him.
After struggling through his first year in college, Michael was sitting on his parents’ bed tossing around whether or not he should join the U.S. Navy. “I said, ‘You don’t have to join the Navy, but you’re not living here. And winter’s coming,’ ” Karen James recalled.
And then she thought, but did not say, what many parents before her have thought about the offspring they love: “You’re not living here doing nothing.”
Easing their son out the door in the run-up to the couple’s 2014 retirement “was one of the toughest things we ever did,” John Kingrey said. Their son’s story had a happy ending.
But more parents than ever are being torn between supporting adult children who haven’t yet launched and getting ready for their own fast-approaching retirement. Record numbers of 18- to 34-year-olds are living with their parents, a result of later marriages and a tough job market for that age group.
I am not a parent and am unqualified to write this blog from their perspective. But as a cold financial calculation, supporting a 20-something is problematic for older parents at a time that nearly half of U.S. baby boomers are at risk that their standard of living will decline after they retire.
With little time left to prepare, the most effective thing people in their 50s or early 60s can do is plan on delaying retirement, which sharply increases the size of a monthly Social Security check. But paying down a mortgage faster or putting more money into a 401(k) retirement plan is also a good idea.
“You shouldn’t be helping them if you want to put more money into your retirement,” says Minnesota financial planner Mark Zoril. But he’s quick to add that getting tough on offspring isn’t easy for parents – or their advisers. “It’s a pretty difficult [conversation] to have with your client.” … Learn More
One out of every 10 Generation X mothers is single – many more than in the generation born during World War II.
Nearly two-thirds of single older people are the survivors of divorce – far more than in the past.
About one in three couples has moved away from their hometowns and from both of their mothers – blame this geographic mobility on the growing share of U.S. workers who are college educated.
These are just a few of the dramatic changes in U.S. family structure and behavior that have developed over the past half century. These changes have had enormous financial consequences for everyone, especially women.
Squared Away has documented some of the financial impacts in previous blogs. A Lucky 7 such blogs, most of them based on studies by the Retirement Research Consortium, are summarized below (with links to each one):
Women are having babies five years later, on average, increasing their earnings substantially over their lifetimes.
About half of Americans don’t live near their mothers, creating new pressures for caregivers. This video explains who they are.
In the aftermath of divorce, many women figured out how to rebound in the labor force and earn more.
But when it comes to retirement preparedness, a doubling in the divorce rate since 1990 has put more baby boomers at a financial disadvantage.
Stepchildren, divorced parents, blended families – the structure of the parent-child relationship has grown more complex, and so have the parents’ wills. …
An interesting psychology powers this video in which the youngest daughter of a low-income, single mother explains how she migrated into the financial services industry – and then became the company president.
Mellody Hobson’s fascination with finance took hold as she watched her mother struggle with evictions, repossessed cars, and empty gas tanks. She once spent all her money on her daughters’ Easter dresses but then couldn’t pay the phone bill, Hobson recalls in the video above.
“I do not think it’s an accident I work in the financial industry,” she explains, “because as a child I was desperate to understand money – desperate. I hated the fact that I felt this insecurity around money.”
Hobson is a celebrity in her industry. In other videos, she talks about being black, being a successful career woman, being financially savvy, and the trouble with credit cards. Perhaps she’s all over YouTube, because she’s worth listening to.Learn More
Physical power, fast reactions, steady hands, a crisp memory, and mental dexterity – these physical and mental abilities, taken for granted in youth, break down slowly but persistently over the years.
A unique combination of physical and mental skills help to determine whether each worker’s continued employment is more or less susceptible to aging. To better understand who can work longer and who can’t, researchers at the Center for Retirement Research developed a Susceptibility Index to rank 954 U.S. occupations.
Using the skills required for each occupation in the federal O*Net database, they ranked the occupations from 0 to 100 based on the risk that age-related decline will affect a worker’s ability to perform that particular job. The risk reflects the number and importance of the age-vulnerable abilities.
Of course, individual workers experience aging in different ways, and some learn to compensate for declining skills. But there are dramatic differences between occupations with very high and very low Susceptibility Indexes.
As one might expect, physically demanding blue-collar work suffers the adverse effects of aging: rock splitter in a quarry (90.3 Susceptibility Index), floor sander (91.0), steelworker (94.4), commercial diver (94.0), truck driver (96.4), and oil rigger (98.5).
Occupations with very low indexes are primarily white-collar: interior designer (5.8), lawyer (6.3), aerospace engineer (8.9), loan counselor (12.4), and radio announcer (14.8).
Where things get interesting is in the middle rankings. Mixed in with somewhat physically demanding jobs – personal care aide (52.7), warehouse order filler (53.7), baker (54.7), postal service clerk (56.3), and food server (58.2) – are white-collar desk or hospital jobs. These include private detective (44.8), surgeon (51.2), architectural drafter (52.8), anesthesiologist’s assistant (53.1), computer network architect (54.8), and critical care nurse (55.7).
After ranking the 900-plus occupations, the researchers concluded that “the notion that all white-collar workers can work longer or that all blue-collar workers cannot is too simplistic.” …Learn More
Some suggestions for late-summer fun include an independent movie about a woman earning a very good living on a not-so-friendly Wall Street. But first, here are two practical financial guides, one for grown-ups and one for kids.
Harris (Hershey) Rosen, who is 83, put serious thought into how to leave household financial information in good order for his wife should he die – and put his thoughts together in his homegrown “My Family Record Book.” This book “is not a money-making proposition,” he said. Rosen suggests husbands and wives make this important task a joint project.
As the former owner of a candy company that made those lollipops packaged in strips of cellophane, Rosen learned to sweat details. His “Family Record Book” records the nuts and bolts of things like mapping where files are located in the house, planning the logistics of downsizing to a smaller home, and making lists for everything that’s important to you – doctors, the home-maintenance schedule, birth dates of friends and loved ones.
“The purpose of the book is to motivate people to commit all the information in his or her head to writing,” he said.
Susan and Michael Beacham are pros when giving financial information and advice to children and young people. I just came across their award-winning “O.M.G. Official Money Guide for Teenagers,” published in 2014, which merges personal finance and colorful graphics, while finding ways to get inside teens’ heads.
For example, it points out that “when you deposit a check, it may take several days” to clear and advises on how to handle “awkward money moments” with friends. A credit card is like a snowball, which “starts out fairly small” but “can get out of control.” If only they’d listen!
Movies about money – “The Big Short,” “The Wolf on Wall Street,” “The Smartest Guys in the Room,” “Glengarry Glen Ross,” “American Psycho,” “Bonfire of the Vanities,” “Trading Places,” and, of course, “Wall Street” – are about men. Until now. …Learn More
Source: U.S. Social Security Administration poster, 1954.
When Social Security was created in the 1930s, wives were mainly full-time homemakers, with their pension benefits based on their breadwinner husbands’ earnings.
But wives went to work in droves after Social Security’s passage. Today, women make up nearly half of the U.S. labor force. Yet the program’s design remains the same, with the result being a steady decline in married couples’ replacement rates – the percentage of the combined earnings of two working spouses that Social Security replaces when both retire.
A study by the Center for Retirement Research found that the replacement rate for couples has declined from 50 percent for married couples born in the early 1930s to around 45 percent for the oldest baby boomer couples, and it will fall to just 39 percent for Generation X couples when they eventually retire.
A declining replacement rate is an important consideration for working couples as they plan for retirement.
The simple explanation for the declining replacement rate is that household earnings are much higher when both spouses are working, but their Social Security pension benefits do not increase proportionally. The reason is that even if a wife doesn’t work, she still receives a spousal benefit equal to half of her husband’s benefit. The more a working wife earns, the lower the couple’s replacement rate. …Learn More