Author Topic: Advice on blended family money issues  (Read 492 times)

anonperson

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Advice on blended family money issues
« on: February 21, 2019, 02:36:10 PM »
Long time lurker, first time poster.  I need advice relate to finances in a second marriage. My older husband of three years has 3 kids from his first marriage (oldest is at a very expensive college, middle has committed to a very expensive college, and youngest is still in high school and lives with his mom in another state) and we have one baby together. His ex-wife is bitter, lawyered up and never wastes a second to go back to court for more money if she can. She has plenty of money and a good job.  Between child support, shared child expenses (no expense is spared on their kids) and college tuition (heís obligated to pay half by his divorce decree, wherever they choose to go), at least 55% of his after-tax income goes to the ex-wife and their 3 children, and weíre still looking at many more years of expensive colleges plus whatever support he decides to provide them when they are adults (and on this issue I donít feel like I have a voice since theyíre not my kids and he takes offense and shuts down whenever I express discontent).  He also pays 5% of his after-tax income to support an elderly parent.  He is a partner in his business (so he should be making quarterly tax payments), makes 3x my income, and has about 5x my net worth in ďpremarital assetsĒ, but those assets are illiquid. No prenup.  Through his work he could have one or a series of sizeable equity events at any time in the future, or never. But heís in a lot of debt, and because he insists on filing taxes jointly and I acquiesced, we both currently owe more in taxes than my annual income.  The reasons he has accumulated so much debt are: (1) divorce obligations that he didnít fully disclose before we were married (and admittedly, I didnít push him to disclose); (2) overspending in the years between his divorce and when we met and were married by borrowing against his brokerage account believing it would never go down but it did in a big way, which he regrets this terribly; and (3) overspending to buy a house at the very beginning of our marriage, back when I thought he just had deep pockets and didnít ask enough questions.  I learned about all of this after we were married.

I am a very disciplined financially and Iíve never had any debt prior to this marriage.  I continue to max out my 401k like I have since I took my first job, and I secretly save money in my childís 529 plan through direct pay at my work, because I know he would not be supportive of saving for her while heís simultaneously putting his older kids through college and dealing with all this debt.  I dislike my current job, but I continue so that I can save aggressively for retirement and fund my daughterís college account, and now I am also over withholding 2019 taxes to help the situation (we bank together, so this is just my way of asserting some control over the situation).  My plan was always to make my money first in a job that I donít love, then pursue a career doing something more fulfilling later.  And on this point, if I were still single and living as modestly as I always had, Iíd be FIREíd by now. 

It would be very hard to deal with this debt if we were to divorce or he dies (after all, Ďhisí assets are all premarital assets; the only thing we have to show for our marriage is debt and a home we own together, which is frankly way more house and more mortgage than I need or want).  My anxiety about all the debt is very high, and it affects my health, my ability to perform my job, and has caused me to feel resentment toward his kids (I understand this is not their fault, but the feelings are still there).
We have a positive net worth, both individually and collectively. I believe if there were no stepchildren involved our marriage would be great, but thatís counterfactual.  I do not want my daughter to grow up in a broken home, or to expose her to a series of other women or a stepmother. 
 
Itís easy to pass judgment say I shouldíve known better and I did this to myself, and I agree, but I didnít appreciate the magnitude of the situation and how it would affect me financially and emotionally, and now Iím looking for advise on how to move forward.  Here is what Iíve done and am doing: (1) I see a therapist off and on for the anxiety; (2) Iíve asked to file taxes separately each of the last 3 years but heís opposed since it will increase our overall obligation as a couple; (3) Iíve threatened to leave the marriage; (4) weíve been to counseling, but he discontinued counseling because he says I only want to complain that he needs to pay taxes and his other debt and he already knows that; and (5) I now make large payments to the IRS each month as soon as his paycheck hits our joint account, but at the current rate itís going to be years before we pay it off, and it may cause him to default on his other debt, and I know he resents me for it and feels emasculated.  For all I know, heís so unhappy with the situation and how Iíve reacted that heís planning to leave me.  So, any advice?

Goldielocks

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Re: Advice on blended family money issues
« Reply #1 on: February 21, 2019, 11:28:57 PM »
Do I have this correct...

He has expenses to others that amount to 60% of his after tax income, and earns 3x more than you currently.   Your income is modest, but so was your prior lifestyle and was sufficient to allow you to retire early.

If I was to guess that you bring home $40k, and he has after tax of $120k, of which 60% goes to others, he is bringing home $48k.
Your tax debt is more than your income, so around $50k.

He has other illiquid assets (such as ownership in his company) that obviously can not be sold at this time.  (but not, like a second home that he co-owns with his sibling who refuses to sell).

If that is the case, I would look at it like he only makes slightly more than you do, and figure out a budget based on the total $88k/yr after tax income.  This means that you need to sell your home, get something cheaper to live in on a monthly basis and pay down the tax debt and then other debt.

While you are doing this, you , personally, need to build up your retirement account and get a promise that some of the illiquid assets will be used to fund your child's own expensive college education.  I would try to get that as a post-marital agreement of some sort.

When you are married, you have to figure this out as a team.  You just found out that he has a lot less income than you thought, and that he has large loans.   I would create a "move forward together" action plan based on this new baseline, and live modestly in your new reality, but do it together.

Oh,  and if you were previously doing 90% of the house work or child care because you only brought in 25% of the income, that needs to stop.  You actually bring in 45% of the income, according to your comments.