From the outset, Kofi and Yvette Moyo firmly believed that their union would add value to all members of their growing brood. Combining his eight children and her one child could have easily led to emotional upheaval and financial discord—but the Moyos had a plan.
First, they adopted the concept of a village raising a child. Yvette and Kofi needed unity to raise nine children (who now range in age from 18 to 33) over their 15-year marriage. The couple garnered support from both sets of grandparents as well as Kofi’s former wives and Yvette’s former partner. Some of the children stayed with the Moyos full time for a stretch, but Kofi and Yvette didn’t have primary custody. The children would journey from Cincinnati to join them in Chicago for the summer months, weekends, holidays, and birthdays. “We had a commitment to harmony,” maintains Yvette.
So, how did the Moyo’s keep their financial house in order? Yvette, 50, an advertising sales and marketing executive, and Kofi, 64, a photojournalist, author, and amateur chef, quit their jobs to start Resource Associates International (RAI), a marketing firm best known for its Real Men Cook for Charity fund-raising events, and the Marketing Opportunities in Business and Entertainment (MOBE) conference series. The company grossed annual revenues of approximately $600,000, generating enough income to support the growing clan and pay for everything from summer camp and family trips, to child support and the first year of college tuition for everyone. (By the second year, the children have to pay for their tuition by working or gaining scholarships or other forms of financial aid.)
Next, the family went on an austerity program. “I shopped at Burlington Coat Factory instead of downtown at Lord & Taylor,” Yvette explains. Furthermore, Kofi is a frugal and savvy shopper. For example, he drives a mint condition 1988 Land Cruiser that he purchased online. (Yvette owns a 1971 Mercedes, which is also in excellent condition.) Over the years, they have been able to realize more savings since Kofi makes repairs around the house. “We gave up luxuries like new suits and expensive stuff and settled for what mattered,” says Yvette. “[The children] knew we cared for them. If one of them had a prom, they’d go and I’d do without if necessary. The priority was to expose them to a variety of things and make them feel good about themselves.”
As the Moyos demonstrate, bringing two households together—each with its own culture, traditions, financial habits, and values—is no small matter. Entering a new relationship with children, former spouses, and expanded financial responsibilities can be downright daunting. But many couples are willing to take on the challenge. According to the Lincoln, Nebraska-based Stepfamily Association of America (SAA), about 75% of divorced people eventually remarry and about 65% of those remarriages involve children from prior unions.
While the divorce rate is nearly 62%, blended families can and do succeed. Making it work, however, requires a strong commitment from the couple—to each other and to the newly formed family.
Poor planning and disagreement on goals can quickly unravel recently constituted stepfamilies. For one thing, the second or third time around, finances can be an even greater issue since both spouses usually have more assets, more debts, and contradictory money-management styles. Also, asserts Marilyn Bergen, a certified financial planner with CMC Advisers in Portland, Oregon, “the children may have very different spending habits and values. How will you get everyone on the same page?
ACHIEVING FINANCIAL HARMONY
Few things are as unromantic as finances. Before you get too deep into the prospects of marital bliss, you must engage in straight talk about money. There are a myriad of issues to deal with, including child support, prenuptial agreements, property ownership, retirement finances, and estate planning. First, you need to gain a full accounting of your loved one’s assets, debts, legal issues, and tax liabilities. “You want to know what sort of verbal agreements they may have, say to help pay their parent’s prescription drug costs, or to buy a child a car,” says SAA President Margorie Engel.
Take a good look at each other’s spending habits. “Poor spending habits are often what caused the first marriage to break up. You should work to come up with a common financial plan and a debt-elimination plan,” advises Pierre Dunagan, president of The Dunagan Group, a Chicago-based financial services firm. “Commit your plan to paper. Having a document that you both agreed on and signed makes a huge difference. It’s a little hard to dispute.”
Dunagan says once couples are married, they should schedule weekly or monthly meetings to review the family’s finances. The two need to determine whether financial goals
are on track or, if not, factors that have stalled progress. Other issues include deciding how money will be managed. You should answer the following questions before you take the plunge: Will you have separate accounts, joint accounts, or a combination of the two? How much will each contribute to household expenses?Dunagan says there’s another important matter to address: What will the combined financial needs of the children be? Maybe you already made plans for college financing for two children, but how do you now make adjustments for your spouse’s other two? Or, what if you and your new spouse are contemplating having a child together? Have you considered the expenses of daycare, larger living quarters, and the like?
MAKING ADJUSTMENTS
These are matters that the Moyos had to take into account when their family expanded. In fact, the entrepreneurs made some rather smart financial moves along the way. They bought a house with a four-car garage, which was spacious enough to provide living quarters for Yvette’s mother, an office for a staff of four, and the family’s living quarters. “It’s a major resource,” says Yvette. “We’ve used the equity to assist the business, make home repairs, and otherwise keep the family going.”
Another decision they made early on was to get substantial life insurance for each other ($1 million for Yvette, and $1.5 million for Kofi) and for their children ($10,000 per child). However, some would argue that life insurance is about income replacement, so it’s not necessary to obtain it for a child. But when tragedy struck—one of Kofi’s daughters was killed in a car accident—they realized that it was a wise decision.
All stepfamilies have to make major adjustments to their lifestyles and to their spending habits. Take the Hales of Long Branch, New Jersey.
When Kim, 37, and William, 39, were married seven years ago, they had six children between them. Since then, they’ve added one foster child from Guatemala, Kim gave birth to another, and one more is on the way. Initially, the family moved into a three-bedroom apartment in Kim’s building because she didn’t want to live in the home that William had rented with his former wife. The newly formed family was a bit cramped, and within a couple of years, the Hales purchased a four-bedroom home.
Largely due to Kim’s influence, the
Hales have learned to be frugal in their spending. Concedes William: “I made some bad financial decisions in my first marriage. We were over-spenders. I thought I could work overtime and make it work, but that wasn’t the case.”In fact, when William and Kim married, he didn’t have a checking or savings account. Kim proved to be a good teacher and he was a willing student. They opened joint accounts and William has learned from her thriftiness. “Saving is hard with a big family,” says Kim, who spends as much as $250 each week on groceries. “I learned from my mom to save on small stuff. When you have a family this size and everybody saves a dollar here and there, it
adds up. I shop with coupons.”
They have also spent considerable time teaching their children to have respect for the value of a dollar. When the children were younger, they received allowances of $5–$10 a week, but now the teens must earn their money—especially since they have developed a taste for FUBU, Sean John, and other designer goodies. The older children have jobs and the Hales require them to fork over 10% of their paycheck as a tithe, another 10% for long-term savings, and the remainder for personal items such as school clothes, cell phones, and leisure activities.
These days, the Hales have been forced to batten down the hatches. Before William lost his job 18 months ago due to a legal complication with his employer and Kim was unable to handle the physical demands of nursing as a result of her pregnancy, their household income was $120,000. Today, their household income has been downsized to $35,000. To make ends meet, William sells health plans for AmeriPlan USA and Kim sells real estate. The two also generate limited income from Pure Word Ministries (William is a licensed and ordained evangelist). Over the past two years, they have tapped William’s entire 401(k) account—roughly $40,000—to maintain living expenses.
The good news, however, is that William will return to the electric company as well as gain 18 months in back pay. He plans to use the money to pay off debt that the family has accumulated, build up retirement savings, and develop a fund to help their children finance their college education. Kim and William hold life insurance policies but admit that
they have yet to complete their wills. “With a blended family, it’s more than a notion about what to do about the kids,” says Kim. “Somebody’s not going to like the decisions you make, like the children’s mother. It’s a sticky situation because we haven’t legally adopted each other’s children though we have custody.”Making household finances work will mean that couples must pay attention to details and diligently handle legal and financial matters. But in order to truly secure their family’s future, each spouse must embrace the planning process as a joint venture.
How to Blend Your Family’s Finances
- Re-evaluate all of your insurance needs. Review your policies—health, property, auto, and, especially, life. Your expanded family will likely mean you need to increase coverage. Consult with your financial adviser.
- Update all financial documents. Any paperwork that named your previous spouse as a beneficiary should be changed.
- Create a budget and stick to it. With a bigger family, there is less wiggle room for money mistakes if you want to achieve your financial goals. Be sure that budget includes a fund for emergencies and savings for the short and long term.
- Rethink your asset allocation. Before it was just you and now it’s you and your spouse. Look at both portfolios closely. You don’t have to merge accounts, but it’s important to note, for example, if you both have shares of the same stock or if your respective portfolios are heavily weighted in a particular asset class or sector. In all cases, think diversification.
- Develop a will or living trust. If you already have one, it will need to be changed to reflect your current situation. If you don’t have one, by all means complete one. In the document, name guardians for your children. This is a tough issue for any parent, but particularly when there are different sets of children and possibly multiple guardians.
Resources for Stepfamilies
Websites:
Family and Stepparenting Tips:
www.blended-families.com
Stepfamily Matters:
www.step-family-matters.com
The Stepfamily Association of America:
www.saafamilies.org/index.htm
Books:
Blending Families: A Guide for Parents, Stepparents,and Everyone Building a Successful New Family (Berkley Books; $14.00)
Money Advice for Your Successful Remarriage:Handling Delicate Financial Issues Intelligently and Lovingly (iUniverse.com; $14.95)
The Complete Idiot’s Guide to Step-parenting (Alpha Books; 16.95)