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The whole reason my finances ended up destroyed. My wife didn't work for the entirety of my time as a graduate student and you just can't support two people with what a grad student makes. Even when I won fellowships that paid better, it wasn't enough. When I made oodles of money off a TV gig, it evaporated. When I got a high-paying (relatively so, for my field) post overseas after I finished my PhD, it vanished with her fidelity. I am only now beginning to recover, fiscally, from the brink of financial oblivion (luckily had a relative's couch I lived on for a year when I got back to the US). She was able to work, no matter her claims to the contrary, but chose the free ride, as was her wont for much of her life up to that point. She also spent more extravagantly than me, by far. She did promise to work, at times -- this was something I'd bring up every now and then, and sometimes she'd get defensive and hostile but sometimes she'd admit the necessity of two incomes -- but she never did. For twelve years. I still owe obscene amounts in student loans, zero of which (as a grad student with tuition wavers and good external funding for most of my tenure) would have been necessary if she'd worked even part-time or if I'd been single.
It's almost eerie how closely what's happening to your brother parallels what happened to me. My wife's refusing to or failing to secure gainful employment once we left our jobs in California for the place where I started my PhD program was a source of constant stress. I could beg, plead, or yell and, ultimately, nothing I did could make her do what she needed to do.
I'm not enamored of money for its own sake but the unfortunate fact is that it is necessary to secure things in our society, including basic survival essentials such as shelter and food. Not having money is, as you and I and anyone who's been there knows, a source of major stress, and stress is Bad For Us. I resented, deeply, her not working. When I think about it, I still do resent the way she was for all those years. They say that money and sex are the two things that usually kill a marriage -- one or the other, or (as I was lucky enough to experience) both. If your sister-in-law is like my wife -- and, frankly, she sounds much worse than my wife was -- there's not likely to be a 'save' possible here. It's so extreme now that I doubt any change would be sufficient. And she is unlikely to change until the last cent's been sucked out of his accounts and wallet, and then she might just move on. She's exhibiting behavior so self-centered over a prolonged period -- and so extreme in its extremes -- that my prognosis would be that this marriage is over, or needs to be while he still has a roof over his head.
I hate to condemn any marriage, but -- though the players are different -- I've been in such a similar trap, and known others with stories along the same lines, that it's hard to hold out a lot of hope. The only hope is that she changes, immediately and profoundly. That rarely happens. He cannot -- as I could not -- force her to work, when it comes down to it.
I hate to tell anyone they should walk on a marriage, but I really think she has to go. At the very least, he perhaps needs to make it clear that he's seriously prepared to cut her loose unless she turns around and does so very quickly...a good way to do that is to present her with divorce papers.
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