By Karin Grablin
I see it all the time: a client couple in which one partner (usually the man) takes care of all the finances and the other partner (usually the woman) is often completely in the dark about the family finances.
Usually it’s the husband who likes to be “in control” and just wants “to take care of her.” Or the wife isn’t interested in learning about financial matters, or has many other jobs to do to support the family.
And then the husband dies.
Or worse, he has a stroke and has to go into a nursing home. And (possibly) for the first time in her life, the woman is forced to wrestle with financial decisions she is ill-equipped to make. This is 2018: it seems hard to fathom that women might still be financially “helpless,” but I just witnessed it recently.
It’s easy to blame one side or the other for this deficiency, but from my viewpoint (a Certified Financial Planner for almost 18 years), both partners share the guilt:
For the man: if you really want to “take care of” your spouse, you would try to educate her about the basics of your personal financial picture (e.g. monthly household bills & how they are paid, access to the bank/investment accounts, sources of income, where the insurance policies are located, etc.). You would realize that some day, you may not be here (on average, women live 6.7 years longer than men in the U.S.) to “take care of her” and the biggest gift you can give her is some financial education so she can fend for herself without you if she has to. And if you really aren’t willing to teach her – or she just doesn’t want to learn – then you need to develop a relationship with a financial planner now so they can fully understand your financial picture and be ready to step in and help her if something happens to you.
For the woman: Wake up! Women are already at a disadvantage to men in terms of earning less in their careers and working fewer years in total. Why would you compound those issues by not understanding what it takes to financially maintain the household, or more importantly, how secure your financial future is, and what the risks and “blind spots” are that could derail your plans? Ask – no, demand that your spouse give you a full understanding of how the household finances work and where all the important paperwork is – the sooner the better. And again, if you lack confidence in this area, hire a financial planner now to help you.
Ellevest co-founder Sallie Krawcheck summed it up well:
“Women will not be fully equal with men until we are financially equal with men.”
As early as possible in their careers or marriage, women need to build a strong foundation of personal financial understanding and responsibility. Having control, clarity and confidence with your money is both liberating and empowering! To start that journey, here are some steps to take, preferably with the support of your spouse:
- Track your spending.Delineate between fixed costs (mortgage, rent, utilities, phone) and discretionary costs (lifestyle spending). If spending cuts are needed, the discretionary costs are the first place to go. Try to create some leftover income each month, and save it regularly.
- Examine cash flow,today and in the future. How much in income do you have now, and what will that look like in the future (e.g. considering Social Security and/or pensions)?
- Create an inventory of all of your assets and liabilities. Also known as a “net worth statement,” this will help you understand what you have to work with and/or where your financial “gaps” are. If you need help with this, find a financial planner – and spend some time with them understanding each item that goes on that statement.
- Check your credit report annually: go to com (it’s free!). Look for suspicious inquiries from companies you don’t recognize. Are there accounts listed that aren’t yours? Be sure you have established credit in your own name – not just in joint accounts with your significant other.
- Invest carefully.Your financial planner should be able to educate you on how to design your portfolio at your current stage of life. This involves considering your current/future cash flow needs, your time horizon and your tolerance for risk. Don’t let them talk over your head! If you don’t understand their explanations, ask for clarification. If they can’t provide you with explanations that make you feel comfortable, consider finding another financial planner.
- Protect your assets. Consider what risks you currently face: premature death (if you have dependents), disability, health (e.g. long-term care) or liability risks. A good financial planner will help you evaluate each of these risks and develop action steps to mitigate them.
- Establish an estate plan.If you don’t want the state you live in to decide where your assets go upon your death, you need a will – and you need to specify/update beneficiaries on IRAs, life insurance and bank/investment accounts (via “transfer on death” titling). You also need to specify in writing who you want to take care of your legal matters or make health care decisions for you if you are incapacitated (remember the husband with the stroke?). This is done via health care directives and powers of attorney documents.
- Get organized.Gather together the aforementioned information (including account/policy numbers) into a binder/file along with a list of your advisors (financial planner, CPA, attorney, etc.) and tell your loved ones where to find it, so if something happens to you, they know how to step in and help. See my next article: “The Final Instruction Letter.”
The aforementioned list applies to everyone – not just women. However, women often suffer the most without such plans in place. Don’t wait until a life-changing event creates a financial crisis for you! It’s a financial mistake women – and men – can’t afford to make. If you need help getting your financial plans in order, our team at SRQ Wealth welcomes the opportunity to assist you.