We know when we are in a relationship where one person is large and in-charge of the family finances. One day we realize we don’t know all we should. Perhaps a seminar sparks your interest, such as “Are you ready for retirement?” or “Know your Asset Allocation.” Or you wonder, what would happen if my spouse wasn’t around to run our finances? Either of these forces us to question our knowledge of our own finances. All too often it is a life cycle event that forces us to learn all about personal finance. This is when contacting a Certified Financial Planner™ professional is a good idea.
Often, I work with those who need assistance during trying times. One challenge in assisting an individual in these circumstances is gathering the necessary information at a deeply emotional time. Often, one person was large and in charge of the finances, and when a change occurs in the relationship, the other person is left to grieve while learning sources of cash for living expenses and making decisions in an area where they have no experience.
In happier times, I work with those who realize they don’t know all they need to know.
In relationships, we divide and conquer household responsibilities: one cooks the meals, the other is does the dishes, one does the laundry, the other takes out the trash. One pays the bills, and the other is the primary breadwinner. Life is busy, and responsibilities are delegated, but this can create problems with financial matters.
As a woman running my own business, I am proud to help other women who find themselves somewhat behind in their personal finance knowledge. Several recent studies published by large financial advisory firms confirm what we see in practice, “58 percent of women leave those crucial (financial) choices up to their partners. Younger women — those between ages 20 and 34 — were even more likely to defer to their significant others, at 56 percent. Meanwhile, women ages 51 and up were not far behind, with 54 percent saying they leave money decisions to their spouses.”
Changing financial practices in your home will better prepare you. These tips will help you avoid hours spent locating documents, delayed access to needed resources and perhaps even fear related to moving forward. Major financial decisions related to cash flow management, account titling, and insurance can be time consuming. Take steps to increase knowledge now and reduce future stress:
- Keep a household checklist of vital information including account numbers, account details (where and why), and contact person’s email and phone. Feel free to contact me for access to a spreadsheet I created and use for my personal needs.
- Understand your accounts: savings and taxable brokerage accounts, retirement accounts, long term care and/or life insurance policies.
- Account titling: jointly owned assets or separate assets inherited or earned before marriage
- Beneficiary of each retirement account: Beneficiaries are generally individuals. Are you the sole beneficiary? Who are successor beneficiaries?
- Details of insurance policies: make sure your name is titled properly on the account (or as beneficiary) and you can access that resource when needed.
- Understand your household’s use of credit: have a list of all debts, with bank, interest rate and monthly payments made.
- Passwords: Kiplinger’s recommends LastPass to digitally store passwords. I use LastPass, and I highly value it.
- Put important documents in a fire safe lockbox in your home or a safe deposit box at a bank.
- Know how your household is funded. Does funding come from one or more salaries?
Is payroll deposited into a joint account where you have access if needed? How would you access cash if your spouse was disabled?
- Establish credit in your name alone. Have a major credit card in your name only and review that bill and pay in full each month. This is not a secret account meant to be deceptive; this is a priority for financial freedom.
- Be active in creating financial and investment goals together. Consider working with a CFP™ professional to develop an investment policy statement (IPS). The IPS provides a blueprint for investment decisions and can assist in guiding future conversations.
Avoidance is a short-term strategy that can lead to extra work and confusion at a potentially difficult time. As a Certified Financial Planner™ professional, I am happy to work with clients to assist in getting organized and develop an understanding of their financial future.