Writing about finance often finds me involved in stranger's lives in an
intimate way. And unlike men, women tend to bear their financial
underbellies much more readily than men. They ask questions and seek
direction from people they trust and sometimes from those they barely know.
Two separate conversations I have had recently has given me good reason to
address something I never wish to confront head on and fortunately, because
my wife and I have laid some good financial ground work, probably won't.
The first conversation took place with a young lady with whom I am just
acquainted. She explained that she had recently married - I congratulated
her - and she wondered what I knew about taxes. I responded that I knew some
but largely left the taxes in my household to my wife, whose business
warrants a CPA to prepare them. And then I asked why?
She told me that her new husband had failed to file his income taxes for the
last four years and wondered if, now that she was married to him, would his
liability become hers.
The second conversation involved a business associate as she tried to
confront her financial fears following what appeared to be a not-so-amicable
divorce. She had no idea exactly where she was financially - a year after
the ink dried on the decree - and was even more fearful because of the
disruption, she would need to work much longer than she had previously
planned.
There seems to be common thread between these two women, both in successful
careers and both with a good deal of future in front of them: fear. Fear of
whether they will be responsible for their husband's investment bravado;
fear that they will need to work much longer to get the same comfortable
retirement that co-joined finances would have provided; fear of making
decisions now that would affect them in the future grip each of these women
and I suspect many more with a paralysis leaving them unable to decide what
to do next.
It strikes me as odd the amount of planning many couples devote to the
wedding without ever successfully building a financial relationship. Only
those who have yet to make those mistakes can learn from others. Those that
have joined themselves in matrimony, found for some reason that it was not
going to work for a lifetime and are now faced with an uncertain financial
future, will find the following of use. Those still in a relationship should
consider some of the ideas listed below as not a precursor to divorce but a
good solid plan for any disaster that might find you alone without your
spouse.
Making a Financial Plan
For a couple, the loss of a spouse through divorce, illness, or some other
unforeseen occurrence is hard enough without suddenly realizing that what
you had was more than just a love-based union but a financial pact.
In spite of the growing earning strength of women, the chances that her cost
of living will drop and often considerably are far greater than you might
imagine. While the man tends to suffer from the lack of financial planning
as well, it is usually the former wife whose worth drops 10% or more. Throw
in the care of children and you have increased your chances of personal
bankruptcy tenfold.
It is important to understand that marriage is more than just a joining of
two people in love. It is a financial union with long-term and far-reaching
consequences. Understanding this while the playing field is level is much
easier. Early in the marriage - or even better, before the knot is tied, a
couple should discuss their financial future and should do so without one
exhibiting financial superiority over the other. In other words, both of you
need to understand where and how you plan to get from point A to point B.
Often hidden beneath soul searching conversations about children, is the
underlying question of how they can be afforded. Life throws many more
conundrums your way in such wide variety that unless you both know how you
feel about money, making the right choice, one you both agree on can be
increasingly difficult as time passes.
Each decision should be done as a joint effort.
Far too many women find themselves on the financial fringes of a
relationship largely because they trust and believe in their husband's
financial savvy - or the appearance of expertise. Your involvement is key to
the future of the relationship and the future of a relationship that might
at some point, no longer exists.
Every time a financial decision is entered into, both members should be
willing to commit the time to understand it fully. This may mean that you
need to set aside a specific time to talk about money and the household
finances. It should, however, never be a conversation in passing. Find the
time and the place to speak about it without interruption.
Both of you should know how to read a tax return, know where all of the
accounts are located and how they are set up, and how you can gain access to
them in an emergency. Safe deposit boxes serve this purpose well.
The tax return, a concern for the first woman I spoke to is hardly the kind
of thing you ask your future husband to reveal. But you should anyway. After
the "I do's", his taxes become your taxes, or better, his obligations become
yours.
If one of you has filed a tax return and has been less than forthright on
it, a glance at it before you tie the note might prove to be a financial
revelation - better had before you take your vows. This type of
truthfulness, with any luck, you will allow you to create a spirit of
honesty, which anyone married for a significant amount of time will tell you
is the cornerstone of successful marriage.
Believe me, if one of you makes an exorbitant amount of money, a glance at a
tax return can be an eye opener. Don't be surprised if you are asked to sign
a pre-nuptial agreement. If you are, be sure that there is an expiration
date. Either way, knowing what kind of financial future you may have based
on the commingling of incomes is an important step in planning for a future
together.
Planning for Protection
Checking accounts and savings should be listed in both names and for the
protection of the less savvy of the two, should be opened as Mr. AND Mrs.
not Mr. OR Mrs.
That way, both names would be needed to close the accounts. You should know
how to read bank and brokerage statements and be able to balance them
against your numbers. Even more important, you do so every time they arrive.
Discuss any discrepancies as soon as you are concerned, not when you bounce
a check.
You should also strive to be signed on every financial obligation. While it
is a good idea for each of you to have your own established credit, paying
for it should be part of the financial obligation of both. This should be
part of your regular meetings and planning sessions. While some couples may
have very complicated financial arrangements, it is far easier to sort them
out while you are married than when the divorce attorney is involved.
Once attorneys are used, the mindset of divorce takes over and despite any
amicable intentions, it usually becomes the driving force in the termination
of the marriage. Letting that happen will have long-term effect on your
chance at a fresh start. You do not want that fresh start to be haunted by
the financial missteps of the past.
And lastly, take inventory of what you own, copy tax returns, locate
important papers, and even back-up your hard drive - your spouse's as well.
It seems as if these are tactical moves more than financial and they are a
little of both, but knowing where these papers are kept, being able to
access them can save you from more disasters than divorce. We have all
witnessed the destruction of hurricanes, fires and floods. Much of the
financial problems that arise following these problems could be alleviated
with good bookkeeping and storage.
Divorce and separation are not inevitable. A good plan is one that is in
place and (hopefully) never used. So ultimately, these types of moves are
not something anyone wants to plan for when they are walking down the aisle
but they are necessary nonetheless.
Consider it personal financial insurance. If nothing goes wrong with your
marriage, you are at least prepared for some other financially crippling
event such as a fire or natural disaster. Just remember, the key to a good
plan is revisiting it occasionally and updating the information.
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