A lot of times when it comes to our family finances, we see the need for one spouse to handle the money while the other kind of takes the backseat and is just along for the ride. This is not a good idea. The one that has the lead now may not always be in the lead role. Many times divorce, illness, injury, or death can cause the role of financial officer for the family to change. When these things happen it can cause current plans in place to be drastically changed and not always for the good. The spouse that was not in the lead becomes overwhelmed with the new responsibility of handling the finances of the family and is unprepared for the task. Research shows that while women are involved in the day to day finances of the family, when it comes to long-term planning and investment strategy they have little to no involvement. Since women have a longer life expectancy on average this seems to be to their disadvantage.
When it comes to financial planning, both spouses should be involved and should share in the decision-making responsibilities. This not only allows both to have a say in what they are comfortable with but also provides valuable insight into what the other is thinking when it comes to retirement. Below are five easy steps to allow both spouses to align their long-term plans.
- Review and Talk about Assets
Communication is the key to a long and successful marriage and financial future. Be on the same page when it comes to your assets. Both should be informed on where assets are held and why they are being held in those locations. Both need to be aware of user names and passwords, account numbers as well as contacts for those accounts, and how the beneficiary designations are set up.
- Ultimate Goals
Everyone has their own ideas and dreams when it comes to their retirement. The problem comes when you and your spouse’s ideas don’t overlap. If one wants to retire to the mountains and the other to the coast, then one will not be satisfied in retirement. Again, communicating these things early on in your marriage will help so that your pictures of retirement will be aligned once retirement gets here. Remember some surprises are good and some are bad. You don’t want bad surprises in retirement.
- Ask Questions and Share Ideas
The common practice is to let the most knowledgeable person take control of the long-term retirement and investment planning. It is fine for one person to run point, but make sure that you are not in it all alone. If your spouse is very conservative in their risk tolerance and you are very aggressive in your risk, then the portfolio will not let one of you sleep well at night. You need to take time and listen to each other’s concerns when it comes to the strategy you use. If you have a question of why 98% of the portfolio is sitting in cash, then be open to share those concerns.
- Don’t Let Touchy Issues Derail Conversation
Just because one of you disagrees with a strategy or an asset allocation doesn’t mean you should avoid the topic. If things get heated, take a break and do some research on the subject. If you are still uneasy about the topic, then consult your financial advisor. They will be able to give guidance on what is the common practice for people in your situation. Remember an extra percentage point or two is not worth causing problems in your marriage. You are in this together; so both of your opinions always matter.
- Check Back In
Once you have everything set up just right and have talked through your plan to the nth degree, then remember your plan is already outdated. It is frustrating but our lives constantly change and since they do, so does the plan we have for the future. As we move forward in this life, our family needs change and so do the needs of our future selves. Checking back in on our well laid plan helps make sure that we are moving in the same direction that life is taking us.
There are some bonuses to you both being on the same page. One, it strengthens your overall financial plan. With both of you looking at the financial outlook and future plans you are less likely to miss something. Second, the uninvolved spouse will feel more comfortable in the knowledge they gain from the plan and the spouse that had the lead will feel a sense of support and relief that they are not alone in the responsibility of planning for the future.
When you married, you became a team and teams work together to get things done. Each of us bring unique skills to the table. Learning to listen and communicate with each other will make this walk through life and finance much easier.