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 their male counterparts. They ask questions and seek direction from people they trust and sometimes from those they barely know.
Two conversations I 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. While I do often address them in my writing, it is often on a general basis and how they affect your investment decisions. On a personal level, I leave the taxes in my household to my wife, whose business warrants a CPA to prepare them.
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 and found that for some reason 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 following such unforeseen disasters
. 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, even more importantly, how to 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 not often the kind of thing you ask your future husband to reveal. During courtship, we tend to put on many financial fronts, some of them false, to impress or give the appearance of stability or even wealth. But you should ask 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 should 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 recent destruction of hurricanes and floods are are well aware of the disruption of fires . A good deal of these sudden and unpredictable events and 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.
