The common story.
I sit down with a nice couple, meeting them for the first time. We exchange pleasantries and they tell me they are looking to retire. One of them starts telling me everything about their family and finances. Madly, I take notes trying to get a baseline for their financial affairs. Finally, we get everything out on the table. There is a moment of respite before I pause to ask:
“Now that I understand your situation more clearly, may I ask one question Mr. Prospect?”
“Absolutely, Andrew. What is it?”
“You seem to have a decent understanding of your finances and what you’d like to accomplish. However, my question isn’t for you it is for your wife.”
I now turn my attention to the spouse, who has basically stayed completely silent for the past 10 minutes.
“Mrs. Prospect, what happens if your husband doesn’t wake up tomorrow? How comfortable do you feel taking over the responsibilities of bills, finances, taxes, investments, and everything else?”
Silence. When it (and the puzzled faces) finally fade, I get the answer: “I don’t know. I guess that’s one reason we are here.”
I see this scenario frequently, regardless of which spouse is the one unprepared (or whom handles the family finances). During my meetings, I find many couples generally divide and conquer the family duties — one handles the laundry, the other does the cooking; one does the cleaning, the other plans the vacations; one handles all the finances and the other deals with charitable endeavors.
This strategy is fine “most” of the time. However, the problem here is when the time comes to pass the finances baton. Most often this pass is to the female in the relationship, as women typically outlive men. (If don’t believe me, go to Boca Raton retirement community. It’s quite astonishing to see the ratio of women to men.)
If this is you, you’re not alone. I also have this same concern. In my family, I handle all the finances (since it’s what I do for a living). My wife knows she is in excellent hands. Because of this, my wife’s (along with many significant others) financial muscles have atrophied.
What to do.
If you find yourself in this situation, I recommend some useful exercises to strengthen that financial muscle, at least enough to survive on its own. I’ll preface this by saying I understand finances are complicated. The expectation is not for you to become a financial wizard. Rather, the goal is to know that in the face of a tragedy, or being forced to handle these items on your own, you know what to do.
1st: Start a dialogue with your spouse. It’s amazing how rarely a lot of us openly discuss finances with our loved ones. Remember, a lot of the conversations can be big picture or goals based. Just asking questions to understand each other’s goals and how you plan to get there is a great step in the right direction.
2nd: Figure out if you both feel comfortable handling your “oh so important” finances yourself. Naturally, I am biased here. Regardless, this is important to understand, especially as you age and your cognitive capacity decreases.
3rd: Get help! Work with a financial planner (like myself or my partners), or a trusted CPA if that makes you feel more comfortable. I’m even OK with you turning to a family member or friend. My recommendation in the majority of cases is to simply put the onus on someone who is well equipped to hold your hand, both now and in the future. The important characteristics are that they are competent, want the job, and you BOTH trust them implicitly.
4th: Make a list and check it twice. Regardless of who you get to help, you’re going to need to get some basic documentation. I recommend making a detailed list of the following:
- Assets and Debts– You’ll want to gather values and account numbers. Many of us have assets all over the place. A clear, concise place to view this would be the foundation of knowing how to proceed.
- Professionals – Be as comprehensive here as possible. Include names, phone numbers, emails, etc. You’ll want your CPA, attorney, and financial planner all on this list. Heck, I’d even include landscapers and handymen to this list, as it will be good for both spouses to know.
- Expenses– You’ll want to make sure you understand what it takes to live a year in your shoes. Also, what if your spouse isn’t here? Do these expenses increase or decrease?
- Bills– At a high level, understanding the costs of your life is important. Get a grasp on how you pay your bills. Keep a list of all the bills with account numbers and contact information. Also, add how these bills are being paid and their frequency. Is it automatic withdrawal? Does it go to a joint credit card? Do you write a check and send it by pony express?
- Passwords and Logins– Nowadays everyone has a website and a lot of what you’ll need is on the Internet. Therefore, I’d recommend keeping a secure list somewhere of all the sites you use, as well as the username, password, and security questions. This list can save a lot of headaches and time by remaining updated, too. (There are good sites like dropbox.com or www.lastpass.com on which you can securely store all this information.)
- Estate Plan– It’s very important to have a summary of your estate plan’s details. Are trusts set-up? Who is responsible for what?
5th: Either partake in or have your own annual meetings. If you work with Diversified, you already know we encourage involving both spouses in your yearly check-ups. It provides enough insight into things, even if you don’t care to be overly engaged. Even if you don’t work with us (dramatic gasp), you can have your own yearly meeting between spouses. Just sit down and go over everything with a nice bottle of wine once a year. Quite frankly, that is what I do with my wife every year. I want her to know exactly what to do in the event something happens to me, plus a good excuse to open a nice bottle of vino.
6th: Rinse and repeat. Once I was told you have to hear something 7 times before it sticks. (Of course, it wasn’t until the 7th time I was told this that it actually stuck. Just kidding folks.) Don’t think sitting down with your spouse once to run through this stuff means they’ve retained it all. Remember, there is usually a reason they aren’t handling this to begin with. If you want to make it impactful, make it regular.
7th: Take turns. This last step isn’t for everyone, but I’ve seen couples literally switch who pays the bills every year. He takes it on even years, she takes in on odd years. This way, both spouses have an idea of the expenses and finances. This may be extreme for most, but I thought it was interesting and worth sharing.
For many, finances can be very complicated. Imagine the daunting task of handling it if you know you aren’t good at it, don’t enjoy it, and have avoided it for the past 60 years! When my Dad passed, I witnessed it first-hand, as my brothers and I helped my mom get situated. My Mom is about as sharp as they come. She had a decent amount of engagement in the finances, yet it was still surprisingly difficult.
Hopefully, the next time you sit across from some handsome financial planner (like me of course) and are asked how comfortable are you taking over the finances should you be forced to, you’ll be able to answer with much more confidence!
In his role as Financial Planner, Andrew forges lifelong relationships with clients. He coaches them through all stages of life and guides them to better achieve their life goals. For more information about Andrew or the other firm partners, Kyle Hill and David Levy, click the link below.