Jointly Managing Finances
When meeting with new clients, there is an all too common statement made that causes concern every time. I often hear one spouse tell me that they handle the finances so there is no need to have the other spouse involved.
This one notion can be more damaging to a couple’s financial planning path than almost any other destructive behavior. My response is always to strongly recommend that both partners be involved and here’s just a few of the many reasons why:
1) One of you will very likely outlive the other – If the spouse that handles the finances passes away first, then the surviving spouse is left to handle everything on their own without the benefit of learning about the finances over the years and being properly equipped to take this on. In addition to grieving the loss of your partner and trying to take care of final expenses, funeral plans and other necessary arrangements, the survivor needs to simultaneously spend considerable time and effort trying to figure out where they’re left financially. This scenario is unfortunately way too common since men still handle house finances more often than women and men typically pass away first.
2) Your financial goals will be more achievable – Mutual financial goals require a mutual commitment to reach them and buy-in from both spouses is critical. If one spouse commits to living within a set budget to free up cash flow to pay down debt but the other keeps spending whatever comes in each month, the goal will never be reached. However, if both spouses set the financial goal together and both commit to achieving that goal, the odds of success are much higher.
3) You will have a happier and healthier relationship – It has been well documented that money and finances are the number one stressor in a marriage. While I have heard people argue that they can avoid this stress and fighting by just letting their partner deal with the finances, I can tell you this strategy never works. Frequent honest and open conversations about your current state and future goals is a much healthier approach to take. Jointly celebrating the attainment of a mutual goal is a lot more fun than bearing frustration or resentment for a decision made by your partner that you weren’t aware of.
4) Exercising financial discipline is easier with a buddy – Much like going to the gym and not skipping a workout when you’re too tired, sticking to a budget is easier if you’re using the buddy system. The resolve and support of your spouse will make it easier to stick to your financial plan and not make emotionally driven financial mistakes if you’re in it together. Spouses may have different ideas of what the right goals are and how they should reach them but a well laid out plan with some compromise on both sides should result in a financial plan that both are happy with.
While you don’t have to make joint decisions on every small aspect of your finances, a combined effort on the planning and execution of the bigger ones is strongly encouraged. Even if one spouse feels like they’re clueless about money matters and the other ones is fairly astute, any big discussions and all regular financial planning reviews should involve both parties.
For the currently un-involved spouse, sitting through a review with your financial planner that your spouse normally goes to alone may feel painful at first, but as you learn more and become more aware, I promise you a higher level of contentment will follow.