September 5th, 2018
It has been estimated that every 13 seconds someone files for divorce. This sounds like a staggering statistic when most people don’t enter the union of marriage expecting it to fail. However, even in the best of marriages, there are financial steps you can take which can contribute to the health of the relationship.
Surprisingly, even in modern day when great strides have been made toward equality in the workplace, it is not uncommon for women to leave investing and other financial decisions in the hands of their spouse. At some point, possibly when a woman is divorcing or widowed, she may learn of debts, spending, accounts and even outdated beneficiary designations she was unaware of. This may leave her unprepared to manage her new circumstances. This does not have to be the case.
Either partner in a marriage may not feel comfortable taking the lead when it comes to handling financial responsibilities, but this should not mean that they be kept in the dark either. By taking steps to clearly understand the complete current financial picture, future plans can be made with informed accuracy.
Simple Ways to Stay Informed
• Keep a Summary of All Accounts. A list of savings and checking accounts, 401(k) retirement plans, credit cards, mortgage and car loans, and documentation of all other assets or liabilities should be accessible to both spouses. This can provide both transparency and a useful tool to keep available for financial planning.
• Review Tax Returns. Whether one spouse prepares the returns, both do it together, or a professional is hired, it is helpful to be aware of what information is documented on the forms. Both must sign the return, and it is in your best interest to know what you are signing.
• Checkbook and Expense Review. With many people using debit cards in place of checks and direct bill-payment systems, it’s a good idea to review bank statements directly to keep informed of all expenses going through checking accounts. Setting up a routine to go over statements and spending on a regular basis can catch any banking errors which may accidentally occur and will ensure that both spouses know where day to day funds are being directed.
• Insurance Check-Up. Do you have enough coverage for a variety of situations? Health, disability, life, auto and homeowners or renters insurance are some of the major policies a couple may have. All these policies can come with varying degrees of coverage and costs. It’s important to be aware of what you are paying for and how well you are protected by your plans. As life changes take place, updates to these policies may be required. Setting time to review together with your insurance agent may lead to worthwhile adjustments that better protect your family and even if no changes are needed, you will both be more aware of the coverages you have in place.
• Beneficiary Review. Every retirement plan account (i.e., IRAs, 401(k)s, 403(b)s, etc.) and life insurance policy has designated beneficiaries. It is a good idea to review your beneficiaries when circumstances change (i.e., the birth of a child) to ensure assets would pass according to your wishes.
• Check Estate Documents. Your wills give your instructions for where assets are to go after you pass away, except for assets for which beneficiaries are named. Your will is also where you name Guardians for minor children. A Health Care Proxy states who can make medical decisions for you if you are unable to make them for yourself and a Power of Attorney delegates the authority to another to handle your financial issues (such as filing taxes and writing checks) if you are unable to handle that yourself. These very powerful documents should be up-to-date and reflect your wishes.
• Ask Questions. Each relationship is unique and fighting over money is often cited as one of the top reasons for divorce, but clear communication about joint finances can help to remove stress of the unknown. With facts in hand, it may help the couple or individual to make informed decisions.
Money can be an intimidating topic and it might seem easier to ignore details than to make efforts to understand what can be confusing. If you need assistance or guidance in creating a financial plan, please contact us.