In my experience, it is common for one spouse to have a greater interest in the family’s finances. In fact, the spouse that is ‘most interested’ typically takes fully responsibility for making the family’s financial decisions. However, there are some fundamental and important flaws with this approach which I’d like to share with you.
What happens if one spouse unexpectantly passes away?
If the spouse that is the ‘financial decision-maker” passes away, particularly if it’s unexpected, it does cause the surviving spouse a lot of stress and worry. Not only do they (probably) have little knowledge of their financial affairs, but they also typically have a low level of confidence and experience with making financial decisions. This all compounds to create a lot of stress and worry, at the worst possible time.
To avoid this occurrence, each spouse must understand their financial position and strategy, even if its only at a basic level. They also must know who to seek advice from and who to trust, so they are able to share the burden of making ongoing financial decisions.
If the relationship breaks down beware of skeletons
There have been some horrible situations of spouses finding out about how dire their family’s financial situation is after their relationship has broken down. This includes massive tax debts, liabilities and so on. Of course, a strong relationship is founded on mutual trust and respect which includes discussing and disclosing all material financial decisions with your spouse before any transactions are made. Unfortunately, this does not always occur.
One spouse, often men, may feel a strong sense of responsibility to “provide” for their family. Sometimes, this responsibility can unfortunately drive them to make unsound and inappropriate financial decisions. And to compound this, they might avoid discussing these decisions with their spouse, so they don’t ‘burden’ them.
Of course, this is a foolish approach. That said, I believe it is the responsibility of each spouse to ask questions and seek to understand their own financial position. Nothing is too complex to explain in simple, easy-to-understand terms. It is something you can share together.
It’s your money, so it’s your responsibility
There is one thing you cannot delegate and that is the obligation to take responsibility for your money. It is your money and its your job to be responsible for it, not anyone else’s. That is not to say that you cannot trust anyone else or take their advice. But you must make sure that know what’s going on i.e. where its invested, what risk you are taking, how much you spend and so on.
If you don’t take responsibility and you end up losing money one day, you only have one person to blame.
Therefore, be engaged in the topic of money. Ask questions. You don’t need to have to understand the nitty-gritty or feign competency, but you must take responsibility. If you have a financial advisor, attend at least one meeting every couple of years. If you don’t have a financial advisor, ask your spouse to explain what’s going on and what your family’s financial plans involve.
You have to be on the same page
One of the important advantages of ensuring that both partners are engaged in understanding their finances is that you will be more likely to stick to the plan.
For example, if your financial plan requires you to contribute say $20,000 per year into a share portfolio, and both spouses understand why this is important to maintain, then it is likely that you will hold each-other accountable for achieving it. However, if one spouse doesn’t understand the strategy and therefore the importance of sticking to the $20,000 budget, then it can be more difficult to encourage them to curtail other expenditure. Therefore, there is merit in making sure each spouse “buys into” the plan and commits to it.
What if you’re the only interested party?
If you are reading this blog, then its likely that you are the person in charge of your family’s finances. You might be thinking: how do I get my spouse interested in our finances? Here are a few suggestions. Ask them to:
- Join you when you next meet your financial advisor and/or accountant.
- If they know what financial steps they must take if you pass away?
- For help. You can say that the burden of making the families financial decisions is best shared amongst both of you.
- Ask them to read this blog.
- If you are still having trouble, engage a third party, such as a counsellor in the conversation. They may have tools and strategies to help you address this.
Beware of financial abuse
The Australian Banking Association’s (ABA) new Banking Code of Practice was implemented on 1 July 2019 and it requires lenders to “take extra care with customers who may be vulnerable”. That includes victims of financial abuse and/or domestic violence. If you don’t have access to bank accounts or other assets that are in your name, asked to sign forms you don’t understand or anything you are uncomfortable with, you may need to take action.
To learn more about what this includes and how to get help, visit the government’s SmartMoney website here.
Your executors may also need help
Executors occupy a very important role. They carry out your wishes as set out in your will. However, it can also be a very time consuming and onerous job. And sometimes your executors may not have the experience, understanding or time to execute their duties in an accurate and timely fashion.
One solution is to instruct them (via your will, verbally or in a letter-of-wishes) to engage the services of your trusted advisors (financial advisor or accountant). If you would like to do this, you need to discuss this with your advisor(s) to ensure they are willing and able to take on this work. This is a good way to ensure your finances will be looked after correctly whilst not over burdening your spouse, family or friends (i.e. executors).
A responsibility shared is a responsibility halved
It is okay for one spouse to take responsibility for organising your finances. However, the responsibility to make decisions and understand your income, assets, liabilities and cash flow is something that must be shared equally. This will ultimately empower each spouse and have them feel more in confident. Of course, please reach out if we can help.