Both Spouses Should be Involved in Handling Financial Affairs
Division of labor in a marriage can be a good and often necessary thing. It can allow couples and families to be much more productive, freeing up precious time to spend on things they enjoy. In fact, according to Pew Research, the perceived fair division of labor is a key component of a successful marriage. Household duties can be divided between spouses by many different methods: interest, aptitude or skill, willingness, career flexibility, or even by who tends to benefit the most from the completion of the task. My husband often shoulders most of the laundry responsibilities in our house because he works from home and can easily toss in a load or two while he is working. This is usually the best way to handle this chore in our family, barring the occasional shrunken sweater or white shirt gone pink.
So, when it comes to managing finances, it makes sense that couples naturally try to divide this task up as well. As a wealth advisor, we often see scenarios where one spouse does most of the communicating and attends the meetings alone. In addition to the simple rationale of division of duties, this can occur for many reasons. Often one spouse will say that the other spouse does not have any interest in managing their financial affairs, or they do not have the time. Sometimes this is really because the other spouse feels overwhelmed by financial information and does not want to place themselves in an uncomfortable situation. It can be intimidating if you are a financial novice. Sometimes, they try to shield their spouse and spare them stress. Sometimes a spouse can be protective of what they have earned or inherited. And sometimes the other spouse is content to ignore the money factor as long as their needs and wants are met. Even if both parties agree to this, it generally is not a good idea to leave the majority of financial affairs solely to one person.
In our first meetings with a prospective client, one of the things we most want to learn about is how financial decisions are made in the family and what those financial conversations look like. This tells us a lot about a person. When it comes to managing your finances, both partners should ideally be involved in the management of their financial affairs, and there are several reasons:
1. Goal Alignment
If you have mutual goals, then you need a mutual commitment. Both parties need to buy into your stated goals and these important planning decisions need to be made together. The decisions you make will affect the futures of both spouses. When both are committed to achieving their goals, your odds of financial success are much better.
Two brains, as well as two temperaments, are usually better than one. Financial planning and investing can be complex, and it takes resolve. Just because one person has a greater interest does not mean they will always make the right decision. Sometimes emotions or competitiveness hinder good decision making. It is not uncommon for one spouse to be more concerned with performance and the other more concerned with how and when their money will be used. With both parties as an active part of the discussion, you balance each other out, each bringing your best qualities to the table. It is easier to avoid mistakes and hold each other accountable.
3. Risk Avoidance
The uninvolved spouse can end up managing the assets at the worst possible time, whether they want to or not. Death, illness and divorce can force the uninvolved spouse to make financial decisions at a very vulnerable time. One spouse will outlive the other, and due to life expectancies, it is often the female. Throwing a spouse into this situation opens them up to many potential risks- poor or no financial oversight, predatory advisors, missing assets, or spending down the money too soon.
4. Marriage Wellness
Intentionally or unintentionally leaving a spouse out of the financial discussion can create an environment of tension, resentment, and distrust. This can lead to a power imbalance in your marriage and unfortunately, even financial infidelity. And if one person shoulders all the responsibility, they inevitably carry all the stress that might come with it. These stressors can be damaging to the best of relationships. Read our blog on merging finances for more tips on how couples can succeed in managing their finances together.
By leaving the financial duties to one person entirely, you expose yourself to far greater risks than an occasional shrunken sweater. There is no right answer as to how duties should be shared and divided. Every couple is different. All duties need not necessarily be split exactly 50/50. But both parties need to be a part of the financial goal setting and in discussions on how those goals are best achieved. They need to know what is going on, how much they have in family assets and debt, where it is and how to access it. Ideally, they both go to meetings and have a relationship with their financial advisor. Both should make an attempt to be financially literate and aware of family finances. Financial literacy can bring peace of mind. It allows you to be more productive and deliberate in your financial decisions-spending, saving, and planning- and frees you from unnecessary worry.