When working with a new client, I often hear one spouse, usually the man, tell me that they handle the finances so there is no need to have the spouse involved. My response is to strongly recommend that both partners be involved, and here are the reasons.
1. Your future is heavily dependent upon it
Making good money decisions can move up the date of achieving financial independence, while bad ones can significantly set it back. So these decisions are important ones and, as with most important decisions, they should be made together.
2. Buy-in from both spouses is critical
A mutual goal needs a mutual commitment. If, for example, one spouse commits to living within a budget but the other doesn't, the plan is doomed. Conversely, when both spouses set the financial goals, and both commit to achieving those goals, the odds of success greatly increase.
3. Two heads are better than one
Investing can be complex, especially the tax consequences. Misunderstandings can occur between spouses and between the client and me. Having both partners present increases the odds of having a sound plan. And because typically, women are better at investing, their role is especially key.
4. Exercising discipline in tough times is easier when you have a buddy
The stock market is risky, and maximizing its return comes from, as Warren Buffett puts it, "being fearful when others are greedy and greedy when others are fearful." This philosophy illustrates the benefits of rebalancing your investments between stocks and bonds from which so much of the return comes. But it takes discipline to do it, especially when it requires buying more stock funds after a plunge. With the resolve and support of both partners, it will be easier to resist making the emotional mistakes of buying high and selling low that can eat up return.
5. One of you will likely outlive the other
Actuarially speaking, it will typically be the wife, since women have longer life expectancies. If the surviving spouse knows little about the finances (something I see far too often), that opens up all sorts of risks. Predatory financial advisers do read obituaries and cross-reference to affluent zip codes, and are eager to step in and fill the void. "I'm so sorry for your loss. Let me do everything I can to reduce the burden of having you take over the finances — just sign here and those worries are gone!" Or perhaps the surviving spouse doesn't know what accounts are open, or doesn't know the passwords to access the accounts. In my own situation, I'll confess that my wife pays all the bills and I'd have to dig into our bank accounts and credit cards to see what's due.
Dividing up responsibilities with your spouse by skill or interest is an efficient way to go, except when it comes to finances. That's a responsibility both spouses need to share in equally, since the outcome will affect them equally.
Allan Roth is the founder of Wealth Logic, an hourly based financial planning firm in Colorado Springs, Colo. He has taught investing and finance at universities and written for Money magazine, the Wall Street Journal and others. His contributions aren't meant to convey specific investment advice.
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