Relationships are typically divided into two financial roles: the active and the passive. To be more specific, the person who assumes the domestic financial lead by paying bills and making financial decisions and the person who takes a passive approach to the finances (“I don’t know” … “fine” … “you decide.”) Although this is typical, it is not optimal. In this traditional circumstance contentiousness can emerge between spouses as a result of misunderstandings and miscommunications about money. Ideally, partners should approach finances like all other areas in a healthy relationship, as a team: collaborating on goals and strategies while openly communicating about money. If they don’t however, the following are important points to consider about each role. 

The Financial Lead

The role of the financial lead, for those who take this responsibility seriously, is not an easy one. You have the challenge of balancing the important financial responsibilities while simultaneously making your family happy. And for domestic tranquility’s sake, you can’t always say “no, we can’t afford it,” but occasionally you need to pull the reins on the household spending.

We have met with many widows who were surprised to find that their spouses left them in a precarious monetary situation: little asset, too much debt, not enough life insurance and typically, no realistic way to make sufficient income. In cases like these, the financial lead neglected his/her responsibilities to the detriment of the surviving spouse.

Along with providing the necessities of life, the lead’s role is to ensure that enough is being saved for a comfortable retirement at a reasonable age. That could mean saving 1/3 or more of gross income (depending when one starts saving) and investing it appropriately.

Protecting against that which would be catastrophic to your finances is also among your duties. As such, you need to make sure that, in addition to the obvious, health, automobile, homeowners and umbrella insurance, that you have adequate amounts of life and disability insurance as well.

Lastly, it is important for the lead to be transparent about the finances with the passive partner and to encourage his/her participation.

The Passive Partner

The passive partner frequently doesn’t even want to know what is involved in the finances because their own professional and domestic responsibilities are already very demanding. There is a risk to assuming this role, however. It is possible that your financial lead is not equipped to handle the responsibility like the ones of the widows earlier mentioned. If your spouse passes away and you have been left with little asset, not enough life insurance, too much debt and no way to make money, you will chastise yourself for not having been more involved.

Although I recommend against it, if one truly wants to take the passive role, then, your most important responsibility related to the finances is to be clear about the budget and try to adhere to it. This is not to say that you never overspend, but that you give due consideration to the mutually beneficial objectives that your spouse is trying to meet. Sometimes, the passive partner’s own lack of knowledge of the financial situation leads to overspending… mostly in trying to “keep up with the Joneses.” A syndrome by which many are afflicted.

The Ideal Couple Scenario

Ideally, couples will strike a healthy balance of shared interest in the overall financial picture by adopting a team approach. They collaborate on goals and strategies for achieving them and communicate openly about money. This has the best chance of leading to a nice balance between a comfortable life and financial security in the future.

Although each couple will find a mix of responsibilities that works in their own domestic environment, both partners should know at least the following things:

  • How much asset you have
  • How the asset is invested
  • How much income is coming in
  • How much debt you have and at what interest rates
  • How much is being saved and whether it is enough
  • Whether you have life insurance and if so, how much, for how long
  • Whether the working spouses have disability coverage
  • Whether the estate planning has been done
  • Who your financial professionals are and how to contact them
  • What bills must be paid and when
  • How the bills are paid (auto-draft, by check, online)
  • Where the passwords are kept
  • Where the important documents are kept

Working with Your Financial Advisor

Lastly, both spouses should attend meetings with the families Certified Financial Planner™ practitioner. Not only will your CFP® professional advise you about next steps in the financial plan, but they will also be the financial resource that is needed to support a surviving spouse through a difficult transition.

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