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 i Our most popular free guides: Over the years we've written hundreds of articles. These three bring our best thinking together on the topics that matter most right now: choosing a super fund, debt recycling, and navigating the new tax changes. Download them here My new book, Wealth by Design, is out now: Buy online or in bookstores. The ebook is available now, audiobook coming soon. Got a question for the podcast? Email us at questions@investopoly.com.au Interested in working with our team? Discover how we can work together Subscribe to my weekly blog: Stay connected here Important This podcast provides general information about finance, tax and credit. It doesn't take into account your specific objectives, financial situation or needs, so you need to assess whether it's relevant to your circumstances before acting on it. If you're not sure, speak to a licensed, trustworthy professional.
