How Couples Can Work Together To Manage Household Finances

A former client’s husband passed away shortly after retiring. Prior to my meeting them, he had started drawing his pension, based upon single life expectancy. What that meant was that he received a higher amount of money each month while he lived, but after he died his wife would not receive any additional payments. Unfortunately when passed away suddenly, shortly after retiring, his wife was left as a young retiree with little money.

He had managed the finances and, presumably, thought he was making a smart decision and would live past the break even point (after which the single life pension was more advantageous). Sadly, this did not happen. His wife was caught completely unaware and left to deal with the fallout. She was left trying to untangle their finances while also grieving.

Another couple I know had no financial advisor. The wife entirely managed the finances on her own. She did a great job of it. When she passed, however, he realized that he knew next to nothing regarding their finances. It took him several years to track down all of their accounts and to identify and pay all the bills.

Each household manages its finances a bit differently and needs to find the method that works best for its members. Sometimes one partner prefers to take the helm and other times there is a division of responsibility.

Frequently people in relationships will tell me that one of the partners handles the majority of the finances for the couple. In these situations one of the individuals is more comfortable managing money matters while the other would rather not deal with them.

Just as often I see couples who divide the money management along lines that I think of as the big picture/ daily living. One of them handles the cash flow and bill pay, while the other deals with investments, retirement accounts, and insurance.

There are also couples in which money is held separately and each partner manages their own finances. In these situations there may be a division of joint bills or a joint account to which they each contribute.

If you have a domestic partner, which of the above scenarios most closely resembles your situation?

I believe that these are all valid options for coordinating your finances. It makes a lot of sense to divvy up tasks according to skills and interests.

Additionally, these structures may change and evolve along with the relationship and life circumstances. Personally, my spouse and I started out managing our own money. Over time, and particularly after becoming parents, our finances became more integrated.

The problem occurs, as shown in the above story, when one partner is completely unaware of and unknowledgeable about their financial situation. By necessity, in our society, money plays a huge role in all of our lives. If we completely hand over such an important element of our well being to another then we are giving up our power and control over our own lives and futures.

This is not to say that you need need to balance the checkbook (we need a more modern phrase for that. Do most people even use check registers any more?). But you do need to know where your family money is held and roughly how much you have. You do not need to make the life insurance payment, but you do need to know what policies you have and if they are appropriate.

You should be aware of the big picture even if you are not the one handling the daily details. There are several reasons for this.

1. We are all human. We all make mistakes. We have varying opinions. And in matters of finances there is rarely a “right” answer. If one person takes on all of the responsibility and something goes wrong, it is easy to see how it would be detrimental to the relationship. Shared responsibility can prevent future guilt and/or resentment. Few people would purchase a house or even a car without consulting their partner. Yet many make decisions about insurance, retirement savings, and taxes without any discussion. The ramifications of these decisions can be at least, if not more, substantial than a large purchase.
2. We should be prepared for any eventuality. If the partner who manages the money should die or become incapacitated, the other must be in a position to take over.
3. Not all relationships last forever. None of us want to think this way and I certainly support optimism in this area. But spouses who are unaware of their money situation may end up financially dependent upon their partner. It is best to avoid this possibility by having both persons retain some control. This is true even if one spouse is earning the bulk or all of the money. Money management does not need to be tied to earning money. Otherwise an unhealthy power structure is more likely to arise.

If you are the money manager in your family, I encourage you to make a date with your partner to share with them about your family finances. You don’t need to bore them with every detail (unless they want to know). But, they should have a general knowledge of and agreement with your financial situation, any strategies you are employing, and any struggles you may be encountering.

For those who have handed off the duty of overseeing finances, please take the time to learn more about the financial matters that impact you. Again, knowing every detail is not necessary but being able to access your resources and contribute to the decisions is important.

This same advice applies to those who divide the financial responsibilities. Make sure that you are keeping your partner in the loop regarding the items you handle.

For each individual who manages family finances, here are some important items to document:

• What accounts do you own?
• Where are they held?
• How can they be accessed?
• What payments must be made and when?
• What contribution dates, required withdrawals, or other time sensitive items should your partner should be aware of?
• What insurance do you have?
• How can it be accessed?
• Where do you have any titles or deeds for property stored?
• Where can your estate plan be found?
• What financial professionals do you work with (accountant, attorney, etc.) and how can they be reached?

There are numerous ways in which this information can be maintained and shared (If there are any methods/tools you use that I have left off of the list I would love to hear about them):

• password managers
• spreadsheets and files on local computers
• online document storage such as gdrive or dropbox
• hard copy files

You do want to make sure that the information is accessible to your partner and is also stored in a secure manner. (hint: keeping your passwords under your keyboard is not as original as you may think.) Everyone has different items to keep track of and different organizational methods.

However you have divided the responsibility of financial management within your relationship it is vital that both members contribute to the decision making. It is also necessary that both have access to the financial details.

Household finances affect all members of the household and should be a collaborative effort between all adults involved. Each couple may have a unique method that works best for them. We do not all need to approach things in the same manner. What is universal is that both partners need to stay informed and both should have a voice in the financial decisions. After all, a domestic partnership is also a financial partnership.

Maura Madden is a registered investment adviser in the State of Washington. The Adviser may not transact business in states where it is not appropriately registered, excluded or exempted from registration. Individualized responses to persons that involve either the effecting of transaction in securities, or the rendering of personalized investment advice for compensation, will not be made without registration or exemption.