By Andrew Rosen, CFP®, CEP®
When speaking with couples and discussing their finances, I frequently encounter situations where one spouse handles all of the finances and the other has nothing to do with it. If you are in this situation, you are not alone. Even in my family, I handle all the finances since it's what's I do for a living. But because of this, my wife's financial muscles have atrophied.
Regardless of which spouse is the one unprepared, there are steps to take to ensure that both spouses are able to handle the finances should either have to suddenly begin managing the money. The goal is to know that in the face of a tragedy, or being forced to handle these items on your own, you know what to do.
1. Start a Dialogue
Openly discuss finances with your loved ones. Remember, a lot of the conversations can be big picture or goals based. Just asking questions to understand each other’s goals and how you plan to get there is a great step in the right direction.
Figure out if you both feel comfortable handling the important finances yourself. This is important to understand, especially as you age and your cognitive capacity could start decreasing.
2. Work With a Financial Planner
If it makes you feel more comfortable to have a professional review your finances, consider working with a financial planner or a trusted CPA. It's even okay to turn to a family member or friend if you just want someone else to review your financial situation. My recommendation in the majority of cases is to simply put the onus on someone who is well equipped to hold your hand, both now and in the future. The important characteristics are that they are competent, want the job, and you both trust them implicitly.
3. Make a List of Important Records
Regardless of who you get to help, you’re going to need to get some basic documentation. I recommend making a detailed list of the following so that your spouse can access people and financial documents that they will need if they suddenly have to begin operating on their own:
- Assets and Debts: You’ll want to gather values and account numbers. Many of us have assets all over the place. A clear, concise place to view this would be the foundation of knowing how to proceed.
- Professionals: Be as comprehensive here as possible. Include names, phone numbers, emails, etc. You’ll want your CPA, attorney, and financial planner all on this list. I’d even include landscapers and handymen to this list, as it will be good for both spouses to know.
- Expenses: You’ll want to make sure you understand what it takes to live a year in your shoes. Also, what if your spouse isn’t here? Do these expenses increase or decrease?
- Bills: At a high level, understanding the costs of your life is important. Get a grasp on how you pay your bills. Keep a list of all the bills with account numbers and contact information. Also, add how these bills are being paid and their frequency. Is it automatic withdrawal? Does it go to a joint credit card? Do you write a check and send it by mail? Knowing these details is important.
- Passwords and Logins: Keep a secure list somewhere of all the sites you use, as well as the username, password, and security questions. This list can save a lot of headaches and time by remaining updated, too. There are good sites like Dropbox or LastPass on which you can securely store all this information.
- Estate Plan: It's very important to have a summary of your estate plan's details. Are trusts set up? Who is responsible for what?
4. Review Finances Annually
Involve both spouses in your yearly check ups. It provides insight into your financial situation, even if you don’t care to be overly engaged. You can have your own yearly meeting between spouses. Just sit down and go over everything with a nice bottle of wine once a year. Quite frankly, that is what I do with my wife every year. I want her to know exactly what to do in the event something happens to me, plus it's a good excuse to open a nice bottle of vino.
Sitting down with your spouse once to run through this type of stuff doesn't mean they’ve retained it all. Remember, there is usually a reason they aren’t handling this to begin with. If you want to make it impactful, make it regular.
5. Take Turns
This last step isn’t for everyone, but I’ve seen couples literally switch who pays the bills every year. With this route, both spouses have an idea of the expenses and finances. This may be extreme for most, but for some people, it works.
For many, finances can be very complicated. Imagine the daunting task of handling it if you know you aren’t good at it, don’t enjoy it, and have avoided it for the past 60 years. When my dad passed, I witnessed it first hand, as my brothers and I helped my mom get situated. My mom is about as sharp as they come and she had a decent amount of engagement in the finances, yet it was still surprisingly difficult for her to take over.
By making an effort to speak with your spouse and be open with each other about how the finances work, you’ll be much more comfortable taking over the finances should you be forced to.
Recent articles by Andrew Rosen: "6 Ways to Automate Your Financial Life"
Disclaimer: Financial planning and Investment advisory services offered through Diversified Financial Consultants, LLC, a registered investment advisor. Securities offered through Securities Service Network, LLC, Member FINRA, SIPC . Associates of Diversified Financial Consultants are registered representatives of Securities Service Network, LLC, a registered broker/dealer, 9729 Cogdill Road, Knoxville, TN 37932. (800) 264-5499.
This article was originally published on Investopedia