In most households, one spouse typically takes the lead in managing the family finances. The other spouse values and appreciates this because they have so many other responsibilities. While there are some couples who share financial responsibility, the husband is nearly three times more likely to assume this role than the wife. If you’ve let your husband take charge of the finances, over time, you may come to rely more and more on him and get further away from being prepared to handle the finances on your own. Unfortunately, the statistics illustrate the dangers of such an approach:
- Eighty percent of men die married, while 80% of women die single.1
- Half of the women over age 65 outlive their husbands by 15 years.2
- Seven out of 10 currently married American women will become widows, at an average age of 59.
- Today’s divorce rate hovers at 50%.3
- Only four out of 10 couples (38%) who use a financial advisor interact jointly with their advisor.4
Ten Questions About Your Finances
At SignatureWOMEN, our goal is to help women achieve clarity and confidence with their finances. Even though not every woman wants to take on full responsibility for the family finances, we believe every woman should be prepared to do so if the need arises. Here are some questions we think you should be able to answer about your household’s finances:
- What do we have and where is it?
- How do I access it?
- How is the money invested?
- How much risk are we taking with our investments?
- How much risk are we exposed to at work or in the business?
- How much debt do we have?
- Are we protected? Are our wills, powers of attorney, incapacity documents and insurance up to date? Do we have adequate life, health, disability, long-term care, homeowners, auto, liability, and umbrella liability insurance?
- How much are we spending, saving and giving each year?
- Are we on track to meet our goals (retirement, education, charitable and legacy)?
- Who can I go to for help if I need it?
Don’t be part of the “if only” club. At a minimum, make sure you can answer the questions above regarding your financial situation. Below, I’ve described some real-life scenarios that illustrate the dangers of not knowing this information. Unfortunately, situations like this happen every day.
Liz and Carl: An Unexpected Death
Liz and Carl were married for 25 years. Carl was 15 years from retirement and lived a very healthy lifestyle. Liz did not work outside the home. One morning, Carl did not wake up; he had died of a heart attack in his sleep. Not only did Liz have to go through the grieving process, but she also found out that her entire world was about to change. Carl and Liz had assumed he had another 15 years to work, so their retirement savings weren’t sufficient for Liz to continue the lifestyle that she was used to. Carl had no life insurance to help with the gap. As a result, Liz had to sell her home. She did not have enough income to continue paying the taxes, insurance, and upkeep. However, because of recent downturns in the real estate market, the property’s value had dropped significantly. Once the first mortgage was paid off, she didn’t have enough equity to purchase a smaller, less expensive home. Liz had to rent an apartment. Then, she had to find a job for the first time in many years just to make ends meet. Her salary, coupled with the income from her retirement portfolio, was not enough. Liz had no choice but to ask her adult children for help.
If only Liz had asked Carl if there was life insurance in place if something happened to him.
Brenda and Brad: Divorce Reveals the Financial Truth
Brenda and Brad had been married for 30 years. Brad had a successful business that paid for a nice lifestyle and many extras. He had always taken total control of their finances. Brenda never had to worry about a thing. One day, Brad came home and told Brenda that he wanted a divorce. Brenda went to see her divorce attorney and after paying significant legal and accounting fees found out that she would have to sell her home. In addition, there was a substantial amount of debt that exceeded the value of the assets she and Brad currently owned. Their home, vacation home and Brad’s business were all leveraged in full. At the end of the day, there were no assets to split up. Brenda was forced into bankruptcy. At age 52, she had to find a clerical job that barely paid her rent.
If only Brenda had known there was so much debt, she would not have taken lavish family trips each year, helped her adult children buy a home, bought (leased) her new BMW or added on to their vacation home.
Bill and Barbara: The Danger of Not Having Enough Insurance
Bill and Barbara had twin 16-year-old girls. One daughter caused an accident while texting and driving that resulted in the death of an occupant of another vehicle. The family members of the deceased sued Bill and Barbara for $1.5 million for pain and suffering, plus the lost income needed to support their family. Bill and Barbara had an auto policy with a limit of $250,000 for each accident. Their auto insurance carrier paid the limit of $250,000 and its responsibility was complete. Bill and Barbara had to pay for their defense costs and damages out of pocket. An umbrella policy, which provides higher limits and is usually purchased in million-dollar increments, could have helped protect them. Bill and Barbara could have purchased this coverage for as little as $200 a year. Families with means need this type of coverage.
If only Barbara had suggested they purchase an umbrella policy to protect her family from a liability suit.
Women Need to Know About the Family Finances
These scenarios illustrate how critical it is for women to be informed about the family finances. Even if you don’t make the day-to-day decisions, make sure that you understand the basics (including how much money you have, how much you owe and what kind of insurance coverage you’ve purchased). Having that knowledge will make it much easier to cope if the unexpected does happen.
Bonus question: Knowing what you know right now, what is your next step?
- Thakor, Manish and Sharon Kedar. On My Own Two Feet, 2007.
- Milestone Bank. “Financial Empowerment for Women, Feb. 4, 2009.
- Centers for Disease Control and Prevention, 2009.
- Fidelity Investments. “2011 Couples Retirement Study,” May 2011.