What's in your spouse's wallet?
You need to know everything about your partner's finances to make smart decisions together. But most couples know next to nothing.
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| In a recent poll, four out of five respondents revealed that they hide purchases from the one they love. |
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(Money Magazine) -- If Silda Spitzer had only made it her business to look at her husband's bank statements, the story might have ended so differently.
Maybe seeing the mysterious multi-thousand-dollar wire transfers would have tipped her off that something was awry, and she could have dealt with the situation privately. Then, perhaps, her husband Eliot might still be governor of New York.
Alas, discussing their money was apparently not at the top of the Spitzers' agenda. In that, they're hardly unusual. A growing body of research shows that married couples are astonishingly clueless about many aspects of their financial life together.
Consider: Half of the pairs in a 2003 study came up with completely different figures when asked to estimate their family's income and net worth. In a survey last year of couples ages 43 to 70, some 35% were more than two years off when guessing when their spouse planned to retire.
About a third of those surveyed admitted to lying to their partner about money. And four out of five respondents in another poll revealed that they hide purchases from the one they love.
What in heaven's name is going on here? Blame at least part of the problem on the way so many couples divide financial labor in the family. Maybe he does the investing and she pays the bills, or he buys the insurance while she files their taxes. As long as there are no obvious snafus, each is content to let the other handle whatever he or she is handling.
Then too, couples these days marry later than they used to and come into the union with their own credit cards, bank accounts and investments, which often stay separate. And if you're convinced that sharing what you've spent or saved will spark criticism or a fight, it's understandable you might choose to keep a few details to yourself.
Understandable, yes, but hardly optimal. You can't come to smart decisions - or even joint decisions - if you don't know what assets and liabilities you're working with and what your partner's goals and priorities are. "You also lose out on the benefit of collective thinking," says family lawyer and financial planner Violet Woodhouse, author of Divorce and Money.
In other words, two heads really are better than one for solving financial problems. The blinders-on approach also makes a crisis more difficult to handle. Should your spouse pass away, you'll be left scrambling to find bank accounts and insurance policies. And if you divorce, you'll be at a real disadvantage in getting your fair share.
Fortunately, the solution is simple: Mostly, what you have to do is talk to each other. Here are the big questions you need to tackle and how to approach them.
You may think you know the basics, like how much your spouse earns and saves, but don't be so sure. When queried about their household's finances, half of the couples in a 2003 study by Ohio State University's Center for Human Resource Research differed by more than 10% in quoting the family's income and by 30% in assessing net worth - mostly because one spouse didn't have a good grip on the other's side of the ledger.
See if you can nail this:
All source of income Just knowing his or her salary (gross and take-home) isn't enough. You should also have a ball-park figure on any bonuses, commissions and other compensation (such as stock options or profit sharing) your spouse receives.
If he or she has a business, freelance or otherwise, you should know its revenue and net income.
Savings and investments Apart from your home, retirement savings are likely to be your spouse's biggest asset. You should have a solid idea of how much is in his or her 401(k) and IRAs and roughly how those assets are invested.
Split 60-40 between diversified stocks and bonds? Excellent. The whole portfolio in company stock and emerging growth funds? Uh-oh.
In addition to your joint holdings, does your spouse have a separate checking, savings or investment account? That's fine as long as you're aware of its existence and have a pretty good idea of how much is in it.
You should both make a list of the financial institutions where you keep your money, plus account and phone numbers. Leave a copy at your office or with your lawyer in case you lose it.
Any debts or obligations This is the thorny one. Your spouse may not want you to know individual charges like the $200 she spent on her BFF's birthday lunch at L'Escargot Très Cher - and that's okay - but she should at least share her credit-card balance.
Also to be included: business loans and ongoing obligations such as child or parental support. All of this material should sit in one or two file drawers in your den or home office where you both have access, rather than in piles scattered around the house or at one person's place of business.
That way, when you sit down together to discuss any kind of financial planning, everything you need to work with will be readily available. Plus, you need to be able to grab this stuff in a hurry if one of you is injured or you have to leave your home because of a natural catastrophe.
Not every husband or wife is eager to talk about or share financial information, of course. So you should be prepared for a bit of resistance, especially if you've been married for years and never expressed interest in these matters before; your spouse may be understandably taken aback, perhaps even worried that you're about to clean out all your bank accounts and run away with your tennis coach.
Getting stonewalled? If so, a little financial forensic work may be in order. Your best source of data is likely to be your joint tax return. Since you have to report interest and dividend income to the feds, your 1040 should reveal the existence of all bank and investment accounts. You may glean information from the business and personal write-offs claimed. (Look on Schedules A, B and D in addition to the 1040.)
"You might learn of an interest deduction for a house you didn't know about," says David Seror, a Los Angeles divorce attorney who has seen it all. It could be an investment property - or a love nest he forgot to mention. If you do find something amiss, it's better to know and deal with the problem before it gets worse. Just ask Silda Spitzer.
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