Managing the Risk of Your Spouse Managing the Family Finances

Compared to women who came of age in the 1950s or earlier, young women today have significantly more financial freedom. Women are graduating from university  at higher rates than men are. They are also assuming more leadership roles in the workplace. While there is still more progress to be made in terms of pay equity and sexual harassment within the workplace, women today have more control over their financial futures than previous generations ever did.

Despite this progress, when it comes to managing their long-term investments, many married women still act like it’s 1959 and not 2019. Case in point: a recent report from UBS[1] found that many women still defer to their husbands when it comes to big financial decisions and long-term investment strategy.

Surprisingly, these trends seem to be even more pronounced among millennial women. According to UBS’s survey of 3,652 high-net-worth married women, widows, and divorcees in the U.S., 56% of women age 20-34 defer decisions to their spouse, as opposed to 54% of women over 51 years of age. This tendency to let men drive the financial bus can leave women ill prepared to manage their finances should they become divorced or widowed later in life.

Are you among the cohort of women who defers to your partner? If so, you may want to take some time to contemplate why you are putting yourself at risk. Is it a lack of knowledge or confidence? Or is it because you simply have little interest in following the stock market, interest rates, and investments?

While a lack of interest in finance and investing is no crime, these topics are simply too important to delegate blindly to your partner. The risk of not being informed about the household finances is simply too great to completely abdicate the responsibility we all have to ensure we protect ourselves financially.  Consider these action steps to help you overcome your aversion to financial topics. Doing so will ultimately protect your own long-term interests:

 

  1. Start small and keep it brief. Schedule a monthly sit-down with your partner for a 15-minute review of your finances. Discuss whether you’re paying all your bills on time. If your partner is the one who manages bills, you may want to ask if they are happy handling that task. You may be wrongly assuming that your partner prefers to manage this task. In fact, you may be surprised to learn that your partner would welcome your help. If that’s the case, agree on a “divide and conquer” strategy to managing your monthly household finances, while committing to keeping each other informed.
  2. Examine the big picture. If you have not already talked about your long-term goals with your partner, schedule some time to have an in-depth discussion about each partner’s vision for “empty nesting” or retirement. To lighten the mood, share a meal and perhaps a bottle of wine and dream about tomorrow – kind of like those conversations you may have had back when you were just dating. If you disagree about your long-term goals, that is something you’ll want to resolve sooner rather than later. You may find there are shared interests you have and some interests you have as individuals.  Know that that is ok.  For those who don’t like to talk so much about investments and investment strategy, these types of discussions can be more appealing given then are more about lifestyle and dreams and not so much about the details of investment strategy. So regardless of whether you’re interested in discussing investment strategy, you should be interested in what your retirement years may look like.
  3. Hire a financial advisor to protect yourself. UBS’s study found that 56% of married women leave investment and long-term financial planning decisions to their husbands. A better approach may be to outsource this job to an impartial investment professional, rather than delegating responsibility to your spouse. This may be especially important if you and your partner have fundamentally different approaches to risk management. If you are risk averse but your partner is an aggressive risk-taker, do you really want to outsource management of your life savings to your partner? A financial advisor can protect your interests and ensure that your investment strategy reflects your own risk tolerance and not just your partner’s. Most importantly, an advisor should be communicating with both of you – keeping you informed not just about the investment strategy, but also helping you plan financially for tomorrow and keeping you on track to your longer-term goals.

 

Doing these 3 things, understanding how the day to day income and expenses are being managed, being a part of the planning conversations and having a professional advisor guiding you, will go a long way to ensuring your financial future is protected in the event you find yourself responsible for your own finances in the future – a circumstance that awaits 90% of women.

 

[1] https://www.ubs.com/global/en/ubs-news/r-news-display-ndp/en-20190306-study-reveals-multi-generational-problem.html

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