“I make all the financial decisions in my household, but does it make sense for my spouse to be involved in our financial planning?” is a question I’ve heard several times in my career and seen implied many more. Absolutely! is the answer. Both spouses in a household need not be financial experts, but it is imperative that both contribute to the financial decision-making process.
While it is not always the case, we often find that there are two financial types of people in every life partnership. One member of the team is the “financial spouse,” while the other is the “non-financial spouse.” A conspicuous dose of historical paternalism has led many to stereotype these roles as gender-specific, and the male-dominated financial industry has shamefully reinforced this fallacy. But our firm’s 30 years in the industry has proven otherwise—men and women seem to share the title of financial spouse equally, even if the household roles have been established to the contrary.
Typically, we know who is who within minutes of our introductions. We don’t derive this knowledge from a fancy questionnaire or psychological analysis; we simply ask the couple. It’s exceedingly rare that they don’t immediately spit out their respective roles. This, of course, doesn’t mean that mismanagement of said roles doesn’t cause a great deal of disagreement in households. With over 50% of marriages ending in divorce and over 50% of those splits citing financial disputes as the primary reason, having a clear understanding of which spouse monopolizes the fiscal prowess doesn’t seem to help much. In fact, it may be part of the problem.
This problem comes to bear most often when respective partners fall into the trap of living out the stereotype of their role. Non-financial spouses may deem it their responsibility to be irresponsible. They may presume it the other spouse’s duty to handle the household’s finances, and focus more on the household duties that mesh better with their proclivities. In extreme cases, non-financial spouses may even—hopefully subconsciously, but not always—permit themselves an allowance of financial foolishness. And sometimes, the financial spouse almost deserves the punishment, especially if they’ve taken to condescension and judgment of every decision the non-financial spouse makes.
Yes, marriage does have a way of bringing out the worst in us, but it need not be the case. It’s actually imperative that non-financial spouses not abdicate the role of participating in financial decisions and that financial spouses engender a collaborative environment for decision-making. Here are three reasons why:
- Like it or not, one of life’s only guarantees is that it—our life—will eventually come to an end. If it’s the financial spouse who leaves this earth first, it’s extremely important that the non-financial spouse knows enough about the household finances to survive that difficult personal transition without financial stress.
- It’s impossible to survive in this modern world without being at least reasonably financially literate. Whether or not you’re a “money person,” nearly every decision we make involves money. You don’t have to learn how to calculate the alternative minimum tax or understand the standard deviation of a mutual fund, but everyone must understand the basic s of cash flow (budgeting), banking, investing and insurance.
- Financial spouses make better decisions when inviting the non-financial spouse’s influence. Financial spouses tend to be analytical and more prone to taking on risk, but financial planning and investing is not an exact science. That means the non-financial thoughts of the non-financial spouse are vital to the success of a balanced plan.
I realize that money isn’t exactly romantic discussion matter, but making it a recurring topic of discussion in your household might just save your marriage!
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I’m a speaker, author, Head of Wealth Management for Triad Financial Advisors. Connect with me on Twitter and LinkedIn.