Women have been playing a significant, if not the leading role, in family financial decisions for many years. There are still a number of households where the husband takes care of the financial and investment decisions. The wife in these households may be deferring these responsibilities so that she can focus on the family’s other responsibilities, but this can be a big mistake. Here are a few reasons why the wife needs to have input or oversight into the family’s financial decisions.
The old adage that two heads are better than one is true and this applies to family finances. I have seen a few instances where the wife did not know that her husband had a gambling problem. In these cases the wives never looked at the checking or savings accounts or the credit cards. In one particular instance the husband gambled both on sports and online casinos. Once she finally got wind of what was happening, the couple was in debt to the tune of $40,000. The deception that the husband perpetrated has caused a major rift in the couple’s relationship and it will take a lot of work for them to get through this.
Gambling can be a bad thing, but in other instances, it could be a spouse who likes to shop and spend beyond the family’s means. Here too, without the appropriate checks and balances, things can get out of whack in a hurry. In many relationships one spouse likes to spend while the other likes to save. If the one who likes to save ignores the finances it is easy to see how the finances can get out of hand.
From a tax perspective both spouses are equally liable for information submitted on a tax return. If the spouse who controls the finances is putting some aggressive deductions on the couple’s tax return in order to get a larger tax refund, both spouses are equally liable. We are not suggesting that the non-financial spouse needs to be deeply versed in tax law, but having an awareness of what is in their return and what it means is important.
Finally, as much as we do not like to think about it, what would happen if the non-financial spouse died prematurely? In these cases it can be very hard to keep the family on a strong financial footing when the surviving spouse has to take care of the family and get oriented to the finances. For this reason it is also good for each spouse to be aware of the beneficiary designations on all the accounts and life insurance held by the family members.
Jim Heisler is a Certified Financial Planner with Family Wealth Services in Holmesburg. You can read all his Financial Perspective columns here.
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Jim Heisler, CFP®, CDFA™, CASL™ Family Wealth Services, LLC is located at 8275 Frankford Ave. (215-332-4968)
The views expressed are not necessarily those of Cambridge and should not be construed as an offer to buy or sell any security. These situations are hypothetical in nature and do not represent a specific client.