It’s common in couples for one person to serve as the Chief Financial Officer (CFO) and take charge of paying bills, making investment decisions, selecting insurance policies, and employee benefits, etc. This division of labor is common because one spouse may have more interest or knowledge about financial matters, and the set-up works fine – as long as both spouses are physically and mentally healthy.
Of course, our health is not guaranteed, which was the case with my clients, Pierson and Nancy*. Pierson and Nancy were married over 50 years, and Pierson handled all financial matters until he got very sick and subsequently passed away. Their financial plan and investment plan continued on the path we established over our 15 plus years of working together, but Nancy was at a loss about where to find Pierson’s original will or how to pay the power bill. This lack of knowledge about her finances made an already very stressful situation even harder. This experience also made me realize how critical it is for couples to have regular “money talks” to make sure financial information is shared. I want to prevent another client from facing what Nancy experienced.
It may be helpful to schedule a time to have a money talk, so your spouse doesn’t feel like you are springing the topic on him/her. You’ll also want to have separate conversations about each topic rather than trying to cram them all into one talk and risk information overload and inaction. Finally, consider starting with the topic that is of most concern for the non-CFO in the family to try to relieve as much anxiety as soon as you can.
The Five Money Talks
1. How are bills paid?
If the CFO spouse died or became sick, what bills are the most pressing to pay? For example, is the mortgage payment automatically drafted from the checking account or does that bill need to be paid manually?
- If there are multiple bank accounts, what account is used to pay bills and what is the purpose of each account?
- What income, if any, is regularly deposited in the bank account and what bills are automatically drafted?
- If distributions are being made from investment accounts, are those distributions automatically scheduled? Or is a call made to the advisor to request disbursements?
- Are there periodic expenses, like insurance premiums or real estate taxes, paid for via check or online funds transfer?
- When are bills paid? Monthly? Every two weeks?
- Is a larger balance kept in the checking account or is it managed with less of a cash cushion making it more important to balance the account regularly? And, if the non-CFO spouse needs help with how to balance the checkbook, check out this tutorial from nerdwallet.com.
After this money talk, it may be helpful for the non-CFO spouse to sit with the CFO spouse as he/she pays bills to see the process in action and to make notes for future reference. The non-CFO spouse may also have insight on how to simplify the bill paying process, for example, by automating more bill payments or by consolidating bank accounts so there is one operating account.
2. Where are important documents kept?
The CFO likely has a filing system that works for him/her, so the non-CFO may need to make notes about where to find things if that system does not click. Another option is for the non-CFO to take over the file system! Keep in mind that some documents may be in paper format and some may be in digital format. You should be able to put your hands on documents including:
- Social Security numbers and benefits statement
- Personal papers like birth certificate, marriage certificate, military discharge papers
- Income tax returns
- Insurance policies for medical, life, long-term care, auto, home, and umbrella
- Bank and investment account statements, including IRAs and 401ks
- Statements for any debts, like mortgage, car loan, or personal loan
- Employee benefits, including pay stubs and employer provided life insurance
- Beneficiary designations on retirement accounts and life insurance policies
- Real estate deeds, car titles
- Name and contact information for professional advisors including CPA, estate attorney, employee benefits manager, insurance agent
3. Where is the safe deposit box?
- Who has access to it?
- What documents or other items are kept in the safe deposit box?
4. Where do you keep a list of usernames and passwords for online accounts?
- If you use a password manager, like LastPass or Dashlane is used, what is the master password?
- By the way, if you are not using a password manager, you should be!
5. When can we meet again to see what information has changed? Six months? One year? Just like other “talks” we have with our family, this “money talk” is not a one-time event. Your financial and family life will change, and it is important to stay on top of these changes.
Pierson and Nancy did so many things right in their 52 years of marriage, but their experience highlighted to me the importance of communicating about family finances. Your Bridgeworth advisor can be a trusted resource if you need some help getting this conversation started.
In addition, our WealthVision software makes it easy to see all of your financial information in one place and to save important documents in the online vault. It’s another service we offer to give you more peace of mind and to reduce stress.
*Names have been changed.
BTN # 1-627633.0717