Financially Independent -- and Married
Tips for Financial Independence
No matter what your income level, you could be in big trouble if you don't stay involved with the family finances. Take Caroline, a 61-year-old divorcee who learned the hard way.
Five years ago, Caroline was married and living in a huge trophy house in a ritzy Boston suburb. She had millions of dollars of jointly owned family investments and another few million dollars she had inherited in a family trust. She was set for life. Then one day, her attorney husband was arrested for embezzling money from his own law firm and his clients, including his own family and his wife's family trusts.
"She never suspected anything," says Mark Podolsky, the Dedham, Massachusetts-based certified financial planner to whom Caroline went for advice. "One day she woke up poor. She was so surprised that she spent the next six months defending her husband and claiming that it could not be true."
But it was. Caroline said her husband was so smart that he could cover up all of his illegal activities for years and nobody, including her, could figure out how he did it all. But, Podolsky says, the hard truth is that Caroline never looked. In fact, when she came to Podolsky's office for help, she brought six months of financial, banking and credit statements for review, but not one of them had been opened.
Podolsky says Caroline so was so intimidated by her own lack of knowledge about money that she just trusted everything was fine. Today, she has a small amount of savings, a condo in her own name, a few credit cards in her name with small amounts owed, no alimony, no pensions, and she's too young for Social Security. She works part-time selling real estate and she can't pay her monthly bills.
Your situation may not be as severe as Caroline's, but you should still take steps to protect yourself by staying involved with your family's money matters. Our experts offer these strategies:
- Educate yourself. Attend classes, read books and magazines, ask questions. Your spouse may try to involve you in the family finances, or maybe not. So involve yourself. You'll feel more confident, and you'll learn to ask the right questions if you have a basic understanding of how money works.
- Know how to balance your checkbook. Although this may sound obvious, many people -- men and women both -- don't know how to balance their checkbook. If you're not comfortable doing this manually, Marnie Aznar, a certified financial planner based in Morris Plains, New Jersey, says you should consider purchasing a software package such as Quicken or Microsoft Money, which can help guide you through the process.
- Understand your monthly budget. Aznar says women need to pay attention to daily money management in the home. "If, for example, your husband has taken over bill-paying responsibility for the family, you should be aware of the balance in your accounts and on your credit cards," she says. "You do not want to find out in the middle of a divorce that your spouse has run up a $10,000 credit card bill that you may become partially responsible for."
- Open your mail. If Caroline, the Boston divorcee, had taken this one step, she may have been clued in to her husband's finagling. "Always be aware and involved," says Podolsky. "Read your mail, including bank statements, investment statements, credit card reports, etc. If you don't understand something, ask your spouse to explain."
- Participate in major money decisions. You need to understand and participate in major purchases, including investments, the purchase of life, disability, and long-term care insurance. Aznar says you should also participate in your family's estate planning, including any wills and trusts you need.
- Establish your own credit. This is key, especially if your marriage is someday headed for a breakup. If everything is titled in your spouse's name, Aznar says, you won't have your own credit history, and this can ultimately be detrimental to your ability to be a financially independent individual. "Have your own credit card, have a car loan in your name, some of the utilities in your name, keep your name on the mortgage," she says. Podolsky adds: "In the event of a divorce, you will still have something to fall back on."
- Open accounts in your name. You need to have access to funds in case of an emergency, and to count on in the long run. Women tend to spend some time out of the workforce raising children or caring for aged parents and this impacts their ability to save in company-sponsored retirement plans and pension plans. You should have other savings accounts in your name even if you're not working.
- Know what you're signing. If your spouse wants to put your house and all of your joint assets in his own name, or transfer them to a trust, or if he asks you to sign lots of legal documents without reading them, be suspicious, says Podolsky. Don't sign anything unless you understand what is happening and why. Make copies of documents and ask for help from a trusted advisor.
- Be able to support yourself. Even if your husband is the sole breadwinner and you've taken some time off from the professional workforce, consider maintaining professional designations, stay in touch with former coworkers, and stay informed about technology in your field. "Do what you can to keep yourself marketable so that if in the future you decide to return to the workforce, you are in a position to do so," Aznar says.
- If needed, seek help from a professional. If you meet resistance, prepare yourself for the worst by asking for outside help, says Podolsky. A CPA, financial planner, attorney, or family member might be able to explain some of the confusing financial documents that appear in your mail. Also, call investment or credit companies directly if you are a joint owner on the account to ask basic questions about your investments or credit.
Think of your financial education and involvement as an insurance policy. Hopefully, you'll never have to strike out on your own. But if you do, at least you'll have the tools to start anew. --Karin Price Mueller