Don’t Be Clueless About Family Finances
I came across an interesting thread on Wesabe, the financial social networking site:
“I have a very good friend whose spouse has a serious spending addiction — to the tune of over $100,000 in credit card debt in the last 10 years. He’s paid and closed account after account, mortgaged the house to the hilt, went to counseling, etc. He doesn’t want to divorce her as they have three young kids. Likewise, he won’t press charges against her for fraud (she takes cards out in his name too). He’s got the credit alert services, tries to beat her to the mail box but this is only so effective and is “after the fact” anyway. She had a secret P.O. box for a while where the bills went so he wouldn’t find out about them. I found a website for him tonight where he can freeze his credit info that looks like it would help some. But, surely there is some legal relief he can take that declares him no longer responsible for what she is doing. He says it is for naught because the house belongs to both of them. She is a stay at home mom. Any ideas?”
A heartbreaking story, and it might have been avoided. (At least he knows what’s going on.) The problem is, most people don’t discuss their money merger before marriage. Here are a few tips:
-First, review your mutual spending over the last month, withholding nothing but judgment. Come clean on all your debts – student loans, credit cards, etc.. Order your FICO scores and if they aren’t up to par, come up with a debt pay-down plan to boost your credit scores. This is crucial for getting the best deal on a mortgage and other kinds of borrowing you may do in the future.
-Contribute equally to a joint checking account for household expenses—either a set amount each month, or the same percentage of your incomes.
-Talk about what you will do when children come along. Will you use professional daycare? Will someone put their career on hold to stay home? If so, what adjustments will you make to manage that loss of income? How will you structure your finances, and the division of household labor?
-Keep separate checking accounts for those crucial indulgences—football tickets, hot stone massages, or whatever else you love. In addition, contribute to your own retirement savings account, even if you are a not working outside the home, and keep at least one credit card solely in your name. (One study found that a quarter of women over age 50 still have credit only in their spouse’s name. That makes it tough to get a credit card or make other important financial moves should something happen to him.)
-Decide which one of you will be the family’s chief financial officer. If you both hate dealing with money, trade off paying the bills month to month and talk to a financial planner about the bigger picture.
-If either one of you has had a problem with debt in the past (or compulsive shopping, gambling or another money problem), consider technology to help rebuild trust. The major credit bureaus – Experian, Transunion and Equifax — offer a service that scan your credit report daily for changes (such as a change in balance on a credit card), and send an email alert. The cost: About $10 a month – a small price to pay for helping keep your relationship on solid ground.
Keep a careful record of the names of the institutions, account numbers, passwords, tax records, etc. If your spouse is like mine – totally uninterested in finances – include a list of professionals who can help. I put together a file (called “If I get hit by a bus”) for my spouse, with the name and number of a financial planner he should call to take over managing our investments.
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