December 22, 2013

Financial Chores: How Do You Share The Duties

After a few recent posts about financial planning, regular reader, Carole, asked if I'd take a look at how folks divide up financial duties and responsibilities. A female financial advisor dealt with some of the underlying issues in the post, A Woman Looks At a Woman's Relationship With Her Money. But, there are some real practical steps that anyone in a long term relationship should consider. Even if you are not married, someone  will eventually have to deal with the financial side of your life. Having things properly set up ahead of time is the responsible thing to do.

For purposes of this post I will assume you are married, in a committed relationship, or are sharing financial management with someone. There are a few ways that couples can handle finances:

A) One partner does it all. Either through natural talent in this area, long term experience, or simple enjoyment, one person handles all the bill paying and making the financial investment decisions. This can occur with either the approval of the other partner, or acquiescence to maintain harmony and eliminate arguments.

B) The partners split the responsibilities for financial well being and maintenance.

C) The partners maintain separate accounts so each person pays his or her own bills. Joint decisions are made for major investment and tax-related issues.

D) A financial advisor or manager takes care of it all. For those with a sizable estate and nest egg, having a professional handle financial matters is an option.


I have no experience in either choice C or D so my ideas would not be helpful. If you do fit either of the last two options, please, chime in with a comment. Your experiences and reasons for your choice would be very helpful to us all.

For purposes of this post I am going to assume that most of us are either in group A or B and are looking for ideas on how others handle their financial life. I will give you a peak into how Betty and I handle our financial decision-making and duties. Then, most importantly, I will ask you to share your story. Since there is no right answer, all input, all suggestions, and all ideas help everyone one of us refine or rework our personal strategy.

In our household I have been the primary financial manager for all 37 years of our marriage. Even though I was rather poor in mathematics in school, for some reason I do enjoy the process of budgeting, keeping on top of our financial health, and dealing with our financial advisor. He has been part of our life for close to 20 years and is a trusted source of advice. Sure, he has made some bad recommendations that went sour. But, overall, his suggestions and awareness of our risk tolerance enabled us to retire almost 13 year ago and have a nest egg that is actually bigger than when we started our satisfying retirement in 2001.


Betty and I discuss major financial decisions that involve our home, major repairs and upgrades, the yearly budget, and how our vacation money will be spent. But, when the advisor calls to suggest where we can put money that is just languishing in the cash account, I make the decision. Betty is fine with not knowing the specifics.

We are aware that she needs to have a handle on some of the basics of our finances: where the money is, passwords and on-line bill paying details, key contacts, tax information, and the like.

She and I will admit that this "training" has been a series of starts and stops. Betty maintains a book that takes her through the key information she would need to know and how to perform some important tasks. But, that book goes out of date often, what with changed passwords, different things in our investment accounts, changing tax conditions...even different computers and browsers that have things stored in different places.

Like everything else, using her "blue book" on a regular basis should occur to keep her familiar and comfortable with the very steps. But, she will be the first to admit she dislikes this process. She becomes easily distracted and anxious if something is slightly different than it appears in her guide book. Dealing with the financial side of our life together is one area she knows she should take more seriously, but doesn't. Part of that is do to problems with her short term memory, and part because she simply doesn't enjoy it.

That approach worries us both since it is likely I will die or become disabled before her. Without having a solid handle on the bare minimum of things like getting into online accounts, when important bills and real estate taxes are due, how to handle credit card bills and communication, she would have a very rough time. For 2014, we both must commit to doing a much more consistent job of keeping her in the financial loop.

So, my most important advice is to not do what we have done! Both individuals must have enough awareness to hold things together after a life change until others can be brought in to help. Not liking the world of finance and investments is fine. Not knowing enough to stay afloat for even the short term is not. Someone once said,  finance is the art of passing money from hand to hand until it finally disappears. Our responsibility to the people we love is a bit more complicated.

Now, your turn to help us all.

How do you and your spouse or significant other divide up your financial responsibilities and duties? Is this an area of discord and arguments? What works best for you? Where is your game plan not quite up to par? What changes in how you approach things would make sense?

  

31 comments:

  1. We're mostly C, with a little of B and D thrown in. I like to do my own finances; my partner uses a manager for major decisions. We discuss, negotiate and agree on the big things; otherwise, we each squander our own money in our own way.

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    1. Interesting blend of approaches, Tom. I like that you "own" your own squandering.

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  2. I guess we split the work. Well, I do the majority and my hubby reminds me when something has not been done. Having most everything on line sure makes the entire process (including budget) easier to do then the composition books I kept or "household ledgers" that my mother kept.
    I sure would like to find a trusted financial planner… That eludes us.

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    1. On-line bill paying makes our RV travel plans possible. If I had to be home to receive bills in the mail things would be very different. I keep our budget on the computer on a software program I have used for years. I am not ready to trust all that info to a cloud system yet.

      My broker is my financial advisor and I have come to trust his suggestions, but he is just responsible for advice. I continue to make the final decisions.

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  3. Like you, I do most of the financial management in our house. However, I try to initiate instructional conversations with my wife if and when I make any significant moves or if our financial status had made some kind of shift. And sometimes, my wife bluntly asks for a total review of where our finances stand at the moment, which I am usually quite happy to provide.

    However, trying to educate her on the "why's" of what I do can be tough, since I've done a lot of reading and research that she hasn't. Thus, she has less perspective. If and when I go first (mentally or totally), I hope the careful files and records that I keep will help her (and other family members) get a reasonable sense of what needs to be done.

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    1. I am sure Betty will hire someone to help her, but I want to be sure she can get into accounts, pay bills as needed, and know where to look for information she would need to pass on to others. Like your situation, she has never shown much interest in the whys and that is fine - just so long as she isn't left hanging or taken advantage of.

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  4. We are B and D. I handle the tracking and budgeting side, and Mike handles the investment oversight side, with both items being reviewed jointly on a fairly regular basis. Whichever of us ends up getting 'left behind' should be able to pick up the other person's piece of the pie pretty easily. There is a portion of our portfolio that Mike oversees directly via a variety of hand picked bond, mutual and index funds. While I am very interested in making sure the right risk balance is struck, I have no real appetite for tracking it on a daily basis such as Mike does, and would likely move those funds into a managed fund set up, either through our brokerage firm or our financial advisor, should I end up being the surviving spouse. I'm not looking forward to it, but I know I'll be able to do what's necessary should it occur.

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    1. You two sound well prepared for whatever happens. I am more in your camp, Tamara. I don't want to be the one who manages stuff on a daily basis. I look at my on line statements once every few weeks but have learned I worry unnecessarily if I fret over every swing up or down. Investments entail risk. All I ask of my brokerage guy is to follow what I have told him is my risk tolerance.

      Twenty years ago I told him what I wanted in my IRA when I started taking money out at age 64. Even with the economic ups and downs over that period he and I exceeded that figure. I am happy.
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  5. We split responsibilities. I work as a writer for a market-related website, so I handle all investments with input from my husband after I explain what I'm thinking. I handle short-term investments myself and have chosen a trusted manager to handle long-term investments with input from me. My husband handles all bill-paying duties.

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    1. Thanks for sharing, Linda. You and your husband have set up a system that plays to your individual strengths.

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  6. When we were first married, my husband did it all. Eventually, I realized that I needed to become a true partner in the financial piece. I think that as our savings grew, it became more apparent to me that I truly had a vested interest in learning more about our finances.

    This has evolved to where I am primarily doing the mechanics of the budgeting, tracking of expenses, and paying the bills (online). My husband has the expertise with the quarterly financial reports and enjoys doing them. My husband is the "big picture" guy, while I tend to get hung up on the minutia. It's a good balance, actually. I also find that our two brains working together are amazingly much better than either one of us alone!

    We rely on our financial advisor for direction in weight of bonds versus equities, as well as weight of the different asset classes within these two categories.

    Fortunately our finances have really never been a source of conflict for us. We were both big savers. There was an unspoken understanding that we touch base with each other over purchases that involved a large sum of money.

    I think our biggest challenge financially for us right now is that we are living our first year on our retirement budget. We had some unexpected, extraordinary large home related expenses this past year. In spite of that, we remain on budget. What will future years bring, with regard to unexpected expenses? Did we plan well enough? I think so, but time will tell. I tend to be the worrier for both of us, so I probably think about this more than I should.

    Either one of us would be fine managing our finances as the surviving spouse. I do wonder though about how well we will manage if/when there is cognitive decline. I see this with my widowed mother. She is still pretty sharp, but if there is anything out of the ordinary, she has trouble processing and needs my help to sort things out.

    Great post! Thanks Bob. I look forward to reading the different responses!

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    1. I am enjoying reading the different approaches, too. I really hope Betty and I can move to a bit more of a shared role. Doing something is the only way to really learn it. I want to feel comfortable that she would be OK with the inventible financial hassles.

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  7. Since I did the grocery and shopping, it made sense that I would pay the bills. Like you, my math skills are not my strong suit, but it knew our finances and was the one interested in savings and investment accounts. I do regularly quiz my husband as to where the money is if something happens to me. I am confident he will figure it all out without too much trouble.

    I've never had a detailed budget and we still do not. We argued over many things but not finances. He handles the taxes and the car insurance,

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    1. Arguing over finances is one of the major reasons for marital discord. Congratulations on avoiding that problem area and feeling comfortable with each other's ability to take over as required.

      I started to slip behind in math as soon as we left algebra. Thank goodness for computer software!

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    2. I thought algebra was going to get better once the letters went away--lol. Ai-yi.

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  8. Hi Bob, my situation is pretty much the same as yours where I have been doing the financials for our entire marriage. I tried early on to keep my wife involved but she really had no interest other than to complain that I was spending all our money on retirement savings. That I was in fact saving the money and not spending it made no difference to her, she didn't have it to spend, it was gone, therefore I had spent it. That was years ago when the children were young and money was tight, as we approach retirement she now sees that "spending" our money on retirement savings was a good idea.

    Like you, I worry that she really doesn’t know what is going on, she has never signed on to our bank account on-line and has no interest in doing so, my wife just heads up to the bank and works with the teller just as she always has. I show her our financial statements, bring her up to speed on what our financial advisor says but there is little interest on her part (she went to the first few meetings I had with the financial advisor years ago but then stopped.)

    I have two daughters – one is full involved in her family finances, my son-in-law calls her the CFO, while my other daughter can’t keep track of her bills on a regular basis. Despite my efforts at teaching them both “financial literacy” sometimes it’s just temperament or preference whether or not they pick it up and as much as you try some people really just aren’t interested.

    I think this is where the move away from company pensions to the do-it-yourself model for retirement savings falls down. There’s a good number of people that just aren’t that interested and current urgent needs (or wants) far outweigh any nebulous future benefit that they might not live to see. It’s very true that no one really knows if they’ll be alive to actually spend their retirement savings though most of us actually do make it that long. The on-going struggle between “Live for the moment – you never know how long you’ve got” versus “Plan for the future – this will all pay off one day”. No easy answers I’m afraid and I think each couple works it out as best they can.

    - David

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    1. I have been blessed with a wife who not only understood the long term benefits of living beneath our means so we could save for the future, but actively participated in a low consumerism lifestyle. Even so, her desire to participate on a regular basis with the management of that money is a fleeting thing.

      I guess the best folks like you and I can do is have everything clearly written down, step-by-step instructions with contact phone numbers in one place. If the spouse is thrust into the situation of taking over she will have enough to hand it over to someone else (like one of your daughters) to keep the financial wolves at bay until a more permanent solution is found.

      You make a good point: the fear of running out of retirement money is a major fear and motivator of behavior in retirement. Most of the time that isn't a real problem and even if it is, there are programs like Medicaid that keeps anyone from actually ending up on the streets. But, the vast majority do not outlive their money.

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    2. For sure I have no fear of running out of money when my retirement starts in a couple of years and not because I have millions or anything. My plan is to run out of money somewhere between age 80 and 85 (though I would still have my house so money would be available if we choose to sell then).

      My financial advisor thinks I am an odd duck for specifying that “I want to run out of money” but when I look around at our family members that are in their mid-80’s they don’t even spend all their social security income these days (in fact they are saving their left over social security money in the bank). I am also in Canada so most major medical costs are not an issue. From what I see people are active travelling, gardening, skydiving, doing whatever in their early retirements years but things really slow down once you get into your 80’s.

      After age 80 most people are quite content to putter around the house, visit with friends and family, and perhaps take in a movie once in a while. Assuming your house is paid for that makes for a very low cost existence that appears to be easily supported through the usual government programs as you suggest. My view is that we saved and sacrificed all these years to enjoy our retirement and I plan to do exactly that while I can.

      Most financial planners will use an inflation adjusted constant real withdrawal rate running out to age 90 or 95 but realistically how much are you likely to be spending in your late 80’s? From what I see in my own family, very little. Although this has been my view for some time I saw an article last week quoting Morningstar's David Blanchett and he talks about the “spending curve” in retirement.

      In a U.S. study David Blanchett finds “On average, retirees spend the most at the very beginning of their retirements. Spending then drops at an increasing rate through the mid 70s. Through the decade of the 80s, spending continues to fall (the line is rising, but it remains below zero); however, the rate of decline is not as steep as before because medical costs increase.”

      Which is pretty much what I see happening all around me with my older relatives – costs continue to decline throughout retirement. At least it is comforting to have someone do the research to support that (I sent it along to my financial advisor too).

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    3. My dad is a good example. He will turn 90 in February. He lives in a retirement community so virtually all his expenses are covered by his monthly rent. Except for a haircut (yes, he still has plenty of hair), and things like laundry detergent and toiletries he has no other costs. While he couldn't live off just his Social Security, his investments throw off much more each year than he spends - enough he can give each of his three sons (me included!) the IRS's maximum yearly gift amount each year and still have his estate growing.

      You are very lucky in one important regard: medical costs. Even with Medicare and things like extra drug coverage and Medigap policies, the average American will spend over $200,000 in medical expenses between age 65 and death. I gather Canadians don't face that burden.

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  9. I have always paid the bills and moved the investments around. For better or for worse, I have never used a financial advisor, and never will. Have read many finance books and trust my own judgment and have always been basically conservative about money. Fortunately, I *finally* married a man who was conservative also, so no problems there. I slowly talked him out of CD's for retirement and into mutual funds back in the '90s. Great times for investing, those '90s.

    Regarding Betty and the anxiety of changed passwords and financial situations. Bob, why don't you make it your responsibility to keep up her notebook for her? Every time there is any significant change you could print out a new page for her notebook and insert it. It sounds like you are more detail oriented and she wouldn't have to worry about being up to date.

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    1. We do have a master book of names, phone numbers, and addresses that I update, but not her "bluebook" with the details for on-line activities. That is a good idea, Anne. We can see if that works for her. I am going to put a note on my to-do list right now to check all our files for updated info every 3 months.

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    2. Maybe I have an over active imagination, but if someone breaks into your home and finds this book, I'd worry they have access to your accounts :-/

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    3. You are right but we do hide the passwords and so forth in a place no one would find without a very extensive search and no common burglar would do that. They are not in the bluebook.

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  10. Well, as a single woman, this doesn't exactly apply to me as I consider my son the "other partner". Since he will be responsible for my welfare in case I need help, it only made sense that he knew about my finances and had access to them. He is on my checking account so I would not be a burden to him financially. I'm glad that I can trust him as I know some of my friends have commented that their children would be less than reliable. As an only child he also doesn't have to worry about interference by other family members. I tried to read up on understanding the stock market but can understand Betty's reluctance. I'm just not interested in the details of investing and what influences it so I'm sure my portfolio suffers. But, I'm satisfied so I guess that's all that matters. I have a notebook with all the account numbers, passwords, etc. that my son can use after I'm gone and have shared this information with him.

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    1. Having a trusted relative is the best scenario. My dad is not able to handle any of his own financial affairs anymore so I pay all his bills and manage his trust and investments with virtually no input from him. I give him a completed tax return each year to review: but he just signs it and never looks.

      Having your son available and an up-to-date notebook means you can rest easy, Susan.

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  11. Well...after 45 years, we're still tweaking it. Explains a lot, doesn't it?!
    b

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    1. Think of it as constant refinement in a drive to perfection.

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  12. I have handled the bill-paying and managing the bank accounts and my wife has been happy to let me do it. However, we have discussed the monthly budget from time to time, and we have always shared major buying decisions.

    A few years before my wife retired, we consulted a financial planner who came highly recommended by friends of ours. At first, he guided investment the decisions that my wife and I jointly made regarding my wife's retirement account from work. Later, after I inherited some assets when my mother died, the financial planner gave us some advice about how to manage these funds, as well. I also asked his advice about my small IRA, but just to be ornery, I suppose, I have not sought his advice about a personally managed a deferred income account that I began to fund during the last ten years of my career.

    Our adviser recently retired, himself, turning our account over to a woman who has worked in his office for years. We need to make an appointment to talk with her soon.

    So, we have shared some of the financial decisions, while I handled the day-to-day stuff. We are an A couple, I guess, and we have never argued about money.

    The issue that you raise about whether the surviving spouse has enough information to take over is a separate issue altogether, I believe. It is one that we have not addressed in our household, but we know we should. It is something that we want to figure out in 2014. We have to come up with a good way to address the concerns you have mentioned. Access to on-line banking and creditor accounts, while maintaining security, is perhaps our biggest concern. It sounds as though you and Betty have made a great start on this but that there are still some things that you are fine-tuning. I will be interested in hearing more about how you handle this, as well as the ideas from others who leave comments.

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    1. I'll write a follow up post as we move toward a better balance in our system and Betty's system for knowing what to do if the need arises is updated. It is a very important part of our life together that we must focus on this year.

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  13. Hi Bob, I stumbled across your blog recently and really enjoy reading both your posts and the many replies. Not yet retired, but working towards it. As it relates to household finances, we have certainly evolved over the almost 30 years of our marriage. Early on, as the newly-minted CPA (vs. my wife, the newly-minted registered pharmacist), I "did everything", but would consult with her on investment decisions (which only came into play after we paid off student loan debt). We've always had joint checking, savings and, where possible, investment accounts. After some marital trauma about 13 years ago (sad but true), my wife requested to have a more meaningful role in day to day, month to month household financial management, in order to have more ownership (my word, not hers) in the direction we were going. Since then, she pays all the bills, balances the checking account, etc. We have our little system (she puts statements, etc. in my "in box" -- a manila folder, really -- for my review and, ultimately, filing away in our home office). With the assistance of an out of town financial planner, we do a full review our investment portfolio once per year and a "mini review" in between. I carve out a couple of hours during the business day for the "full review" with the financial planner and my wife participates via conference call from home. She asks very few questions but is an active listener and follows up directly with me later if we covered anything that she didn't fully understand. I don't invest money without running the idea past my wife for her approval, or I don't give the go ahead to our financial advisor before getting the wife's okay. We also recently updated our estate planning and both participated in the meetings with the attorney. Seems to work for us, we rarely argue anymore about money. If it ain't broke, don't fix it, right? :-)

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    1. Your system and division of duties and responsibilities sounds just about perfect. Nether of you is out of the loop, so if health issues arise later, one of you taking up the slack should be no problem.

      Thanks for the nicely detailed description, Don, and welcome to the blog. I hope you will be a regular reader and contributor.

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