Monday, July 13, 2009

7 reasons why wife must know about finances

7 reasons why wife must know about finances

Are you the person in the family with the sole responsibility of maintaining the household finances? Is your spouse completely oblivious of what's happening?

God forbid, but what if for some reason you can no longer manage the budget? Or what if you're just tired of managing everything yourself, and want your partner to become more involved in your household's finances? How do you teach her everything you know?

This is the time to sit down and stress on the importance of your partner needing to be aware of all important financial information. This may not be the most entertaining of activities, but it is the key to taking the best possible care of one of the most important people in your life.

1. Make a list of everything and where they are located

While you may be an open book for each other, don't assume your other half possesses the intuition to know where you keep sensitive information.

While you may think your filing system is the most organized one that one can ever come across, and that your financial records are in a pretty obvious location, your partner may not think so.

So what is the first thing you should do? Present your partner with a list of logins, passwords of all of your accounts making it easy to see everything that needs to be addressed. Keep it of course in a safe and secure location.

2. Discuss transparency regarding investment info, emergency funds and bank accounts

Your partner may be under the false impression that not knowing the details of your family finances will reduce stress.

That's not the case. Explain to him/her that sharing knowledge and responsibility for your financial life reduces stress as it makes you ready for any situation that may arise when one is unable to operate.

In times of emergency like a long absence or medical emergency or death - this info then becomes the most important thing.

3. Awareness of all financial dealings is a must

Your partner should know all your financial dealings so that there are no rude surprises. So sit down and review your financial situation together - cash in the bank, investments, equity in your home, mortgages, credit card debt, and any other liabilities you may have. Review your budget together.

Being aware of all financial dealings has a couple of benefits. First, you make better decisions when you collaborate.

Second, you share responsibility for the outcomes -- good and bad -- which means that he/she is never in the dark about where you stand. And this eliminates a lot of the tension that inevitably results when one party knows a lot less than the other.

4. Have your partner watch you handle the finances

Educate your partner on how to handle finances. Let him or her watch and learn.

Explaining things is helpful, and written instructions/checklists/spreadsheets are even better, but nothing beats sitting down with your partner and talking through actually managing the finances.

Let your partner observe the process while you explain it, and then have him or her practice it with your help and guidance.

5. Gradually give your partner some financial responsibility

If your partner hasn't handled the money at all, start off with a small, manageable task - preferably one with low stakes. As he or she becomes more adept, give additional tasks to manage.

Eventually, have your partner handle all the finances for one month (with your supervision, of course). Then, try switching off months, with your partner handling the finances every other month until you both feel completely comfortable.

6. Discuss contingency plans

Make sure your partner knows what you would do in an emergency or unplanned financial event. Don't keep it conceptual - discuss actual, concrete strategies to handle unplanned events.

If there is a sudden loss of income, which bills would need to be prioritized, and which expenses could be reduced or dropped altogether? What are your savings priorities? If there is an accident which account do you access before you get benefits from your insurance? Is there any charity to which you would donate a significant sum?

On a lighter note, if you win a lottery (the ticket of which you have just bought with his/ her consent) which debts do you clear?

7. Maintain a household budget

You may not be the type who needs to write everything down to successfully manage your money, but a budget is an excellent way to give your partner a big-picture idea of all the money in play - the income, the debts, the recurring expenses, the investments and so on.

It can also help your partner pick up where you left off in managing the household's finances if you die or become incapacitated.

So, start encouraging him/her to start making a budget plan. Soon you will find that both of you are enjoying it and life is becoming a real partnership.

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