A. Even if finance is neither of the couple's strength, both people should gain at least a basic understanding of the household finances. As most women survive their spouses, women need to take a more active role in their finances. Below are some key considerations and steps you can take.
Create a budget that accounts for your required expenses, discretionary expenses, retirement savings and non-retirement savings.
Creating a budget can bring to light unnecessary expenditures as well as necessary expenditures you may not be thinking about, but can creep up on you and cause financial havoc.
Create a balance sheet that lists of all your assets and liabilities. Include account numbers, telephone numbers and website logins and passwords. While obvious assets may include homes, vacation properties and 401(k) accounts, less obvious assets may include: cars, jewelry, artwork, savings accounts, IRAs, brokerage accounts and 529 accounts. While obvious liabilities may include mortgages, less obvious liabilities may include credit card debt and 401(k) loans. Creating a balance sheet can bring to light undocumented assets and debt reduction or consolidation opportunities.
An estate plan should be on the agenda, if you don't have one yet. Agree on guardians for your minor children and cognitively or physically impaired parents. Create wills, living wills and/or trusts that clearly outline your joint wishes. Determine if a durable (effective even if you’re incapacitated) power of attorney for one another and special power of attorney for others is/are appropriate. Your best wishes will be ignored unless they are clearly documented.
Regularly review and update beneficiary designations on retirement accounts, such as 403(b)s, 401(k)s, 403(b)s, 457(b)s and IRAs. Beneficiary designations on these types of accounts generally supersede wills. If your goal is to have your current spouse receive the assets in your IRA when you pass, verify your current spouse is listed as a beneficiary (instead of possibly an ex-spouse).
If your goal is to have your children receive the assets in your IRA when you pass, verify your children are listed as beneficiaries (instead of possibly an ex-spouse).
The Bottom Line
Get involved in your finances. If you ignore them, they will ignore you!
All too often, delaying until ‘next year’ or when you ‘come back from vacation’ leads to indefinite delays. Unfortunately, delays can be emotionally and financially costly. When it comes to your finances, ignorance is not bliss.