I look at him, batting my blue eyes and give him a sweet smile. He knows that can only mean one thing. Well, it could mean a few things, but regardless, he knows I am about to ask him for something. The look I get back is a mix between an apprehensive “what now” and a “should I be scared”… We have been married for ten years, at this point we know each other rather well. We also trust that we don’t keep secrets, we are both open books and offer each other “full disclosure” about everything, even the hard stuff. I finally tell him: “It’s time, honey… time for our financial review.” – “Oh… THAT!” he replies with relief. This is a conversation every couple should have to get their finances under control – and I will help you prepare for it.
“The hard stuff” is different in every relationship. But one thing that many relationships struggle with is finances. We are taught at an early age not to discuss money with strangers, and rarely even with friends. When we then find life partners and merge households we are put in situations that feel uncomfortable and awkward.
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The important talk:
My husband and I both come from financial careers, when it comes to money discussions we speak the same language. We both understand the terminology and feel comfortable throwing around industry terms. However, talking about OUR money, OUR spending and OUR goals can be hard, leaving us feeling vulnerable – but our quarterly financial life review is important for our family’s financial future – and our marriage.
Invite your partner to sit down for an hour one night after the kids are in bed. You can prepare the template for your “financial life review” spreadsheet ahead of time. Once the legwork has been done it takes little time to update quarterly. You will feel a renewed sense of “family”, “team work” and know that you are both working towards the same goals and objectives.
Start a binder titled “Our Financial Life”. The first pages should be a printout of your Financial Life Review spreadsheet, followed by statement copies from the various accounts you have, life insurance policies and any other important financial documentation. You should both have access to the information and it will become the basis of your quarterly financial “check ups”.
Create your own Financial Life review:
What should you include on your Financial Life Review spreadsheet? We include all of our accounts related to our financial life: assets, debt, insurance. In short: anything that changes value over time. Most accounts are required to report at least on a quarterly basis, which is why we review things every three months, once the statements have arrived.
Assets:
Yours and your partner’s non-retirement assets:
- Checking accounts
- Savings accounts
- Investment accounts
Yours and your partner’s retirement assets:
- Individual Retirement Accounts (IRA and Rollover IRAs)
- Roth IRAs
- SEP IRAs
- Employer provided 401(k) plans
- Employer provided pension plans
Your children’s:
- Custodial accounts
- Savings accounts
- Educational Savings accounts
- 529 Plans
- Prepaid college plans
- Investment accounts
Debt:
- Credit cards
- Student loans
- Consumer lines of credit
- Mortgages
- Car/ boat/ motorcycle loans
Information to add for each of the above referenced line items:
- Account number
- Financial institution
- Phone number
- Account ownership
- Balance
- Beneficiary information
- Website
- Login/ password
- Interest rate being charged or earned
Keeping a spreadsheet with this detailed information is valuable as you start to take control of your financial life.
The next step is to create a budget for your family. In order to do this, you will need a lot of the information from your spreadsheet, so make sure to keep it updated.
I recently read a very good guide on how to create a realistic budget for your family. Check out Allison Lindstrom’s book here: The Beginner’s Guide to Budgeting
Once your Financial Life Review spreadsheet has been put together, there are a few things you and your spouse should review every quarter.
- The interest rate on your debt.
- Has the interest rate increased on any of the accounts since last review?
- Could you move the balance to a credit card or other line of credit with a lower interest rate? (I will discuss this in future posts).
- The interest rate on your savings accounts.
- Has the interest rate decreased on any of the accounts with sizable cash balances?
- Would you earn more interest by consolidating your cash balances? (I will also discuss this in future posts.)
- Are all your accounts held in joint name?
- Although you may keep your spending money in separate accounts, the ownership should still be in joint name (or the name of a trust, if you have sizable assets).
- You need to have access to each other’s assets (and debt) in case of an emergency.
- Confirm the beneficiaries on all your retirement accounts.
- Depending on the state you live in, spouses are not always the default primary beneficiary.
- Most people designate their children as the contingent beneficiaries.
- In case you recently had a child, confirm that you added the baby to all the retirement accounts.
- Beneficiaries are not automatically updated at financial institutions when you have a “life event”, so make sure you contact them with the required information.
Important discussions to have after reviewing the spreadsheet:
- What are your financial goals for the next quarter/ year/ 5 years/ 10 years/ until retirement?
- What do you need to do short term and long term to reach your goals? (I will discuss this in future posts.)
- If you wish to speak with a financial professional about your investment objectives and goals, bring this spreadsheet. It will be a great starting point for someone to evaluate your personal balance sheet.
- Create action items for each of you to complete over the next few weeks.
- Examples: get a life insurance quote, reduce credit card debt by 25%, consolidate cash accounts into the money market account with the highest interest rate.
I realize that these discussions may sound intimidating, especially if you are not usually the financial decision maker. However, while one person can make a majority of the financial and investment decisions, it is important that you are both equally informed and kept up-to-date on all aspects of your family’s financial life.
Enjoy the process of getting your finances under control. Most importantly have fun making goals for your future, dreaming with your partner and working together towards common goals. It is a process that unifies you – together you can fulfill your dreams!
