What would you do?
Where would you start?
The good news is, statistics show that the number of marriages that last to at least 15 years has been growing since the 1980s. That means the rate of divorce has actually been dropping. Despite the statistics, couples are still getting divorced. At least once a week, I meet a new client who’s been surprised with the news that their spouse wants out. They need my help because they do not understand all the details of the marriage’s financial issues.
If you were faced with this situation, would you really understand, or be able to accurately convey, your complete financial picture?
In most marriages, it is not unusual for one spouse to have a more “hands-on” role or a better understanding of the household finances. If you were responsible for other duties and less focused on finance, could you explain your situation to a divorce attorney or a mediator?
Here are some ways that you can easily become knowledgeable about your household finances.
Don’t be afraid to ask questions about your financial health and spending. If you are repeatedly discouraged about being “too” curious, that could be a red flag. If you aren’t responsible for handling the details, your partner should be willing to be transparent about all financial matters.
If you’ve told yourself you won’t understand, or think you don’t need to be involved, even if your spouse has total control … push yourself to be involved. One day, your financial stability might depend on it.
Divorce happens. So does widowhood, critical illness, and a lot of other things that might force you into the driver’s seat.
Participate in preparing your tax returns.
Your tax return contains your most important financial information. It reports the critical data regarding wages, bank accounts, investments, business activities and deductions. When you file a joint tax return, you are signing a document under penalty of perjury. Know and understand what you are signing. If you work with a tax professional, make sure you attend any meetings that are scheduled.
Check your credit reports.
Make it a practice to review your credit reports — both yours and your husband’s — at least annually. This will disclose all credit cards and perhaps hidden debt. In a community property state, you are responsible for your spouse’s debt during the marriage, even if you did not incur it.
Make sure you have access to everything.
Do you have access to, or awareness of, all bank accounts, investment reports, retirement plan documents? Are your statements online? Be sure you have access to logins and passwords. Check regularly to make sure you are not shut out of your financial reality.
Keep your eyes open.
Look at your spouse’s lifestyle, clothing, hobbies. Does your spouse seem to spend more than he/she regularly earns? Be aware of changes in spending habits. What you don’t know could hurt you in a community property state.
Do you know someone who is experiencing an unexpected divorce? A CDFA can help you understand and document your financial information.