It is quite common in most relationships for one person to take control of all of the household income and expenses. Some people are wired to manage money better than others, and it makes sense to play to your respective strengths.
HOWEVER, it is wise to make sure that you know enough about what is happening with your money to ensure that you are going to be financially OK, and to make sure that you do not get blindsided at a point at which it is too late to come back from financial mistakes.
These are the minimum requirements for what you need to know.
- What debt do we have? What credit card debt do we have and is it being cleared each month? What hire purchase debt do we have and are we going to pay it off in the interest free period? This is an area where your finances can easily be “blown out” and your partner may be uncomfortable to tell you that things are not tracking well.
- Will the mortgage be cleared before the eldest of us turns 65? Many people make the minimum payment for their mortgage term, but forget to check when the mortgage term will finally expire! If your mortgage is going to run past your 65th birthday, use a mortgage calculator on a website such as www.sorted.org.nz to work out what minimum payments you need to be making to have the debt cleared by age 65, or ask your bank to do it for you. You will find it very difficult to retire with mortgage commitments.
- What insurances do we have and where are the policy documents? This is part of having a Plan B – knowing what to do if life unexpectedly throws you a major curve ball. Have a conversation about the types of insurance that you have and the amounts of cover that you have, make sure that you know where the policy documents are and know who you need to call if something happens.
- Wills – where are they stored, what do they say and who do I ring if you die? This is a very important part of planning for Plan B. Your original wills are required to be produced to the High Court for probate to be granted, so you need to know where the original wills are. Some legal advisers offer storage facilities for wills, but not all do. You also need to know which law firm or trustee company will act for you at the point that you need to get probate granted – hence, who you will call.
- Savings – how much do we have and can I access it in an emergency? If your partner has had the foresight to set up an emergency savings account, it will be no use if you don’t know how to get to the money if there is an emergency involving them! Make sure that the money is in a joint account so that you can legally access it, and at the very least, know which bank you will need to go to. If you have internet banking access, that is even better.
The responsibility of managing money for others can weigh heavily sometimes, especially if money is tight, so please feel free to encourage your partner in what they are doing.
Encourage them to talk about money decisions with you so that they don’t feel alone in their decision making. It is also OK if you want to actually get involved with the day to day process of managing your household budget. As the old saying goes, two heads are better than one!
Janet Natta is a financial adviser and director of Smart Money Advice, offering investment portfolio construction and management services to clients throughout NZ, as well as comprehensive financial planning advice to assist clients to build and protect wealth to achieve their dreams.
DISCLAIMER: The information contained in this article represents the views of the author. It is based on information believed but not warranted to be correct. Any views or information, whilst given in good faith, are given with an express disclaimer of responsibility and no right shall rise against any of the authors or Smart Money Advice or their employees either directly or indirectly out of any views, advice or information.