Is Your Better Half Not Sharing Money Chores?
Retired engineer LeRoy Herold of Rancho Palos Verdes worries that if he should die first, his wife would have no clue how to manage the family’s finances.
Barbara Herold, who, like her husband, is 66, readily admits that’s true. She knows that statistically, she is more likely to be a widow than to be outlived by her husband, but she says she has a hard time paying attention when her husband wants to talk about investments or other money matters.
“Money isn’t that important to me,” she says. “I know I need to learn more, but it’s intimidating.”
Not being knowledgeable about the family finances can have severe financial and emotional consequences, especially in the event of divorce, death or incapacitating illness, financial planners say.
At best, the financially clueless spouse will be forced to “learn the new language” of finance at a time when he or she is emotionally devastated, said Victoria F. Collins, a certified financial planner and author of several books, including “Couples & Money” and “Divorce & Money.”
The problem is particularly severe for older women, who as a group tend to be among the least savvy consumers, said Lee Norgard, lead investigative specialist for the fraud prevention division at AARP (the organization formerly known as the American Assn. of Retired Persons) in Washington.
“What we have found is that this generation of older women has allowed the husband to be the chief financial officer of the family. But the demographics are that men tend to die around age 74 and women live beyond that,” Norgard said. That creates “one of the most vulnerable consumer populations in terms of not knowing their rights and being susceptible to any friendly salesman that comes along.”
That doesn’t mean, of course, that financial vulnerability isn’t an issue for men or for younger women.
Surveys of the general public commissioned in 1997 by Oppenheimer Funds found that only about half of married couples said they made major financial decisions together, such as buying insurance and planning for retirement. For 1 out of 3 couples, it was the man who made most of the major financial decisions; in 1 out of 6, it was the woman who was in charge. The survey’s margin of error was less than 3 percentage points.
Financial planner Esther Berger said she has noticed a sea change in her Beverly Hills practice in recent years. With older couples, it’s still the man who tends to hold the financial reins, but younger couples tend to either share the responsibility or let whoever is more interested handle the money. Some men--those in the entertainment industry or other creative fields for example--seem to take pride in being clueless about finances, and are more than happy to let their wives take over, Berger said.
“It’s a right-brain/left-brain thing,” she said.
Psychotherapist Michael Moran, 48, is happy to let his wife, financial planner Judith Martindale, 52, handle the family finances while he takes care of more “creative” tasks, such as gardening and landscaping the couple’s San Luis Obispo home.
“There’s no point for me to get educated [beyond the basics] when she’s got all the background and is ready to go,” Moran said. “For me to get anywhere near [Martindale’s level of knowledge] would take years.”
Moran was dissuaded early from learning about money by the “very grim” atmosphere that would descend on his childhood home when bills had to be paid.
“My father would go into a room once a month and close the door. Everybody knew to be quiet,” Moran said. “Sometimes he’d come out and huff down the hall, wondering where a check was.”
Today, Moran and Martindale, who have been married five years, sit down regularly to go over their family’s financial situation so that Moran won’t be completely in the dark, Martindale said.
Thanks to conferences and socializing with other planners, Moran also has met several other financial professionals he could turn to for advice should something happen to her, the couple said.
Martindale believes that a trusted advisor can be crucial in helping a spouse pick up the financial pieces after death or divorce.
“That’s why I often make couples come in as couples to see me, even if I only work with one of them,” Martindale said. “I want the other partner to come in so they know me too.”
Sandy Overton, 40, wishes she had had that kind of preparation.
Six years ago, Overton was a stay-at-home mother with two children in La Canada Flintridge who rarely talked about money with her husband, a mortgage banker. Then he died unexpectedly of a heart attack at age 40.
At the time, the Overtons were in the middle of an IRS audit over their sideline business, about which Sandy knew little. Overton is convinced that had her husband been there to handle it, or had she been better prepared herself, the tax bill could have been settled for less than the $80,000 she eventually paid.
That was only the start of her money troubles. Overton lost the family home to foreclosure. She also lost a $100,000 lawsuit over a second mortgage on the property, which she erroneously thought would be forgiven in the foreclosure.
The most painful thing, she says, was losing nearly 40% of her husband’s life insurance proceeds on in a single year to bad investments. Overton has entered an arbitration complaint against her broker, alleging that he put her in inappropriate investments. The broker denies any wrongdoing.
Overton now lives in a smaller home in Huntington Beach and works full-time as a mortgage broker. She worries about how she will pay off her debts and pay for college for her daughter, now 8.
“I’m a stronger person now and I’m more knowledgeable,” Overton said, “but I’m living paycheck to paycheck.”
Overton’s attorney, Jeff Ferentz of Irvine, said much of his securities litigation caseload involves people, often women, who were faced with handling money and were ill-prepared to do so.
“She gets a divorce or inherits money or her husband dies, and she doesn’t have a clue,” Ferentz said.
Barriers to learning more about the family finances can be significant. Lack of organization or overly complex finances can stymie a financial beginner, planners said.
LeRoy Herold, for example, has made a virtual second career in retirement out of managing the couple’s money. He has accounts with two financial planners, a 401(k) with TRW, his former employer, several limited partnerships and a rental property to track.
“We’ve got money all over the place,” Barbara Herold laments. “For a while, I didn’t even know where our safe-deposit box was or what was in it.”
Fear keeps many women, and also some men, from learning more about money, said Barbara Stanny, 52, a Port Townsend, Wash., resident who was nearly wiped out financially before she learned about investing and then wrote “Prince Charming Isn’t Coming: How Women Get Smart About Money” (Penguin, $12.95).
Stanny’s father co-founded the H&R; Block tax preparation chain, Stanny said, and he had promised her that she would never have to worry about money.
But her first husband lost much of their money, in risky stock market gambles; after their divorce, she faced huge tax bills from a disallowed tax shelter. Her father refused to bail her out.
Only then, Stanny said, did she begin trying in earnest to educate herself. Previously, she said, she had thought money was too mysterious, too complex for her to grasp. When she tried asking questions, what she calls a “brain fog” would descend, making it difficult to comprehend the answers.
Persistence, and being willing to take some risks, can help financially reluctant spouses get up to speed, financial planners say.
Torrance resident Sonia Moses, now 66, began learning about personal finance by filling out the family’s income tax returns in the years when her husband, an engineer, was too busy with work to help. Early in 1985, she decided she needed to know more about investing and took an adult education class called “Dollars and Sense for Women.”
“I didn’t know what a mutual fund was when I started,” Moses said. “Pretty soon I was able to read the newspaper [mutual fund charts] and know what the NAV [net asset value] was.”
Emboldened by the class, Moses made her first investment: $1,000 in a mutual fund. Today, it’s worth more than $11,000, and she has other investments as well. She had some scary moments, such as the October 1987 stock market crash, but refused to sell because she knew she was investing for the long term.
Having real money at stake brought the lessons home, she said.
“You see your funds going up and it gets exciting,” Moses said. “You want to do more.”
Moses said her husband, Jim, has been supportive of her efforts, always referring to the family finances as “our money” and encouraging her to discuss what she was learning. She, in turn, encourages her female friends to learn about their own families’ finances, even if their husbands seem reluctant at first.
“Just ask questions and make yourself get involved,” Moses said. “I think most men would be very happy to have their wives ask questions.”
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He Said, She Said
A 1997 survey of the general public found that couples tend to share major financial decisions such as planning for retirement, but that women were more likely than men to handle routine duties such as balancing the checkbook and paying bills. The figures below, which suggest that men and women perceive the household division of financial chores differently, reflect the fact that only one member of a household was polled.
Source: Oppenheimer Funds
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Getting Organized
Spouses who fail to learn the details of their families’ financial situation can be vulnerable to fraud, mismanagement and costly confusion in the event of death or divorce. Financial planners and other money experts offer these suggestions:
* Be patient. No one is born knowing how to handle money, and some take longer to learn than others. Fear, intimidation and a reluctance to contemplate life alone can interfere with a partner’s ability to understand, and he or she may need to ask the same question several times before comprehending the answer.
* Encourage learning. Many financially timid people are afraid of making mistakes or are convinced that money management is too difficult. The best way to overcome these obstacles is through building knowledge and confidence, says Victoria F. Collins, a certified financial planner in Irvine. Collins advises financially reluctant clients to read newspaper business sections, join investment clubs, attend financial seminars and work with advisors.
* Find a money mentor. A financially savvy friend or a financial professional such as an accountant, lawyer, financial planner or money manager might turn out to be a better teacher. The financially reluctant partner may feel more free to ask questions and to persist in asking until he or she gets understandable answers. The mentor could also be there to answer questions should the financially savvy spouse die.
* Simplify your financial life. Consider consolidating bank and brokerage accounts, especially if you are older or facing a serious illness. Determine whether to sell potentially troublesome assets such as rental property that might be difficult to maintain or a collection that could prove hard to sell. Because these decisions can have far-reaching tax and estate-planning repercussions, it makes sense to consult professionals in these areas.
* Write it down. There are several organizers on the market that, if properly used, can help your spouse or other family members find important documents and keep track of financial information. Nolo.com offers Personal RecordKeeper, a software program, and Active Insights ([800] 222-9125, or https://www.active-insights.com) offers an organizer called the Beneficiary Book.
