"Making It Make Sense" (SM) with Dr. Pamela Brewer
Top 7 Money Mistakes that Women Make When They Marry
By Mark Morrison is a Divorce Mortgage Planning Specialist
Alexis Martin Neely wanted her husband to learn more about the family
finances. But he wanted nothing to do with it. Unlike most marriages
where women turn over the financial decisions to men, Martin Neely had
an expertise in financial planning -- and her husband did not. He had
no idea what was going on with our family finances so he could not make
good decisions, said Martin Neely, 34. "And when we got divorced, it
ended up costing us more money." If he had tried to learn more
about the finances.... "he would have had a lot more ability to make
good, smart decisions and have more access to information about
finances and net worth. Instead, he was clueless," said Martin Neely,
one of 35 financial experts that www.divorce360.com heard from when
compiling a list of the "Top Seven Financial Tips to Help Counter the
Top Seven Financial Mistakes Women Make When They Marry." Topping
almost everyone's list was the common practice of women turning over
all their financial power, and assets, to their husbands. Martin Neely
owns a family law firm Martin Neely & Associates in Redondo Beach,
Calif. "Even if you are not the family breadwinner, you've got to be
the family CFO. It's the number one, most important tip I can give any
woman," she said. "Know where the money is coming from and where it is
going."
1. TAKE CHARGE OF THE FINANCES AND HAVE A WORKABLE BUDGET
"Every
women should be the family CFO. As CFO, you are the one who is paying
the bills, keeping track of what you owe and how it's titled. Even if
you aren't the one earning money, if anything happens you are in the
power position. You're the money person," said Martin Neely. It's
basically a spin on the not giving all the financial control to the man
in the family. "Handing over all control of the money to your husband
'because it's a guy thing' is a bad thing to do," said Tracy Piercy,
certified financial planner professional in Victoria, B.C.
Hand-in-glove with that is what Piercy lists as the second biggest mistake that women make: "Putting off talking about money issues with your spouse." "Failing
to discuss financial goals prevents couples from going in the same
direction and can lead to divorce," according to Harrine Freeman,
founder of H.E. Freeman Enterprises, a personal finance services
company based in Bethesda, Md. "Discuss your spending habits, develop a
plan to achieve your financial goals and stick to it." This
means living within a budget. According to Alex Kindler, a CPA at
Horovitrz, Rudoy & Roteman in Pittsburgh, Penn., who analyzes the
finances of divorcing spouses, a major problem women encounter is the
"failure to establish a spending and savings budget during the
marriage. A budget can be a useful tool and may help mitigate some
marital discord. Clearly, a budget facilitates a spouse's understanding
of the current financial picture to assist in asset and debt division
pending divorce." And most of all, be honest. "Be frank with
your husband about your finances, and make sure he's frank with you
about his. Most financial mistakes and mishaps can easily be avoided if
you talk to one another. It's not rude or crude to do so especially if
you're married. You should never be uncomfortable about talking to your
spouse about finances. Discuss things like ownership of existing assets
and whether or not any of these assets will pass to individuals outside
the spouse; discuss debt issues because this will come back to haunt
you should you think of purchasing a home together; discuss whether or
not you'd like to keep separate bank accounts," said Lori Epstein, vice
president of MetLife's Advanced Markets team, New York, N.Y. "In
order to preserve harmony in a relationship, many women forgo their own
needs to keep the boat from rocking. But those little accommodations
can pile up and lead to tremendous resentment. Don't worry about
rocking the boat. Make sure your needs are spoken, heard, and
understood," said Adryenn Ashley,
author "Every Single Girl's Guide To
Her Future Husband's Last Divorce."
2. NO JOINT ANYTHING - ESPECIALLY ACOUNTS
While
this point can be debated, the overwhelming advice from the financial
experts is that combining bank and credit card accounts are not the
measure of a healthy marriage. "The minute you deposit your
paycheck into a joint account, you have co-mingled it. It now becomes
community income not separate income," said Leslie Dawson, a CPA with
the Walnut Creek, Calif., firm of Glenn & Dawson, which specializes
in family litigation and divorce. "People don't understand that. In
addition, if you are going to get into a second marriage, where there
are most likely a lot of assets between the two of you, get legal
advice. Most people consider a pre-nup. I strongly recommend that
someone look long and hard at a pre-nup." "The danger of a
joint checking account is that if one spouse decides to leave the
marriage suddenly, he can drain the checking account upon his
departure," said Kindler." Use of jointly held credit cards, or even
worse, having your husband as an authorized user on a credit card in
your name, is also a bad idea. Obviously, if large credit card balances
are accumulated during the marriage, your spouse can leave you with the
obligation to pay the debt. Some credit card companies will require the balance to be paid off before the other spouse's name will be removed from the account." And
according to Jonathan Klein, certified mortgage and divorce planning
specialist and general manager of Associates Home Mortgage in Boca
Raton, Fla, taking joint credit with a spouse is a bad idea for some
other reasons: "If your spouse is a victim of identity theft then you
are as well. Spouses don't have the same spending habits and thus you
should not be subject to their bad behavior. And debt is one of the
biggest obstacles to leaving a marriage." In addition to
keeping separate credit cards and separate bank accounts, Ashley is a
strong proponent of the joint checking account as well. "You should
each have your own accounts, and one small joint account for joint
bills and living expenses. But if one of you ends up with a tax/child
support/student loan problem, your account can be emptied without
notice. And it doesn't matter if half of what was in it was your
innocent spouse's." "This holds true when you inherit assets
or property, too. Keep that separate. Don't mix that in," said Martin
Neely. "If you did mix that in, get it separated now. It's really
important to keep a record so that the day you get married, you have a
copy of all those statements in a safe place, to say what your assets
were on that day. And you will most likely never need to use it. If you
have a house, call a Realtor and get them to do a CMA and keep that in
that folder, you will be so glad that you have information." Combining
all your assets and your debts can also have a long-reaching effect,
according to Freeman. "Losing your financial identity, merging bank
accounts, closing individual credit card accounts. If you divorce you
will have to start all over with your credit history or may be
penalized if your joint account is delinquent."
3. DON'T GIVE UP YOUR POTENTIAL TO EARN MONEY
It's
far too common that most women make less than their spouses or earn no
income at all during a marriage, especially if they are home child
rearing. "Leaving your career to be a stay at home mom can have
repercussions," said Freeman. "If you plan on going back to work, the
longer you stay home the harder it will be to find a job." And
that has to be taken into consideration. One suggestion is that
stay-at-home moms shouldn't have to suffer from lack of income.
According to Klein, one mistake women make is "not paying themselves a salary as stay at home moms." "You
can be the homemaker and still keep an income stream and/or the
potential for an income stream," said Neely. "Whenever you are not the
breadwinner, and you totally give up the ability to earn money...you
run the risk of having to support yourself. You need to put yourself in
the mind-set that I am going to continue to focus on what I am
passionate about and what I love to do. It's really investing in
yourself."
4. KNOW YOUR PROPERTY RIGHTS
"Transferring
title to real estate owned prior to marriage into joint names might be
a good idea from an estate tax viewpoint if the marriage is successful,
it can lead to undesirable consequences in a divorce. If you owned an
automobile prior to the marriage, there is no reason to change the
title to joint name," said Kindler. The same holds true for
investments, he added. "Changing your brokerage accounts from an
individual account to a joint account isn't wise either. In some
states, money that is received via gift or inheritance is considered
non-marital property; however, by commingling these assets with marital
funds they may lose their non-marital attributes." "Most
people have no idea what their rights are. What is community property,
what is separate property, what would they be entitled to if the
relationship comes to end. It's just awareness so you can make good
decisions," said Neely.
5. NOT SAVING FOR YOUR OWN RETIREMENT
The
belief that many women share is that their husband's retirement is
theirs as well. In the matter of divorce, that clearly isn't true. And
even in cases where the marriage is strong, it's not necessarily true,
either. "Don't trust your spouse to save enough for both of you"
cautions Freeman. "Many women do not make an effort to
understand their investments and life insurance policies and are not
familiar with investments their husband might have made (such as real
estate deals or other businesses). Then when the divorce happens they
are shocked that there is not as much money as they thought there was
or it is tied up and not accessible," said Galia Gichon, personal
finance consultant in New York, N.Y. Planning for
retirement has to be one of the top financial priorities for women, especially those who haven't been working through their entire
marriage. "At the very least, make sure there is enough life insurance
in place on him," said Neely. "20 percent of elderly women today are
living in poverty because they are outliving their husbands and plans
made for elderly years aren't enough." "Make sure that the
assets are set up in trust, so that estate taxes are minimized so that
there is no court involvement if one of you should die. Get a lawyer
involved in this process, so that he can help you decide on kind of
insurance you want," she said. "Some women believe that
saving money and 'cutting back' will be enough to let you retire in
comfort ," said Piercy. "You have to be more proactive than that." "At
some point in their lives, 90 percent of women will have sole
responsibility of their finances whether due to widowhood or divorce.
Yet, women outlive men by an average of seven years and make almost 23
percent less money than men creating a greater risk for them to outlive
their savings in retirement," added Epstein.
6. NEGLECTING TO HAVE A WILL
This
may sound stupid, as if who wouldn't have a will. But according to our
financial experts, many women (and men) do not. "Do not assume that
what's yours is his and what's his is yours," said Epstein. "There is a
case I've personally dealt with where a husband drafted a will without
his wife's knowledge, only to have her find out at his death that he
had left a significant portion of his estate to a mistress. Since his
wife had not taken an active role in drafting the wills or managing the
finances, she had no idea that another woman had come into the picture,
and had lost a large portion of her inheritance to a woman she never
knew existed." "You should talk to a personal lawyer. Every
adult needs to have a personal documents in place. A will, a trust, or
at the very least you need a health care directive," said Neely.
7. NOT UNDERSTANDING WHAT'S ON THE TAX FORMS YOU ARE SIGNING
It's
a boring and tedious job, but the experts say it pays off. Taxes are
another gray area that would be cleared up if each woman were indeed
the CFO of her family unit. Reading through and understanding just what
the taxes are that you as a couple are filing is very important, since
signing it makes you liable. "Signing the jointly filed
income tax form without understanding the information contained on the
tax return is particularly dangerous," said Kindler. "If your spouse
has a Schedule C business and is committing tax fraud by not declaring
all of his income or deducting numerous personal expenses, you can be
held liable for the unpaid taxes and penalties even if you had no
knowledge of the erroneous information."
Copyright 2008 by Mark
Morrison. ALL RIGHTS RESERVED Mark Morrison is a Divorce Mortgage Planning Specialist. Mark has been in
the mortgage business for 20 years. He can be reached at 240-390-2230
or 1-800-851-3730. You can read more on mortgages, divorce and money
at http://divorceandmoney.blogspot.com or his daily posts on mortgages
& real estate at http://mortgagesbymark.thewrittenblog.com