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You may not be a numbers person and despise thinking about money. I get it. (Although, I suspect you may be underestimating yourself.)
Because of this, if you’re in a relationship, you may be inclined to let your partner take the financial reins and oversee your joint accounts. Often times households appoint a spouse as the “CFO,” or chief financial officer, with the good intention of streamlining all the financial bookkeeping and bill payment under one person’s watchful eye. That system has its merits. “While it would be nice to think that every financial decision in a household were made on a 50/50 basis – real life so often gets in the way,” says Manisha Thakor, Director of Wealth Strategies for Women at The BAM Alliance. “In our modern, busy world ‘divide & conquer’ is often the only logistical way to make sure all financial tasks get done.”
But if you’re not the family CFO and/or not interested in personal finance, it’s never an excuse to turn a blind eye to your money. You risk making ill-informed decisions, taking your finances for granted and being financially vulnerable in the event your partner can no longer oversee the bills for any reason.
To avoid such perils, here are critical areas of your financial life that each person in a partnership should understand no matter what.
Income & Expenses
Do you know how much your spouse or partner earns? Believe it or not, this figure is a blind spot in many relationships. A recent study found that 43% of couples failed to accurately report how much their partner earns.
Another survey found that one in three newlyweds discovered their spouse’s spending habits are different than what they thought.
But if you don’t know how much each of you brings home (and spends) every month, how will you be able to really understand what’s affordable, how long it will take you to climb out of debt or save up for a goal together?
“There’s no need to go into the spending nitty-gritty, so long as the difference between income & expenses is positive, savings goals are being met, and no one is upset at how money is being spent,” says Thakor.
Another reason why it’s key to know how much your partner makes is so that you can better assess your tax filings. Taxes may not be something you like to tackle, but if you do sign a joint return, you should know your combined household income. That’s a line item the IRS zooms in on very closely. Misreporting or under-reporting income is a big no-no. And if you’re both signing those tax returns, the IRS will hold the both of you accountable in the event of an audit.
Your Home Ownership Status
If you own a home with your partner and the mortgage is in both of your names that only means that you’re both financially responsible for the loan. But unless your name is also on the property deed, you don’t technically own the home. This is critical to know because in case you separate or divorce, you may not be entitled to the house or profits from the sale.
Your partner may be primarily in charge of paying bills and managing the money, but what if you had to (or just want to) step in and take a look or manage the accounts yourself? Do you know where and how to pay the mortgage if you had to? Can you access your retirement savings and investments online?
“For shared assets you want to know what accounts you have and where they’re kept,” says Thakor. In addition to bank accounts, be sure to keep an updated list of your shared insurance policies and know where and how to access your will.
Your Investment Strategy
How informed are you about the way you’re investing together? You may not be that interested in stock charts and tables, but at least know your allocation and the amount of risk you’re taking together. “Knowing your mix between stocks, bonds and cash, and knowing how much in aggregate fees you are paying (at both a product and an advisor level) are three key drivers of your long term investment success,” says Thakor. Set up a time to review your investments with your partner regularly and make a point to show up to meetings with a financial advisor. And remember, no question is a dumb question!
If you’re ever planning to apply for a loan or credit card together, it’s best to know each others credit scores so that you can better manage your expectations. If you only assume your partner has a strong 800 credit score (like you), but then get rejected for a joint loan because the score was actually in the 500s, you might save yourself the shock and resentment that will likely soon follow. The earlier you know, the sooner, too, you can work together to help repair his or her credit. Keep track of your credit score on a monthly basis using Mint’s credit score tool.
Farnoosh Torabi is America’s leading personal finance authority hooked on helping Americans live their richest, happiest lives. From her early days reporting for Money Magazine to now hosting a primetime series on CNBC and writing monthly for O, The Oprah Magazine, she’s become our favorite go-to money expert and friend.