Often, only one person in the household is responsible for maintaining the family budget and managing the household's finances - and if you're reading this article, that person is probably you.
Tutorial: How To Manage Credit And Debt
But what if you died or became incapacitated and could no longer manage the budget? Or what if you're just tired of managing everything yourself, or you partner wants to become more involved in your household's finances? How do you teach your partner everything you know?
This article will outline the areas you should be sure to cover and the steps you should take to give your partner a clear picture of your household's financial situation and the confidence to take over. (For more information on sharing the household finances, read Why You Shouldn't Let Your Partner Do The Books.)
1. Make a list of everything and where it's located.
While you may be able to finish each other's sentences, don't assume your significant other possesses the intuition to know where you keep sensitive information. You may think your filing system couldn't be any more organized and that your financial records are in a pretty obvious location, but your partner might not. While you probably have printed documents related to some of your financial affairs, there's a good chance some of your information is stored solely in your memory bank, as you probably manage some of your finances online.
Without access to your email to receive monthly statement reminders, your partner probably doesn't know how to find all of your online accounts, and may not even know which banks and brokerage companies you use, not to mention all the bills you pay. A list of all of your accounts makes it easy for your partner to see everything that needs to be addressed. (For more, see Say "I Do To Financial Compatibility.)
2. Make sure your partner has access to everything.
Just knowing that these accounts exist won't be enough. If you want your partner to be able to take charge, you'll have to give him or her full access. Get your partner a set of keys to any safety deposit boxes, divulge the code to your safe and point out which tree in the backyard is beside where you buried the money. Make sure your partner is a named account holder or the primary beneficiary on all major accounts, life insurance policies and any property you own. Also, make sure he or she knows how to access any important computer files and online accounts. (Life changes may mean it's time to update you estate plan. For more information read Update Your Beneficiaries.)
If you're worried about writing your sensitive information down because of the possibility that the wrong person might find it, you're not alone. Here are some options for making your information available to the right person while keeping it safe from criminals (or ill-intentioned relatives).
- Put your list in a safe deposit box at the bank. Make sure your significant other has a key and is listed with the bank as being allowed to access the box. Obviously, this is best for emergency situations, not daily use.
- Make your list electronic and store it as an encrypted, password-protected file. Make sure your partner knows how to locate and access the file and that you have at least one backup copy in a separate location in case the first file is lost or corrupted.
- Encrypt your list the old-fashioned way. Create logins and passwords that have meaning only to you and your partner. This way, your written list can consist of prompts or reminders to your logins and passwords instead of the complete codes. If one of your passwords was the name of the restaurant where you went on your first date plus the date you acquired your dog, the password prompt you wrote down could be "marcos07xxxx" or "first date restaurant+dogbday". (Learn more in Keep Your Financial Data Safe Online.)
3. Explain what everything is and why it's important.
People tend to complete tasks more successfully when they understand the purpose of what they are doing. Just telling your partner that "this account is where we put our savings," isn't as good as explaining why you choose to put your savings there ("we get the best interest rate at this bank"). Likewise, saying "we have to pay x dollars a month for y," isn't as helpful as explaining why you make the payment. For example, if your partner doesn't know what long-term care insurance is and why you're paying for a policy on your mother's behalf, he or she might cancel the policy. (For more, see A New Approach To Long-Term Care Insurance.)
4. Maintain a household budget.
Maybe you're not the type who needs to write everything down to successfully manage your money, but a budget is an excellent way to give your partner a big-picture idea of all the money in play - the income, the debts, the recurring expenses, the investments and so on. It can also help your partner pick up where you left off in managing the household's finances if you die or become incapacitated. (Learn more about household budgeting in our related articles: Six Months To A Better Budget and The Beauty Of Budgeting.)
5. Have your partner watch you handle the finances.
Explaining things is helpful, and written instructions/checklists/spreadsheets are even better, but nothing beats sitting down with your partner and talking through actually managing the finances. Let your partner observe the process while you explain it, and then have him or her practice it with your help and guidance.
6. Gradually give your partner some financial responsibility.
If your partner currently doesn't handle the money at all, start off with a small, manageable task - preferably one with low stakes. For example, make your partner responsible for paying one small bill each month - something with a generous grace period on the payment due date, like the electric bill. As he or she become more adept, give additional tasks to manage. Eventually, have your partner handle all the finances for one month (with your supervision, of course). Then, try switching off months, with your partner handling the finances every other month until you both feel completely comfortable.
7. Discuss contingency plans.
Make sure your partner knows what you would do in an emergency or unplanned financial event. Don't just be conceptual - discuss actual, concrete strategies to handle unplanned events. If you received a windfall, which debts would you want to pay off? What are your savings priorities? Is there any charity to which you would donate a significant sum? On the other end of the spectrum, if there was a sudden loss of income, which bills would need to be prioritized, and which expenses could be reduced or dropped altogether? (To learn more about dealing with personal financial changes, read Competing Priorities: Too Many Choices, Too Few Dollars.)
8. Encourage your partner's ongoing education.
Your partner may be loathe to pick up a personal finance book on a Saturday afternoon, but reading the occasional article will get your partner learning about money at a manageable pace.
To teach your partner how to handle the household finances, take the time to provide him or her with a complete picture of your household's financial situation and provide access to all important accounts. Then, gradually teach your partner enough to ease your financial management burden or get by in an emergency. These may not be the most entertaining activities, but they are key to taking the best possible care of one of the most important people in your life. (For more reading on managing your personal finances, check out Run Your Personal Finances Like A Business.)
InsuranceLearn several effective methods for lowering life insurance premiums. These include quitting smoking and considering term life insurance.
BudgetingObtain information on how to put together and execute a plan to get out of debt, including the various steps and methods people use to become debt-free.
TaxesMost of the time, it makes sense for couples to file their taxes jointly. Except for these possible exceptions...
Personal FinanceLiving together can be romantic. But at what point does co-habitation become a common-law marriage? It's wise to know the legalities of your relationship.
Home & AutoRoofing your home is very important, that’s why you should choose a roof specifically designed to handle your area’s climate.
Credit & LoansA joint credit card may sound like an easy way to split the bills, but make sure you know what you’re getting into first.
BudgetingTo get a better sense of how child care costs can fluctuate, here's a look at the costs of child care across the country.
Home & AutoSome home improvement projects could cost you more to complete than they’ll pay out in equity. So, here we show you the worst projects to avoid.
ProfessionalsMaking the most of Social Security can be a complicated thing for married couples, but finding the maximum return is worth the laborious process.
Fundamental AnalysisThe internal rate of return rule is a popular method used to compare investments or projects.
A type of accounting process that aims to capture a company's ...
A metric used in capital budgeting measuring the profitability ...
The act of combining several loans or liabilities into one loan. ...
Similar to a budget, a personal spending plan helps outline where ...
A falsified statement of income and expenses. A fudget or "fudget ...
A long-term investment made in order to build upon, add or improve ...
Discretionary income is the money left over from your gross income each month after taking out taxes and paying for necessities. ... Read Full Answer >>
A wide range of possible deductibles are available with health insurance plans, starting as low as a few hundred dollars ... Read Full Answer >>
While there is no hard rule for how much of a person's income should be discretionary, Inc. magazine points out that it would ... Read Full Answer >>
Generally speaking, aim to keep between two months and six months worth of your fixed expenses in your demand deposit accounts. ... Read Full Answer >>
The rule of 72 is best used to estimate compounding periods that are factors of two (2, 4, 12, 200 and so on). This is because ... Read Full Answer >>
A large amount of risk is associated with subprime mortgages. Since the mortgages are specifically for people who do not ... Read Full Answer >>