Why Every “Non-Financial” Spouse Needs to Understand Household Finances 

By Dax Dixson, CFA, Partner and Wealth Advisor at Stearns Financial Group 

I don’t generally like using the term “non-financial spouse” because it implies a lack of ability. In most cases, however, it’s not a lack of ability, but rather a lack of doing that creates this situation. One spouse naturally takes over the function, and the other is grateful for it.  For lack of a better phrase, however, and for the purpose of this article, the term “non-financial spouse” will refer to the spouse who has taken on a secondary role in managing the household finances. This means that while one spouse is primarily responsible for managing the flow of money in the family, the other, “non-financial” spouse plays a supporting role in these financial activities. The non-financial spouse typically focuses on other aspects of the household, like planning vacations, scheduling appointments, or making sure the yard is taken care of. Often, the non-financial spouse is also the caregiver of the family, often taking care of children and aging parents. The financial spouse would focus on retirement planning, major expenses, and bill paying.

In my experience, I have seen non-financial spouses with some knowledge of the household financial picture, and I have also seen some with little to no knowledge of the household financial picture. However, studies have shown that globally, 58% of women across all age groups defer the big financial decisions to their partner¹. Significantly, the same study also shows that three quarters of widows and divorcees wish they had been more involved with the household financials during their marriages, as opposed to learning to navigate them while coping with a huge life change.

The truth is, as couples move into retirement, it becomes increasingly important that both spouses develop an understanding of their financial picture to avoid the worst case scenario: the financial spouse’s health declines, bills go unpaid, and seemingly overnight, the non-financial spouse is thrust into a role they are unprepared for While this situation is common, it is avoidable with a some preplanning.

There are many reasons why one person may handle some, or all, of the financial responsibilities of the household.  Below are a few:

Money Roles

There are many aspects to managing household finances, including budgeting, saving for various goals, and investment management. While some couples choose to “divide and conquer” these responsibilities, a significant number of couples elect to have one person manage most of the household finances.

There are many reasons why one person may handle some, or all, of the financial responsibilities of the household, including:

1. Natural Interest: One partner may have a genuine interest or passion for financial matters, finding joy and fulfillment in managing money.
2. Experience: The spouse taking the lead might have a history of effectively handling finances, either professionally or through personal experience.
3. History: Past experiences and the financial management style learned during upbringing can influence the division of financial roles within a relationship.
4. Time and Availability: Finally, practical considerations, such as one partner having more time or availability, can lead to one spouse assuming the primary role in financial management.

It’s important to note these reasons are not mutually exclusive, and often a combination of factors contributes to the dynamic of one person handling money matters in the household.

While having one person manage money might seem organized and efficient, it raises some important questions for the partner who is less involved in financial decisions and execution:

1. How would I pay the bills if something happened to my spouse?
2. What if there’s an emergency, and I’m not familiar with our financial situation?
3. Am I adequately prepared to handle money matters if my partner isn’t around?
4. How can we ensure a seamless transition of financial responsibilities if needed?
5. Are there financial goals or aspirations my partner has that I’m not aware of?
6. Do we have a shared understanding of our long-term financial plan and retirement goals?
7. What steps can we take to enhance transparency in our financial communication?
8. Am I prepared to handle complex financial matters, such as tax planning or investment strategies, if my partner is unavailable?

These questions highlight the potential stress and uncertainty that can arise for the non-financial spouse, especially during unexpected situations like illness or the passing of the partner responsible for managing money.

Emotional stress is a common challenge for the non-financial spouse. The responsibility of managing finances during a crisis can be overwhelming. In my experience, feelings of being ill-equipped or unprepared usually intensify during these challenging times.

Practical Tips for Active Financial Participation

Communicate about your Household Finances

What do you want to do in retirement? Are you prepared financially to do so? And what do you do if something unexpected happens?

Discussing household finances can be tricky, or even taboo, for some couples. Roles within the household are developed over decades, and each household has a different “financial culture.” The financial spouse may even feel disrespected when questioned about the big picture. Scenario planning with a financial advisor can help with “de-personalizing” the conversation. This involves discussing the best case, the base case, and the worst-case scenarios in retirement. A seasoned financial advisor can help navigate these conversions, leading couples to illuminate their real retirement goals like deciding where they will age, when to take Social Security, and how they will forge their legacies.

A financial advisor can also show you where the gaps are in your retirement planning. After all, this is your first (and perhaps only) retirement.  But financial advisors have helped hundreds of clients through retirement planning and know where to look for the typical “blind spots.”

Discussing different scenarios can help you set shared financial goals as a couple. Then, you can discuss if the goals are achievable based on your savings and current health. We recommend setting aside some time annually to review your plans to determine if everything is still on track.

Inventory your assets and liabilities

To do this, you will need to list all the accounts that you have, including:

• Checking and Savings Accounts
• Investment and Retirement Accounts
• Mortgage and Loan Accounts
• Monthly bills
• Credit Cards

Next, list out the household sources of income, including

• Social Security
• Pensions
• Investment Account Distributions

For each account and source of income, list out the institution, account number, and the customer service number for that institution.

This “financial inventory” is a valuable first step towards a more equal shared responsibility, and it helps the non-financial spouse know “where to go” in case of an emergency.

Our team has templates to help you map your financial picture, if needed, and can help with gathering these documents. Many couples decide to simplify their accounts in retirement to make managing finances easier on the surviving spouse.

Create a Support System

Finally, consider building a strong team to help navigate your financial situation. This should include not only a financial advisor, but also your adult children, and/or financially savvy friends. Each person on the team plays a valuable role, especially later in retirement, in helping you navigate tricky situations and tough conversations.

Note that engaging both partners in a financial dialogue is not just a considerate gesture; it is essential. Research indicates that involving both partners in financial decisions can prevent future hardships, strengthen relationships, and ultimately helps ensure a more secure financial future for both individuals². And remember, financial literacy is a skill that develops with practice. We understand that conversations about financial preparedness are not romantic or easy. We can help. If you have any questions about your financial preparedness in retirement, please reach out to us.

Sources

1. Fidelity Investments. “2021 Couples & Money Study,” July, 2021.
2. UBS Investor Watch. “Women Put Financial Security at Risk by Deferring Long-Term Financial Decisions to Spouses,” March, 2019.