Personal finance is one of those subjects you don’t bring up at dinner parties or family get-togethers. Far too many families are carrying this lack of conversation into the privacy of their own home as well. In a recent Fidelity study, over 40% of the people polled had no clue what their spouse’s income was. Guesses from 10% were off by more than $25,000. It’s no wonder that families have trouble balancing their budgets and saving for emergencies or retirement.
Your spouse’s financial state has a lot to do with your future security. The combined finances of a family have a lot to do with the arguments that many couples have. Take time to have the following money talks and get rid of the uncertainty and stress.
1 – Disclose everything to your family.
While it can be prudent to keep some finances separate, moving forward as a family unit requires knowledge of the other person’s income, debt and credit score. A young couple interested in buying their first home should not get a surprise when it comes time for the credit checks.
Revealing approximately how much money the family has can help older children learn responsible personal finance techniques. While kids don’t need to know everything, a firm idea of how much the bills are for a family and how much income you need to cover them is important for their future success.
2 – Work out a budget so everyone pays a fair amount.
A fair amount is not necessarily an equal amount. How much each person in the family pays could depend upon their income or even age. Frank conversation is needed so no one feels as if they are paying more than their fair share. Compromises need to be made on both sides in order to keep everyone satisfied with the budget.
With so many adult children moving back in with their parents these days, including their income in the budget is essential. Expect contributions and clearly outline what they are before the person unpacks.
3 – Plan for retirement together or apart.
No family wants to think about mom and dad dying and the other one being left alone. Talk about Social Security estimates, any pensions and 401(k)s, health insurance and if it will pay for continuing care, life insurance and wills. The majority of families recognize that one parent will die before the other so these conversations are important. Research personal finance options that could benefit the remaining person more than their personal retirement plan alone.
Older children should definitely know where the money for assisted living or nursing care is held, who is the executor of the will and how to take over the personal finance decisions if the parents are no longer able to do so.
Next inspiring story: Datuk Vinod Sekhar , President of Green Rubber Global and Petra Group