Top Money Mistakes for Women

Top Money Mistakes for Women

Finances: Tips to Avoid the Top Seven Money Mistakes that Women Make when They Marry

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 made 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 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 woman 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.

I”n 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 Accounts.

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 prenup. I strongly recommend that someone look long and hard at a prenup.”

“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,” saidFreeman. “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 mindset 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 a 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 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 the 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 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.”