No one enters into marriage expecting to get divorced but statistics show it happens more than any of us want to realize. In today’s world of failed marriages it is important to keep this thought in the back of your head regardless of your overwhelming love for your partner, “We may not always be together.” Life happens plain and simple; as pessimistic as that may sound someday you may become a widow, you may get divorced and if you put all of your financial eggs into the marital basket you may be in trouble when life happens to you.
I was certainly not prepared for my divorce at 27, and suffered financially because of my lack of financial knowledge back then. Do yourself justice and if nothing else be informed that these financial mistakes could cost you.
Ignoring Household Finances
The biggest mistake you can make is burying your head in the sand and not playing an active role in the household finances. This is everything from balancing the checkbook to attending meetings with your insurance agent. I’ll give you two examples:
- You are too busy taking care of the kids, the house and working to sit down with your spouse and review the monthly budget and balance the checkbook. One day while playing cards with your kids the electricity goes out. There is no storm looming outside and you wonder why this happened? You pick up the phone and call the electric company and are greeted with, “Your power is off because you haven’t paid your bill in 3 months.” What how can this be? It is because your family is struggling financially and you didn’t know because you weren’t involved in household budgeting, or bill paying. Big mistake…with an easy fix.
Get involved! Make it a point to sit down with your partner (at least once a month) to review the budget and pay bills. Be sure to have a clear picture of all of your accounts and their standing.
- You skipped last months meeting with your insurance agent, again. At this meeting your partner decided to cancel his long term disability policy. A week later the unthinkable happens and he is paralyzed in a car accident and is no longer able to work. Sad beyond belief you are devastated and then find out that his disability policy was cancelled. The family will not be able to survive on your income alone. Again big mistake…with an easy fix.
Don’t miss important appointments such as those with insurance agents, credit counselors, or financial planners. These types of decisions should be made as a couple with both partners having a vested interest.
Losing your Financial Identity
Giving up your financial identity could cost you dearly in the event you and your partner are no longer together. Your financial identity is everything from savings and retirement accounts to credit cards and loans. By not maintaining accounts of your own you risk losing your financial identity. I’ll give you two examples:
- You are a stay at home parent and receive no income outside of the home. You don’t feel the need to have any accounts of your own because you aren’t paying the bills and your partner is saving for both of you. Are you sure about that? Two years into the marriage your partner decides they want a divorce. Forced to venture out on your own you don’t have the means (money) or the credit history to rent an apartment, obtain a car or even open a credit card. What do you do?
Well this is why it is important to maintain your OWN financial identity, even in a marriage. Be sure to be listed as joint on your mortgage, car loans, and credit cards as well as maintaining at least one bank account of you own. The key is to be prepared even when things are good in your relationship.
- You work outside of the home but do not contribute to your employer’s 401K plan or have any retirement accounts in your name or jointly with your partner. Your partner decides they are leaving you and taking their retirement with them. Their divorce attorney works his magic and legally you are not entitled to any of their retirement savings. You are 40 years old and retirement is sooner than you think! Now what?
Again the importance of standing on your own when it comes to financial matters is important! Don’t let free money such as an employee matched 401K slip through your fingers and don’t ignore the power of having your own IRA.
Forgetting about YOUR Career
Giving up your career completely to stay at home and raise your children is a noble decision to make, but it could cost you. By giving up your career you are losing several things; income, retirement savings, and work history.
For example, as a first time mom your dream has always been to stay home with your child and raise them. Your family can afford it and there is nothing more important to you than being home with them. Your child is now 12 years old and your partner decides they are no longer interested in being married. You are now a single parent with no income of your own, rusty skills, and a professional network of no one. What do you do?
Well you have left yourself in a tough position. Staying at home to raise your children is a wonderful thing and if it’s financially possible, a great idea. But, it is important to stay in the loop so to speak while you are home. Consider doing freelance work around your busy parent schedule, volunteer in the community and stay connected with those in your career field so that if and when the time comes that you need to jump back into the workforce you aren’t dead to it.
The point I am trying to make is that life happens and you need to be ready for it. Becoming one with your partner is wonderful, but don’t be delusional and think that bad things will never happen to you. Don’t ignore the little voice in your head, “We may not always be together.”
Have you left yourself in a vulnerable position? What steps will you take to provide yourself with a little insurance for YOUR future?