What happens when your spouse manages the household finances and you are not involved?

I realise it is quite common for either the husband or wife to be the one interested in personal finance, or none.

One person will take care of the household budget and decide where to invest. The other person is simply not that interested, so they leave it to their spouse.

From my observation, this is quite common!

But what happens when the person managing the money is no longer around? Or when the marriage ends?

Over the years, I’ve been brought into a few situations like this. After a divorce, after a spouse passes away, or when the children start getting concerned and step in.

There are some real consequences that we may not think about while everything is going well.

Let me share three stories.

1. Depending on one CPF LIFE payout: “Will my mum have enough for retirement?”

There was this couple I got acquainted with. The husband had been the sole breadwinner his whole life, while the wife was a homemaker.

After the husband passed away, I was brought into the picture.

One of the concerns the children shared with me was: “Will there be enough money for my mum’s retirement?”

The couple had been depending on the dad’s CPF payouts for their retirement expenses. Now that he was no longer around, that payout stopped and she was worried.

“I no longer receive money regularly. Do I have enough for retirement?

The parents had not built up much savings outside CPF. So the children had to step up and help with the monthly allowances.

In a way, the children became their mum’s “CPF”.

From a financial planning point of view, once the event has happened, our options are more limited.

This is why, with other families I work with, I try to bring forward this discussion.

For people in their 50s or 60s, if both are depending on one person’s retirement income, what happens to the other person when that income stops?

2. Spending after divorce: “I think I’ve spent too much.”

Another client of mine went through a divorce.

The whole process was quite emotional for her. Looking back, she felt she wasn’t well represented and didn’t get a very good deal out of it.

But she's glad the entire proceeding is over and getting her life back in order.

The first problem was getting a roof over her head, because the matrimonial home had been sold and the proceeds was divided.

She wanted a place of her own.

She made a fairly quick decision on the new home and spent quite a bit. Then came the renovation, where she spent quite a bit more.

Afterwards, she started feeling: “Actually, I think I’ve been spending too much. I need to take a better look at the money I have left.”

That was how we got connected.

But by then, the money had already been spent.

This is why I feel financial planning around a divorce should start during the process and not after. By the time everything is settled, some big financial decisions may already have been made.

3. Dad passed away. The children wanted to help, but couldn’t agree on who to trust.

The third story involves a family with three children.

After the dad passed away, the mum received a lump sum. She relied on her husband for financial decisions throughout their marriage.

So she asked the children: “What should I do with the money?”

The children were concerned, but they also felt they weren’t good enough with money to advise her.

Each had their own financial advisor or friend in the industry. So naturally, they thought, why not get someone they knew to help

Somehow, the siblings got into a disagreement. They couldn’t agree on whether the recommendation was in their mum’s interest, or whether the advisor was trying to make a sale.

In the end, they decided not to go ahead. The money stayed in a fixed deposit until the situation cooled down.

In this case, the estate was mainly cash and property.

What if the dad had left behind a portfolio of stocks and shares?

Would the children know what to do with it? Would they understand why their dad bought those investments? And how would the mum react if the value dropped?

People in my industry would say the family should have set up a trust, or planned how the assets would be passed down through a will.

Those may be part of the planning. But there is still this missing link.

Who is going to help the family understand what they have, and what to do next?

Two problems in all transition

1. Emotions are dominant
2. Trust gap surfaces

During transitions, people may not know what to do. They can be overwhelmed by emotions, while still having to make important decisions about money.

Having knowledge and involvement prior to transitions can help a person navigate more confidently and with rationality.

Then there is the trust issue.

Who do we ask for advice? Can we trust this person? Can we trust ourselves?

Trust gap takes a long time to bridge, which also means, resources may be idle for awhile.

If these situations concern you, there are two things you can start doing.

1. Have a conversation with your spouse.

Understand where the money is and how your spouse is investing it. Why are they investing this way? Who is helping them make these decisions?

You don’t need to become as interested in personal finance as your spouse. But at least be in the know.

Of course, you may not know what questions to ask at first. That is fine. Start with what you have, where it is, and how it pays for the household expenses.

2. Find a professional you and your family are comfortable with.

It helps to build this relationship before something happens, while both spouses can still be part of the discussion.

For some of my clients, I’m the person they turn to for investment management and help during these transitions. In a way, I take on the role of the family investment manager.

Not everybody will find this service useful. But some families find it very valuable to have someone who already knows their situation and whom they are comfortable calling.

And don’t just look for someone who has a product to sell. Look for an advisor who takes the time to understand your family and helps you think through the decisions.

One spouse can still take the lead in managing the money. But it helps if the other person knows enough to take over, and knows who they can turn to when they need help.