Christine Benz: Hi. I'm Christine Benz for Morningstar. Many financially savvy individuals would like to create financial plans that are goof proof, in case they should predecease their spouses. Here to share some tips for doing that is Stacy Francis. She is president of Francis Financial in New York City.
Stacy, thank you so much for joining us.
Stacy Francis: Thank you. I'm excited to be here.
Benz: One topic I'd like to cover with you Stacy is, how financially savvy spouses, the one who is hands-on in the household with the money, can help leave the nonfinancially savvy spouse in good shape. So if the first spouse predeceases the other one, how can they make sure that the nonfinancially savvy spouse has kind of a plan and the ability to navigate? What are your tips?
Francis: The biggest tip is to make sure that you understand what's going on, and we all have busy lives. Often you just don't find the time to really sit down and review everything. So instead, what you should be doing is making a financial date. This is a financial date once a month, and on that financial date, you bring the papers, you bring everything. You spend the first half hour really talking about your finances with regard to investments, life insurance, disability, and even just those normal household bills that seem to always be coming in the door.
If you do that on a monthly basis, even if that nonfinancially astute spouse doesn't play as much of role on the day-to-day duties, they will understand the overall picture. And if unfortunately you are not there to help them in the future, they are going to be able to survive and actually really thrive going forward.
Benz: So do you have any tips, Stacy, for organizing documents, to make sure that your spouse could readily put his or her hands on the right information if he or she needed to?
Francis: There are two different file systems that you can have. You can have a file system that's actually a physical file system in your home with tabs listed for insurance, investments, taxes, budgeting, wills, and estate planning.
You can also have it online on your computer with a similar filing system. Both work very well, and which one is going to be right for you is really about your personal situation and your spouse's. Some spouses really don't feel comfortable using the computer and so in that case maybe it's that physical-document program that you would be using.
Others feel very comfortable using that online, but no matter what it is, you need to have that very clear filing system and also keep it up to date. And guess what? The benefits are not necessarily just going to be filed if for some reason you are not here and unfortunately pass away in the future. Having an organized filing system is going to save you hours a year, especially when it comes to tax time, and we know how complicated and frustrating tax time can be.
Benz: So, assuming that a couple doesn't have the time to maybe do that monthly date where they talk about finances, what would you say are sort of the bare-minimum details that one should be sharing with one's spouse about the household financial picture?
Francis: Definitely having a balance sheet would be wonderful. If you could update that once a year to show all of your assets and all of the liabilities. If that's all you can do that's still going to put you light years ahead of unfortunately where most couples are at. And it's going to also help that other person know how you are doing financially, so that they are never, ever in the dark. Part of adding to that balance sheet, I would ask only one more document. So, again, it's not a whole lot of homework here, but also ideal to have a list of all your insurances. So, this list would include what you have for disability, life insurance, long-term care, and any other information on that so that the surviving spouses are not in the dark and know exactly what to do to protect themselves.
Benz: How common is it in your experience that couples are really disparate where you've got one part of the couple who is very hands-on and engaged with financial matters and the other one kind of tunes out?
Francis: It's interesting because you would think that that is actually something of the past, but unfortunately what we see is that we do very much, even in this day and age, find one key person in the relationship not having an active role and sometimes not even wanting to have any role. They've actually made that decision that they don't want to be involved.
And unfortunately--and I don't want to make stereotypes--but typically when we find this, it's the woman. And the biggest thing we could say is: "A man is not a financial plan, and you need to know where this money is. You need to know what type of insurance you have." This is because at some time women will find themselves alone, and according to the Institute for a Secure Retirement, the average age of widowhood for woman is age 56, so you need to know this sooner than later.
Benz: It's a really young age. One discussion that we had with some users on our website was how to widow- or widower-proof a portfolio. I was talking with some of our readers, and they were very interested in streamlining their portfolios, getting them more heavily invested in kind of goof-proof investments that don't need a lot of hands-on monitoring. Index funds were increasingly popular among these readers. Is that a strategy you would recommend, so as you age that maybe you position your investments to be a little more hands-off in case your spouse needs to take over for you?
Francis: It is. It's the right thing to do, and you don't have to have an elaborate portfolio to do well in the market. You should have a diversified portfolio, maybe you're using index funds as well, to give you that broad exposure to the market. If you are investing in certain areas that are more sophisticated, maybe even using hedge funds or other types of private equity, that type of portfolio is going to need a lot of maintenance. And if you feel like your spouse is not up to that or does not necessarily have the sophistication, then most likely you have the wrong investment portfolio.
Benz: Stacy, thanks so much for sharing these tips for couples attempting to navigate their financial matters. It was very helpful stuff here, so thank you.
Francis: Thank you. It was great to be part of this.
Benz: I'm Christine Benz for Morningstar. Thanks so much for watching.