By Holly Mackay, founder of financial advice website Boring Money
Although the concept of ‘blue jobs’ and ‘pink jobs’ sounds like something straight out of the 1970s, there’s still a clear tendency for many of us to bury our heads in the sand when it comes to money, leaving our partners to deal with anything financial. Are you a Money Ostrich?
When Theresa May talked about blue and pink jobs on The One Show last year, it caused quite a stir. The concept that we have gender-specific chores might create some fun banter down the pub or heated debate at work, but the problem is that a sudden change in our relationship – for whatever reason – can clearly create huge impacts for those of us who have side-stepped financial issues.
Whatever your view on gender roles, data shows that women over the age of 40 in particular are sticking their heads in the sand about their personal finances. If we look at people in their 40s – an age when people tell us they’re ‘old enough to know better but not old enough to have worked it out yet’ – 24% of men have both savings and investments, compared to only 16% of women. Worse still, 45% of women that age have no savings or investments in their names at all, making them vulnerable in later life.
“I’m embarrassed to say how ignorant I have been about money management,” admits Linda, a health worker. “I am not the ‘little woman’ as such, but my husband tends to deal with my ISAs, shares etc. We have a house meeting every couple of weeks, but I now realise I did not really understand a lot of it. And we have some big decisions to make as he retires from the police next year.”
If this sounds like you – whatever your age, gender or relationship status – here’s a checklist to at least pull together a basic outline of your financial affairs. Anyone who's been through a divorce, bereavement or separation will tell you that dealing with emotional and financial stress at the same time doubles the burden when you’re at your weakest.
Your personal balance sheet
1. Let’s get the debts out of the way first…
Do you or your partner have expensive debts? How are you clearing them? Is it sustainable?
Don’t be afraid of debt, it’s like fat – there’s good fat and bad fat – and you need to keep track of both. So asking these questions is like performing a quick health check.
Bad debt’s typically things like unpaid credit cards and payday loans. This should be a priority to get your head around and pay off.
Mortgages and student loans are examples of debt which can be part of a stable and sensible financial plan. Make sure you have the account details, know where the accounts are held, and have a think about the mortgage repayments. Do you and your partner have adequate life insurance in place – who would pay the mortgage if something happened to one of you?
“Work on common goals together like moving house or setting up your child financially for the future” suggests Amy Prescott – a financial adviser, mum and wife, “then work together on a realistic plan to achieve it. Be open and honest with no judgement on past decisions.”
2. Is your insurance up to date?
Both of you should double-check this, as you may have some form of life cover included as part of your employment package. If you don’t, getting cover may not be as expensive as you think. For example, to insure a healthy person in their 40s for £100,000 of life cover, it can cost from about £10 to £15 a month. And it can all be done online.
As for how much cover you actually need, a rule of thumb is to have enough to pay off any debts you have, plus at least 75% of your annual outgoings. Make sure you know what insurance policies you have or need and consider things like who’d pay the mortgage in years to come.
If you have children or dependants, decent life cover becomes more pressing than ever. If you don’t have dependants, you may prefer to consider income protection.
What’s in your will? Do you even have a will? And what happens if you and your partner split?
Again, not a fun conversation, but essential nonetheless. If you haven’t written a will, you and your partner can do a very basic one online in about half an hour. A more thorough version can be drawn up by a solicitor.
The law’s a bit medieval still, and as a result writing a will is particularly important if you’re not married, divorced, or have children with a former partner.
At the same time you may wish to consider a lasting power of attorney. This gives you and your partner the ability to act for each other in the event of incapacitation, without getting involved in anything that requires a court or legal complexity.
4. Your assets and cash
Most financial planners will suggest we keep at least 3 to 6 months’ income in cash to protect us from unforeseen life emergencies. Your partner may be very prudent and have set aside this much – but is it just limply sitting in your current account? Even with rates as low as they are, you might find a better deal if you shop around.
Jot down the names of the accounts held, who they’re with, and today’s balances.
5. The stock market and other investments
Hang on in there – you’re on the home straight. Do you know if you or your partner have any ISAs or investment accounts, and whose name they are in?
Ann, 74, has an investment account which her husband manages for her. She talks with a partly amused, partly weary tone about how “Robbie’s sorted all this stuff out – even my iPad is set up with his name and email. I need to work out where this all is but he’s taken charge and is everywhere!”
Understand what accounts you have and where they’re held. How much is in them? Add it all to the balance sheet.
Finally pensions. But this is a biggie. If you’re the partner who stops work to care for the kids, you’re not only giving up on an income but on employer contributions to your pension. And here’s food for thought - in many separations the pension can be the most valuable asset in any family – more than the family house. But because it’s often a little opaque and hard to understand, so we don’t always think of it.
If you’ve chosen not to work for a period of time to support a family need, do be aware of this impact on your future as well as your today. Ask your partner how much their pension‘s worth, and where it is. If, like many of us, there are small sums scattered around a host of former employers, think about consolidating them for ease, and the clarity of that one single number.
If you have an old ‘defined benefit’ or ‘final salary’ scheme consider taking advice first – it gets complex and mistakes can be expensive.
Phew! We made it. Although this list will feel daunting for most of us, it really is worthwhile digging out a piece of paper and working through it all. Even a small list with some headline points is a useful start. Then, not only will you feel more in control, you’ll have shed the mantle of Money Ostrich!
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