Alex, a stay-at-home parent, eats peanut butter for dinner while her spouse earns over $200,000 a year. When he moved out of the house six months ago, he stopped paying the heating and electricity bills. So Alex had to take on a minimum wage job at a local mall while her children are in school.
While this example may seem extreme, as a divorce financial professional, I repeatedly see the standard of living of stay-at-home spouses plummet once their relationship with the wage-earner of the family sours. In the process, their children's lives are frequently turned upside down.
Often unwittingly, caregiver spouses (usually mothers) take on disproportionate financial risk in a traditional marriage. We are brought up to believe that marriage is a lifelong partnership (including financial). In the movies, Prince Charming is a generous guy and to this day a number of school girls believe that the easiest way to get rich is to marry rich. Furthermore, some of our political leaders run campaigns on "family values" for which marriage is the backbone.
But here's the catch. Household income does not usually belong to the household at all, but to the wage earner. Typically, only if the wage earner puts money into a joint account/asset or gives his dependent spouse money does she gain access to the family pot. Conversely, if the earner chooses to spend his paycheck on expenses unrelated to household needs, the dependent spouse has little say in the matter. This state of dependence does not end when the children leave the nest.
Generally, retirement and healthcare plans are also in the name of the wage earner only. Ironically, often the only way a dependent spouse can gain control over assets accumulated during the course of a marriage is through divorce. How's that for family values?
Here are 5 ways you can reduce your financial risk:
1. Keep some money and credit in your own name. Money gives you a sense of self, power, and choice. So it's hard to feel empowered if you don't have any in your own name. Frequently, dependent spouses build up a nest egg before children and then spend it all on household needs once they've given up work. This is a mistake. If one salary doesn't cover all expenses, then you need to acknowledge this up front and budget accordingly. Keep some money in your own name for a rainy day.
2. Know the benefits of having your name on marital assets. If your name is not on the title of an asset, you have no control over it. If your car/home is in your spouse's name alone, he can take out a loan (mortgage) equal to most of its value and you might not even know about it. He can also sell it without your agreement.
3. Protect your credit rating. If you have joint debt with your spouse, your credit ratings are inextricably linked. That means if one you doesn't make a payment on time, both of your credit ratings suffer. If you do not have an independent ability to pay, be careful before cosigning mortgages and credit card obligations. Credit scores are becoming increasingly important. Manage yours accordingly.
4. Set money aside for retirement years in your own name. Every adult should have a retirement account in his/her own name. If your spouse contributes to an employer-sponsored plan, you should still have your own retirement plan (like an IRA or ROTH IRA) so that you can maintain some control over your finances in your senior years.
5. Maintain and sharpen your job skills. If you've decided to take time out of the workforce to raise a family, don't become complacent about your career skills. Keep up with your computer skills, your professional network and education. The idea of starting all over again can be daunting.
(Photo from StockSnap.io)