The Basics of Family Planning

Money is one of the most emotional topics in our lives. For many of us, our attitudes about money were formed in childhood, when our families either did or didn't have enough of it -- and most of us learned that money was either something to fight about or something never to discuss in polite company. Chances are, the messages you got were very different depending on your gender. Men tend to associate money with power and competence, while women see it as a source of safety and security.

 

·        Earning styles: Traditionally, males were taught to "bring home the bacon," while females were brought up believing that careers were optional. Although this traditional view has changed drastically over the last 30 years, one key statistic is undeniable: on average, women today earn 72 cents for every dollar earned by men (down from 74 cents in 1997).

·        Spending styles: Although women are the designated shoppers in most families, no one gender has a lock on spending. In fact, one big splurge by the non-shopper can wipe out weeks of careful budgeting by the primary shopper. The sexes do tend to spend money on different things, however, and this can lead to serious misunderstandings (OK, fights).

·        Investing styles: Going back to the fundamental gender difference between power and safety, men tend to be more aggressive in their investments while women are generally risk-averse. According to a study by the American Savings Education Council and Employee Benefits Research Institute, only 27 percent of women indicated that they were willing to take risks for financial gain, as opposed to 42 percent of men.

As you embark on your financial planning journey, understand that each of you may have very different attitudes about money and, likewise, that you will each have different strengths and weaknesses with regards to saving and spending. The following questions may help you discover those differences:

·        Who's the primary wage earner -- or will you be devoting equal time to both careers?

·        Who's a more careful shopper?

·        Who's better at investing? Will the other person also have a say in the final investment decisions?

·        Who likes to handle the nuts and bolts of family finance: the bill paying, recordkeeping, and tax return preparation?

Some families like to have clearly delineated roles, others like to do everything as a couple. Talk about these issues and decide what works best for you.

 

For couples, financial planning is all about envisioning a life together and making plans for the coming months, years, and decades. Although money is what will bring your plans to fruition, don't ever lose sight of what's really important: how you feel about each other and how committed you are to staying together.

 

Whether you've just met or have already declared your undying commitment to one another, you'll find that the process of financial planning helps you address issues you may not have had previous occasion to discuss.

Get ready for some soul searching and serious sharing:

·        Do you want to have children?

·        If so, how many and when?

·        Will both of you continue to work or will one parent stay home?

If you've bought a house with a 30-year mortgage and already have a child or two, you've clearly made the commitment to stay together -- for better or worse.  You'll find that the process of financial planning will strengthen your relationship and keep you focused on the future.

 

Financial planning for you primarily consists of balancing your retirement income with ongoing expenses and setting the fun kinds of goals, like vacations. However, this is also a time to plan for the inevitable: one of you will probably go first, and the time to provide for the surviving spouse is now.

 

By getting these matters planned and out of the way, you'll have a better time on those vacations!

 

Yours, Mine, or Ours?

Regardless of what your arrangement is when you're just starting out, couples can't help but commingle their finances as they go through life, even if they choose to keep their day-to-day money in separate accounts.

 

Any couple that is married and living in one of the community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, and Washington), should know that any property acquired during the marriage -- including wages earned by either partner -- is presumed to belong equally to both partners, regardless of whose name it's in.

 

Gifts, inheritances, and property acquired before the marriage -- as long as it is kept separate and not commingled with other marital assets -- is not considered community property and may remain the sole property of one spouse.

 

Titling Your Assets

Any time you are setting up an account or acquiring assets, you are faced with the question of how to title the assets. Your two main choices are:

·        Sole ownership (subject to the community property laws discussed above)

·        "Joint tenants with rights of survivorship"

If property is held in one spouse's name, the other spouse can't control it. If the owner dies, the property will be disposed of according to his or her will or, if there is no will, according to the laws of succession in that state.

 

Join tenant property may be controlled by either or both partners; if one partner dies, the property automatically goes to the other.

 

Some assets, such as IRAs and retirement accounts, can't be held jointly. You must arrange for the disposition of these assets in case of death by naming a beneficiary.


If there happens to be a conflict between the beneficiary designation and your will, the beneficiary designation will prevail. For this reason, it is critically important to make sure all beneficiary designations reflect current family dynamics -- no ex-spouses allowed!

 

Kids Are Expensive...At Any Age

Happy are the parents who consider their kids "launched." This means allowances, college expenses, and weddings are behind them and the children have grown up to be financially self-sufficient.

 

Needless to say, this takes some doing. Any couple that has or contemplates having children will need to carefully consider the children's needs for at least a few decades. The financial needs of children are a critical part of family financial planning.

 

The decision to have a child usually transcends financial considerations. Either you want children or you don't. If you do, you'll need to be prepared for the costs -- starting with the medical or adoption expenses required to bring a child into the world and into your home.

 

Check your health plan to see if it covers maternity. Will you need a bigger house? A bigger car? Cribs, strollers, high chairs, etc.? It's amazing how much those little bundles of joy can cost.

 

And that's not counting preschool or graduate school. You may also need to consider the cost of private schools, or the cost of housing in a neighborhood with good public schools.

 

Factor Your Parents Into Your Plans

Lucky are the couples with independent parents who lead interesting lives and dote on the grandchildren. Some families are not so lucky, however, and when a parent is dependent on adult children for financial or emotional well-being, this reality must be factored into the financial plan.

 

Should you ask your parents for help if you need it? Should you take it if they offer it? There seems to be much more sharing among generations today, partly due to the high cost of living.

 

It's not unusual, for example, for grandparents to help with the cost of college -- and there can be tax benefits for them in doing so. Still, it can be a sensitive issue, dredging up all kinds of parent-child emotions concerning power and dependency.

 

Instead of waiting, why not discuss these issues before the need arises, so you can deal with them in a rational manner? Ask your parents if they would object to giving or loaning you money if you ever got into a pinch, and ask what terms would be acceptable to them.

 

Likewise, if your parents are too generous -- offering money (with strings attached?) when you'd rather be more independent -- don't hesitate to share your feelings and come to a resolution.

 

If you're lucky, your parents will remain healthy as they age. For some, however, an aging parent can develop certain dependencies that somewhat reverse the roles of parents and children. You may find yourself caring for an aging parent who isn't quite on top of his or her financial affairs, whether it's reminding Mom to pay the utility bill or having power of attorney and assuming total control over the management of your parents' assets.

 

The only way to prepare for this is to be on the lookout for signs of physical or mental deterioration and to offer help at just the right time -- too early and you may offend, too late and things might slip between the cracks.

 

As you tend to the needs of aging parents, you'll need to brush up on subjects you didn't think you'd need to know about for awhile: Social Security, Medicare, and required minimum IRA distributions at age 70 1/2, to name a few.

 

The family that plays together stays together. And the family that works together feels much better about what they've all accomplished. In families where one partner has to bear the full burden of financial planning, the rewards aren't nearly so great as when everyone pitches in and treats the financial plan as an ongoing family project.