Partners in Love, Life and Money; Why a Team Approach to Family Finances is Ideal

When you create a long-term partnership with another person, you are forming a team with all its benefits and challenges. If you choose to merge your finances, you might be inclined to follow a divide and conquer strategy and empower the more financially savvy partner with financial decision making. This approach is not ideal, however, when unpredictable life events occur and roles are reversed.

Your team will be stronger financially and emotionally if both partners are equipped with the knowledge and confidence to handle the family finances.

Divide and Conquer Strategy – Family Chief Financial Officer

The divide and conquer strategy is often used by busy families to divvy up household responsibilities, including family finances. One partner – typically the one with more knowledge or interest – is often designated as the family’s Chief Financial Officer or “CFO.” While this approach allows the team to leverage the skills of its members, no teammate should be indispensable. When it comes to the family finances, it is best for both team members to be involved and capable of stepping into the role of family CFO.

How a Divide and Conquer Strategy Fails with Family Finances

Several downsides to employing the divide and conquer strategy with family finances include:

  • As the family CFO, you might become the financial “expert” and your partner may not take the time and effort to develop their financial knowledge base;
  • Your partner may lack confidence and defer to you on financial decision making; and
  • If you are not regularly communicating with your partner regarding family finances:
    • your partner may make spending or budgeting decisions in a vacuum; and
    • you may not take your partner’s risk tolerance and appetite into consideration; and
    • the financial decisions you are making might not be accurately based upon your team goals for your financial future.

The real test of the divide and conquer strategy will occur if there is an unpredictable life event, such as your or your partner’s death, a prolonged illness or disability (mentally or physically), or the dissolution of your partnership. In all these cases, the non-CFO partner would be thrust unprepared into the family CFO role, which could be overwhelming and burdensome during an already challenging time in his or her life.

Creating a Financial Team and Cross Training

The best approach to handling the family finances is to cross train your team members so that everyone is equipped to handle the family finances. You can still employ the family CFO approach with one of you taking the lead; however, the other partner should be regularly involved so that they can build confidence and close their financial knowledge gap over time. It may be that sharing the CFO role will work by dividing responsibility for some of the financial tasks. This approach requires regular communication, so things do not fall through the cracks.

Whichever approach you chose, team meetings are an essential part of the cross training. As a couple, schedule time monthly or quarterly to:

  • review your net worth (what you own and what you owe);
  • discuss, identify and prioritize your financial goals and create and implement a financial plan for your future; and
  • review your progress on your financial plan (i.e., spending and savings goals) and revisit your goals regularly.

To make this team meeting something that happens consistently, it might help to combine it with something you enjoy doing together as a couple. Meeting for this discussion over a glass of wine, or following it with a round of golf, will help make the important financial planning conversation something that happens regularly.

A financial advisor can be a key part of the team, taking the role of coach. The advisor can add value by helping to keep savings goals on target, imparting financial knowledge along the way, and facilitating the creation and implementation of a financial plan. Frequent check-ins with the coach will keep the plan on course.

The more financially in sync you and your partner are, the better you will be able to handle unpredictable life events. So, start cross training for the family CFO role now!

Kerry B. Connell, CFP®

Kerry joined HTG in 2014. She helps clients create a picture of their financial goals and directs investments to attain those goals. Kerry is also involved in the firm’s management and strategic planning initiatives and contributes to HTG’s educational and networking efforts.

Kerry is a CERTIFIED FINANCIAL PLANNER™ practitioner. She has a BA degree from Tufts University and an MBA/JD from Northwestern University.
The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.
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