When it comes to finances, David Bach and I have a similar outlook which includes that there is generally one CFO in a couple. However, just because there is a single CFO, both partners still need to understand and agree on the overall family finances. In our family, I’m the CFO, but together Jenn and I have established our goals and she knows how to access all of our investment and insurance accounts, if needed.
Given that it is very likely that you have one CFO, it is extremely important to understand what you both should “know” and what should “be able to get your hands on give an hour or so”. Take this quiz with your partner and check for your scores at the bottom. Reproduced from David Bach’s New York Times Best Seller, Smart Couples Finish Rich.
True | False I know our current net worth (i.e. the values of the assets we have minus the liabilities we owe.)
True | False I have a solid grasp of what our fixed monthly overhead is, including property taxes and all forms of insurance.
True | False I know how my partner feels about our monthly overhead. We have discussed both the size and nature of our regular expenses and obligations, and are comfortable with them.
True | False I know how much life insurance my partner and I carry. I know exactly what the death benefits are, how much cash value there is in our policies (if any), and what rate the money is earning (if applicable).
True | False I have reviewed our life insurance polices sometime in the last 12 to 24 months, and I am comfortable that we are paying a competitive rate in today’s insurance market.
True | False I know the current value of our home, the size of our mortgage, the interest rate on the mortgage, and how much equity we have in our home. I also know the length of our mortgage-payment schedule and how much it would cost per month to pay down the mortgage in half the time.
True | False I know what type of homeowner’s or renter’s insurance we have and what the deductibles are. I know whether or not our policy would provide us with ‘today’s replacement cost’ or actual cash value, if our home and/or property were destroyed or stolen.
True | False I know the nature and size of all our investments (including cash, checking accounts, savings accounts, money-market accounts, CD’s, treasury bills, savings bonds, mutual funds, annuities, stocks and bonds, real estate investments, and collectibles such as stamps, coins, artwork, etc) I also know where all the relevant paperwork is kept.
True | False I know the annualized returns of all the above-mentioned investments.
True | False I know the current value of all our retirement accounts (including 401(k) plans, 403(b) plans, IRA’s, Roth IRA’s, SEP-IRA’s, Keogh plans, company pension plans, etc.) I know where the statements for these accounts are kept and I have a solid grasp of how all our accounts performed last year.
True | False I know what percentage of our income we are savings as a couple.
True | False I know how much each of us is putting into our respective retirement accounts, whether that amounts to the maximum allowable contributions, and what our respective vesting schedules are.
True | False I know how much money each of us will be getting from Social Security when we retire, and what our pension benefits (if any) will be.
True | False I know whether or not we have a will or living trust, what its provisions are, and how up-to-date it is.
True | False I know whether our income would be protected by disability insurance should I or my partner become unable to work. If we do have disability insurance, I know the amount of coverage, when the benefits would start, and whether they would be taxable. If we don’t have disability insurance, I know why we don’t have it.
True | False I know what my partner’s wishes are regarding medical treatment (including being kept alive by artificial means) in the event he or she falls seriously ill or is seriously injured. I know whether or not our will includes a valid power of attorney covering such situations. I also know how my partner feels about being an organ donor.
True | False I know if my partner has taken an investment class in recent years.
True | False I know how my partner’s parents handled their finances and I know what effect that has had on how my partner feels about how we manage our money.
Give yourself 1 point for every time you answered “True,” and 0 for every time you answered “False.”
14-18 points. Excellent! If you are the CFO, well you are doing your job!! Kudos. If you are the “not so much CFO”, you and your partner obviously have been planning together, as a result of which you have a good grasp of the state of your finances and how you both feel about money.
9-13 points. If you are the CFO, you have some work to do, you have some gaps in your responsibility. If you are the “not so much CFO”, you need to at least be aware of how you can answer these questions, in about an hour. Preferably by something provided by the CFO on some regular cadence.
Under 9 points. You and your partner don’t make a habit of talking about money, do you? As a result, your chances of being hurt financially because of insufficient knowledge are enormous . You need to learn how to work together in order to protect yourselves from future financial disaster.