"Do you know where the family money is?"

It was finals week my freshman year at the University of Southern California (USC). I walked into my dorm room to find my roommate on the phone with his parents. He was crying and asking them, "How can you get divorced? You’ve been married almost thirty years . . . you were fine when I left you!" I didn’t know what to say to him. At eighteen I could count on the fingers of one hand the number of people I knew who were divorced.

A week later I returned home to Orinda, California, for Christmas break. As a group of my high school friends got together for dinner, the topic of conversation focused on divorce. I was shocked to discover I now had three more good friends whose parents were deciding to call it quits!

Of course, this article is not about relationships—it’s about money. When I tell this story at my seminars, I often joke that what I’m talking about is not "Men are from Mars, women are from Venus," but rather, "On Earth things cost more . . . so get the money!"

When my friends’ parents started getting divorced, I noticed that after the pain of denial and betrayal wore off, the first thing everyone fought about was the money. My father (who’s been a financial advisor for thirty years) once told me, "David, I know it’s not the money . . . but really, it is the money." It was so true. In all of my friends’ parents’ marriages the mom or dad would say, Well, the real point is . . ."—but in fact, it always came down to money.

The first thing I learned watching this seeming epidemic of divorce is women don’t really get half. At first I couldn’t figure this out. After all, in California we live in what’s called a 50/50 state. That means you just split everything in half and move on—right? Well, talk to someone who’s been divorced and they will tell you this simply isn’t always true. Even when I was nineteen I was aware my mom’s best friends (and my best friends’ moms) were getting a lot less than half. They were having to sell their homes and move to different communities because their income didn’t allow them to stay in Orinda.

Even more intimidating, many of these women had to go out after twenty years of not working and look for entry-level jobs. Starting over at 50 is hard enough, but it’s a whole lot harder if you don’t have any money! I watched uncomfortably as dozens of my mom’s friends became divorced and their standard of living changed for the worse. Their clothes changed . . . their cars changed . . . their homes changed . . . everything changed—and it all came down to money.

Statistics show that a man’s standard of living usually increases by up to 42% following a divorce, while a woman’s standard of living decreases by up to 73%. I asked my father why women seemed to do so poorly financially after a divorce. He told me, "David, women are not typically involved with the family finances. So when it comes time to split up the pie, they don’t even know how much there is to split up." That’s it? I thought. Women don’t know where the money is? Could it really be that basic? I doubted it.

I took my mom to lunch to see if this could be true. I asked about her friends, where they were now living, what they were doing. My poor mom looked so depressed. She said, "David, it’s really terrible. Howard Jones is a surgeon making $500,000 a year, and his ex-wife Ann is working as a secretary. She only makes $25,000 a year now, and she can’t meet me for lunch at the club anymore because she can’t afford to be a member." Story after story, it all came down to money. So finally, I asked my mom the test question . . .

"Do you know where the family money is?"

I thought this would be an easy question. It wasn’t. And Mom’s answer was not what I expected, either. My father was one of the country’s leading stockbrokers, so of course my mom knows where the money is, I thought. My father teaches investment classes three nights a week; of course my mom understands investing.

Boy, was I wrong. Mom squirmed in her chair and finally said, "I know where the money is—your dad manages it all!"

I said, "Mom, that’s not the point. Dad tells me most of your divorced friends are struggling financially because they didn’t know where the money was when they were still married. So, do you know where Dad invests the family money?"

"Well, no, I don’t. Your father handles all that."

"Then how do you pay the bills, Mom?"

She shrugged. "Your father gives me money each month, and I write the checks."

I protested, "But that means you’re not building your own line of credit. You have no credit history of your own."

She laughed. "David, what do I need a line of credit for? I have the best bank in the world—your father."

I was horrified. I realized then and there that my mom could end up just like her divorced friends unless I did something right away.
 

Are you in the same boat as my mom?

So I ask you now the same question I asked my mother three years ago: Do you know where your family’s money is invested? Take a few moments to complete the following quiz, answering true or false for each statement.

True or False:

True or False:

__ __ I know how much money I will be getting from Social Security, and I know my pension benefits and the pension benefits of my spouse [if applicable].

Give yourself 2 points for every time you answered true and 0 points for every time you answered false.

And by the way, if you scored somewhat below 16, take heart—you may need to take immediate charge of your financial health and invest wisely for your family’s future security.

©1999 David Bach, Orinda, CA. All Rights Reserved.

This article is excerpted from David Bach’s Smart Women Finish Rich: 7 Steps to Achieving Financial Security and Funding Your Dreams book (Broadway Books). David is one of the country’s leading financial advisors and educators. A senior vice president of a major New York brokerage firm, Bach is a partner of The Bach Group in Orinda, CA, which manages more than $600 million for individual investors. Visit Bach’s website at www.finishrich.com or call him toll free at 877-ASK-BACH.