“Dependent” is Just a State Of Mind
Most accompanying spouses in the Foreign Service have reduced their income and/or income potential in order to support their officer’s career. But, income is only one measure of overall financial security. There are many ways in which spouses can ensure that if the worst happens—divorce or unexpected death—they will be able to stand on their own two feet.
While most married couples have joint bank accounts, it is very important that the secondary earner (a term I will use to describe the relative financial position of most Foreign Service spouses or partners) also have at least one checking account in his/her name only. This account should be used on a regular basis. For example, I have my own part-time income deposited to my personal checking account, and link it to a Paypal account that I use for various online purchases. The point is not to keep control of “my” money (my husband and I share everything) it is to establish my own long-term relationship with a bank.
Another problem with joint accounts is that they can be closed by either account holder. In the case of divorce, one spouse could potentially close a joint bank account, leaving the other, at least in the short term, with no access to the money in it. However, in the case of the death of one spouse, a truly joint bank account normally reverts to the surviving spouse.
Be sure, as the secondary earner, that you are truly a joint owner of the account, and not just an “authorized signer.” If there is any doubt, especially in the case of a bank account to which the primary earner’s paycheck is deposited, contact the bank to make sure that the account is “joint tenancy” or “tenancy in entirety.” Both terms mean in plain English that the account belongs equally to both parties. (But you should still have that individual account, as well, for reasons mentioned above.)
If you have a bank account, that bank will more than likely be willing to issue you a credit card in your name only. It may have a very low credit limit to start with, but that’s not important: it is important to use the card and pay it off regularly, on time. Even if you are not in the habit of using credit to pay for purchases, you could, for example, bill a couple of monthly subscriptions to the card (Netflix, anyone?) in order to help establish a good payment record. Over time, even if your income does not increase, your credit limit will go up automatically in most cases, and then you will have that credit available in case of emergency—for example, to purchase an airline ticket for a family emergency or to rent a car when evacuated from a post.
Another reason to have a credit card in your name only: if a credit card is a joint account, like a joint bank account it can be closed by either party. And, if the credit limit is based on the primary earner’s income, the secondary earner may not be able to obtain a credit card immediately afterwards. Credit cards are necessary for so many essential activities, especially when living overseas. Don’t be caught without one in an emergency: get your own credit card now.
Credit unions, or other financial institutions with a restricted membership, usually offer the best interest rates on both checking accounts and credit cards. You do not have to be a State Department employee to open accounts at either the State Department Federal Credit Union, or USAA Federal Savings Bank, two popular options for Foreign Service community members. As the spouse of a State Department employee, you automatically qualify for your own accounts. (In fact, I had a USAA credit card before I even married my officer—I qualified because my father had been in the military.) Both of these institutions are exceptionally accommodating to overseas customers as well.
Both of these types of accounts–banking and credit–will show up on your credit rating. Many of us do not pay attention to a credit rating until we need it for a major purchase, such as a house. But, if you do not have a high personal income, your credit rating can be one of your most valuable assets. It tells banks and lenders that you are a good risk, and can easily make the difference between being able to get a car or home loan, for example, or not. It can make the difference in whether or not a rental application is accepted by a landlord. It can even affect your job prospects: many employers check a credit rating as a standard part of the screening process.
Most financial gurus agree: everyone should check their credit rating once a year. This can easily be done for free at annualcreditreport.com. When you receive your report, check it carefully for any kind of errors. If you have closed an account in the past, make sure that it is listed as “closed by consumer.” If an account has been closed, and shows up as open, report that error as well: it could be a problem for lenders if you appear to have too much debt or even too much credit available to you.
Every secondary earner should ideally have a substantial emergency fund set aside that belongs only to him or her. This could take the form of a savings account, a CD, a money market fund, or even an IRA (as long as it can be liquidated easily in case of emergency). If the worst should happen, you do not want to have to jump through any extra hoops in order to get the funds you need. Maybe you can’t initially afford to set aside the often-recommended amount of six months living expenses, but that is no reason not to start small and add more funds over time.
Another reason for this emergency fund is that in the case of a nasty divorce, you will want to have some money put aside where your spouse cannot get to it. No one likes to think that they will ever be in this position and few couples enjoy talking about this subject. But more than one accompanying spouse has been surprised with separation or divorce papers while posted overseas. Make sure that you have some money set aside for what financial columnist Michelle Singletary calls a “home-wreckin’ hussy fund.”
Victoria Hess, a former Foreign Service spouse who now teaches a personal finance class, sums it up: “A minimum standard of financial literacy means knowing about the family’s banking, having money of one’s own, having a basic understanding of taxes, insurance, investing, retirement, and estate issues, and having a say in how the couple addresses these issues. This is all true whether one is in the Foreign Service or not, but being in the Foreign Service makes it even more critical that these minimum standards are met. I say this with four FS evacuations under my belt.”
This article has covered the first few of the most basic steps that every “trailing” spouse should take before going to their first post. But it’s never too late to start! Whether you are on your first or fifth tour, take a moment to review your own financial situation.