In marriage, openness and honesty are the most important requirements for a sustained, happy and healthy long-term relationship. Secrecy and mystification are not good for the union and can lead to disaster, especially where finances are concerned.

In 35 years of helping people with money, I have seen many things but one of the saddest is a spouse who discovers too late that his or her partner was incompetent, irresponsible or dishonest about financial matters. Here are a few examples of things that can happen and some tips on how to help prevent them.

Massive debts, incurred unbeknown to the spouse but now a joint responsibility, can eliminate any chance for financial freedom. To prevent this, spouses need to do credit checks on each other at least once a year to assure no secret debts exist. Credit reports are available from a variety of sources and will show all debts in the names of both spouses, individually and jointly. As a general rule, the only things you should finance are cars and homes. Never carry credit card balances —if you can’t afford it, don’t buy it.

Arriving at retirement age without enough assets to generate sufficient retirement income often occurs because both spouses are not engaged in the saving and investment process. When both are involved and there is total clarity about achieving saving and accumulation goals, it is more likely the couple will be prepared for retirement. If you can paint a room together, you can do this together.

Each spouse should be aware of the other’s financial situation. This involves seeing pay stubs to determine employer retirement plan contributions (which should be everyone’s No. 1 savings vehicle) and reviewing original investment, retirement plan and banking statements. Life insurance, annuity and retirement plan beneficiaries should also be checked to make sure the proper parties are named. Beneficiary designations on insurance annuity and retirement plans supersede instructions in wills and trusts.

Although they are often horribly complex, tax returns, if signed by you, should be reviewed by you. Otherwise, you may encounter significant problems. When you don’t look at and understand your return in at least a basic sense, you are potentially missing important indicators of your financial world. Be sure to check the following:

The W–2.

An employer-provided statement of wages and salaries will show income as well as retirement plan contributions. You should know how much your family makes from working and how much is being put into employer retirement plans?

Schedule D

This form is for capital gains and losses. It is a great way to see the details of transactions in brokerage accounts. Do you know if your spouse is day-trading away your savings? Schedule D will tell you. There should be details of individual transactions on an “attachment” referenced on Schedule D, if not on the form itself. These details will show the number and frequency of trades, as well as the gains and losses in non-retirement plan accounts. Whoever is doing the trading should be able to explain the rationale behind the activity and show verifiable performance results.

Schedule A

Itemized deductions here show the interest expense from mortgages and home equity lines. If the amounts of interest are inordinately high, that may indicate that a credit line has been tapped (This also appears on the credit report). Since this can be done by writing a check, caution and a watchful eye are advisable. Also gambling winnings, net of losses, are reported on Schedule A forms.

Performance reporting

Not knowing the rate of return on your portfolio is a cardinal sin of investing. Whoever runs the money should be able to provide you with performance reports that show rates of return for various periods. Performance reporting allows you to regularly assess the progress toward your asset accumulation goals. If you are paying someone to manage your assets, insist on regular performance reports. Make sure both partners review and understand them.

The consequences of not being diligent about monitoring and understanding your family finances can be disastrous. Spouses need to be open, honest and involved in all aspects of their financial world to avoid any unfortunate and unrecoverable surprises.

As seen in the 9/28/2012 issue of Washington Business Journal