Money problems are notoriously known to lead to relationship strain, and even breakups, for married and non-married couples. So, why don’t couples spend time planning and discussing their finances?
Goal setting will keep you from splurging, ensure that you are both on the same page, and promote honest communication. It would help if you spoke to each other about all your dreams and plans, including owning a home, having kids, taking vacations, etc. It will help build more trust and understanding.
Understanding where both individuals in a relationship stand on crucial financial matters will help strengthen their financial situation and their marriage’s overall health. Here are some essential issues to ponder on.
On Saving and Budgeting
Set and agree to a reasonable budget. It’s something easier said than done. It would help if you established a strategy that you can both stick to. For starters, determine how much you should save monthly to meet your financial goals. Also, consider “paying yourself first” by automating your savings deposits.
For instance, set up automatic transfers for an emergency account into a high-yield, separate savings account, short-term bond, or money market fund. You can also use employer-based retirement accounts like a 401(k) plan for your retirement savings and deduct your savings straight from your paychecks.
Additionally, you can set up a traditional IRA or Roth IRA for extra retirement savings. Ensure that the money left in your shared account or your individual personal bank accounts are truly spendable.
On Debt
The debt trap is one of the common potential pitfalls that married couples might face, so it’s best to try and avoid it as much as possible. If you have a sizeable debt, pay the debts with the highest interest rates first and settle the minimum requirement for all other obligations. You may also agree that expense problems should not be resolved by taking out a loan, as it could end up being a debt.
While paying off all your smaller debts first may seem more manageable and satisfying, paying off those with the highest interest rates will save you more money in the long run. This is particularly true for credit card debt. Of course, you should have a rainy day emergency cash buffer. But once you’ve established this, it’s usually better to pay off debts early as much as possible.
On Insurance
Health, disability, life, and other insurance plans are usually the last considerations for most newly married couples, but they really shouldn’t be. Insurance plans are more affordable for younger people, saving you more money on premiums in the long run. If you’re a young married couple, talk about when you can comfortably get insurance so you can prepare better for your older days.
On Estate Planning
No one wants to talk about their death and related events, especially when you’ve just been married. But regardless of age and life circumstances, everyone must ideally have an estate plan. It’s particularly crucial if either of you owns assets separately and have kids together or in a previous marriage.
In general, a substantial estate plan must include four essential documents: a living will, the last will, medical power of attorney, and a power of attorney. Consult an estate attorney for help in creating a plan that will fit your specific needs.
On Investing
When it comes to investing, you must discuss your goal on why you’re pursuing a particular investment. Ideally, you should invest as a couple. Still, if you have an investment before the marriage, inform your partner about your saving strategy and when the goal should be reached. There’s no one-size-fits-all investment strategy. It’s best to consult an experienced financial advisor who will understand all your circumstances.
Contrary to the old but still popular belief, financial planning in marriage is not just about having prenuptial agreements to determine who gets what if a marriage doesn’t last. It’s really about strengthening the marriage with realistic financial goals and expectations by having cooperation and trust in money matters.
