You and Your sweetie have been dating, he proposes..YAY! you are engaged! Wedding planning begins, maybe you are one of those couples who are fortunate enough to have parents help out financially with your wedding and you both might just have to chip in here and there, you get through the wedding and all of a sudden reality HITS two become one in more ways than you may have thought (hmm maybe you didn’t attend marriage counseling.. lol!) ….
One of the main topics in ‘REALITY 101’ is Finance- that is your money is no longer just your money, as two become one, your financial responsibilities as a couple evolve. Below are 10 tips I think are important for newlyweds to adopt. I have compiled from personal experience and different articles (links below):
- COMPARE SPENDING HABITS: Don’t assume your spouse shares your beliefs about money–the spending and saving habits may surprise you. Watch how they use money. A free spender before marriage will probably be a free spender after marriage.
- DITCH THE DEBT: Pay off all or most credit-card debt. Reduce the number of cards both spouses have, paying off the cards with the highest interest rates first. Avoid those supposedly juicy offers from home-electronics and furniture retailers promising no money down and no interest payments–hidden interest is built into the cost. Put off big purchases until you can pay with cash
- CHECK YOUR CREDIT: Our US readers should know what we’re talking about – Apply for a credit history from one of the biggies like Experian Information Systems or Equifax. Look for any red flags or errors that might affect your car loans,mortgage or credit-card. If your credit history is less than cute, discuss in advance with any loan officers so they’re aware. Paying down your debt is a top priority, even before home ownership so try and keep focus. Tunnel Vision people!
- BUDGET BUDGET BUDGET: Come up with a realistic budget! Try and put down everything you can think about… Consider even routine mani-pedis, ladies night, date night and church tithes. Designate one spouse to oversee the checkbook, so as to avoid confusion. If one spouse makes significantly more than the other, experts suggest setting out a fixed percentage of the income (instead of a flat amount) toward a joint checking account.
- ASSIGN THE BILL-PAYER: After you have worked out your monthly budget, decide who will be the primary bill payer. The primary bill payer also takes responsibility for balancing the checkbook and knowing how much money is in the joint bank account at any given time. Having one person control the output streamlines confusion, makes bill paying orderly and timely and reduces the potential for fights over money. This may be a snap to decide if one of you is more organized or better with finances. But if you fuss and fume over your spouse’s spendthrift habits, or one of you wants to save money by cooking at home while the other craves the fun of eating out, you might need to sit down with a financial planner who can help you prioritize where your money goes and decide who will manage the bills.
- START SAVING: It’s true that you should have several months of living expenses in savings, because you can’t predict job loss, illness or other circumstances that wipe out incoming cash. Set aside a portion of your income every month for a savings account. Participate in your employer’s 401(k) retirement plan; employers often match your contributions, which is free money for you. Open IRA accounts and contribute whatever you can. The long-term impact of opening a retirement account in your 20s or 30s is strong, as compound interest accumulates over the decades until you retire.
- LIVE ON ONE SALARY.. Save the Other: Don’t assume that each of you will always have the earnings you do now. Think about the interruptions of income—voluntary or unexpected—that could lurk a few miles down the road. One of you might get laid off. One might want to change careers or start a business. One of you might want to go back to school, full- or part-time. If you start a family, one of you might want to stay home with your children for a few years. You’ll have more options in such situations if you have enough savings to replace one of your lost or reduced salaries for an extended period—without a sharp drop in your future lifestyle. To plan for that day, start banking all or most of one of your two salaries.
- CONSIDER INSURANCE: If the newlyweds boast significant credit-card debt or mortgage payments, they should consider buying term life insurance. In most states, joint property rules apply to married couples. Should tragedy strike, the debt, in addition to the assets, will get transferred to the surviving spouse. Insurance can cushion the blow. It’s something you may not want to think about but unfortunately it’s a reality.
- RISK WITHIN REASON: While newlyweds can often afford more-aggressive investment portfolios, don’t bet it all on the stock market, notoriously volatile these days. Consult with a financial planner to ensure a diversified portfolio of stocks, mutual funds and other asset classes. If hubby is an avid day trader, the couple should firmly agree on a dollar cap on his investment. (check out betterment.com it’s a great tool)
- LIVE YOUR LIFE: While living within your means and sleeping well at night.
So there it is! Pretty long but much needed information. As we approach our 5th year of marriage, I must confess that we didn’t start off clearly defining some of these things in our first year, so year 2 of marriage I worked hard on financial stability for my family and have successfully crossed off majority of the tips above, it really does work! I hope you find them useful… Next Stop Financial Growth!