You’ve said the “I do’s” or the big day is just around the corner. My greatest hope for you is that before you discussed what your epic wedding song was going to be for the first dance, you’ve already talked in great depth on this subject: finances.
I am amazed at how many couples overlook this crucial topic before getting married. Finances play a huge role in marriage, with investing shortly thereafter. As one of the leading topics of conflict in a couple, it’s crucial to have deep, early, and honest conversations regarding finances and investments to avoid more significant issues and disconnect down the line.
“Marriage has a major impact on your finances. Suppose one partner is poor at managing expenses. Doesn’t communicate, puts the couple in debt, and isn’t focused on the future, this can drag down the other spouse and their financial situation,” shares Doug Raible, President of Sterling Heights Financial.
Combining finances as a married couple has incredible upside and opportunity as well. Raible continues, “If both spouses are adamant on saving, and investing for a common goal, then the marriage can be extremely positive financially. Two people earning and investing will be much faster at building financial security than one individual on their own.”
Interviewing two leading experts in the financial and investment sector, here are five top tips for newlyweds to create economic and investing success early on:
1. CREATING A BUDGET
While budgeting may sound like a snooze, having a budget in place can prevent major spending issues in the future and help set you both on track for future growth and financial freedom. “Two people focused and working together for a common goal is amazing. Suppose both spouses are diligent in keeping expenses low, increasing income, and focusing on an investment strategy they feel confident in. In that case, the team is on a fast track to financial security and a happy life together,” Raible shares. An additional tip, have the budget in a place where both spouses can see it in plain view. Then there’s a visual reminder for accountability and staying on track as a collective.
2. DEVELOPING A SAVINGS
It’s called ‘savings’ for many reasons and in today’s turbulent economy, perhaps best put more than ever. “All newlyweds should work on creating a safety net of at least 4-5 months of expenses in cash at all times.” As a general minimum, this runway can be important in case someone becomes unemployed, has health issues, or just for unforeseen expenses that life tends to throw at us” Raible shares.
Fletcher Jewett, the Managing Partner of Jewett & Co., get specific and recommends “two years of expenses in cash before investing. Rent or mortgage should only account for 10-25% of income.” To reach financial independence, “pick a goal as to the amount one can save daily. This gives us feedback on our consistency and mindset and the benefits of small incremental steps.”
3. WHEN TO START INVESTING
Uncomplicated what appears complicated. As a number one rule, Jewett explains, “Only invest in what you can understand. If it’s complicated, then walk away.” For timing, the earlier you both can begin investing, the better. There are options and opportunities no matter your employment level as well. Raible recommends, “If you both are employed and have a 401k or 403b account through work, it’s important to take advantage of the company match.”
For those self-employed, “there are several great retirement account options to offset their income each year by contributing and investing for the future. These accounts will be individual retirement accounts so that each spouse will have their own investment strategy and risk tolerance.”
4. MAKING PURCHASES
Like many parts of a relationship, communication is vital. “Schedule daily five-minute talks to review and audit performance of tracking purchases and adjustments going forward,” recommends Jewett. As an easy breakdown of expenses, “assets are things worth money, and liabilities are debt that must be paid back. Couples benefit from scheduled purchases versus unscheduled ‘impulsive’ buys.”
“A couple should take some time to understand each other’s financial goals, as well as their strengths and interests when it comes to financing,” Raible adds. “This is where the joint bank account comes into play. Once a contribution amount is figured out by both spouses, now you can plan on what purchases make the most sense to further your goals and happiness based on what you’ve saved.”
5. CREATE A COHESIVE PLAN
“Trust is earned. As long as the Newlyweds are committed to their plan and when an unscheduled event (financial disaster) occurs, they have a Plan B, Plan C … Plan Z,” proclaims Jewett. I find that profound, honest, and true. Keeping on the same page and often communicating to stay on track and building as a couple rather than breaking down will help maintain that trust. Increasing the ROI (return on investment) in financial terms will also help you grow and retain what you’ve saved.
“Progress is one of the best ways to reach happiness in life, and having a partner help you through the ups and downs is a huge asset,” closes Raible. As a newlywed myself, I can attest to these tips personally and truthfully in the development of wealth collectively as a couple and the power and opportunity it holds.