Wedding season is upon us, and money and finances can quickly become a source of contention in any relationship. Whether you’re about to walk down the aisle or have celebrated many anniversaries, here are some helpful tips to help keep couples happy in love and money.
- Talk first, before saying “I do.” You must communicate about finances—including debt. This is a must, as communication is key to most happy marriages. One partner may have more debt than the other; one partner may even be debt-free. This can cause resentment and arguments over who is responsible for paying down the debt. Many couples find that one partner tends to be the “spender” and the other the “saver,” and it is important to recognize this. Understanding money habits and talking about them is important for a healthy relationship.
- Work together on spending priorities. When one partner works outside the home and the other does not, or when one earns considerably more than the other, the money earner often dictates the spending priorities. Nothing builds resentment faster than being made to feel inferior. One idea is for the higher-earning spouse to delegate all spending decisions to the lower-earning spouse, giving both financial responsibility and building that financial value of marriage.
- Prepare for kids. When children come along, be prepared to pay a lot of money for that cute little bundle. Parents who have a child today will spend, on average, $284,570 by the time the baby turns 18, according to “The Cost of Raising a Child,” a report from the U.S. Department of Agriculture.
- Invest in your future. Albert Einstein is reputed to have said that compound interest is the eighth wonder of the world. Even if you start saving for retirement slowly and add to it each year, you will have a better chance of having the retirement you want than if you wait until you are older to get started. But remember: it is never too late to start.
- Establish an emergency fund. This should include at least three months of expenses to help you weather the hard times and not fall back on debt. If only one spouse is employed, it is best to have six months of expenses saved.
- Create an estate plan. No one wants to talk about it—especially as you start your new life together—but you need to have an estate plan. Most think an estate plan is only for the wealthy, but that is not true. In fact, those with limited resources are sometimes the ones who need an estate plan the most. All too often, couples fall in love and get married, and when something tragic happens, they discover that the beneficiary on the 401(k) account, life insurance, IRA or annuity contract never got updated. This can leave the surviving spouse in a bad position. Keep in mind: the state in which you live has an estate plan for you, if you don’t take the time to do it yourself—and you may not like who they appoint to raise your child or receive your assets.
Finally, don’t forget to enjoy the fruits of your hard work! It is great to have the discipline to save and keep your financial house in order, but you should enjoy life along the way. By living beneath your means and setting aside a little each month, you will find it easier to accomplish your vision and goals. What a great treat to enjoy the last chapter of life with no financial concerns!
Time flies. Retirement will be here before you know it, so start reaching for your ideal future now. PM
Daryl R. Dagit, CFP, CRPS, CEP, is a financial advisor and market manager in Savant’s Peoria office.