Jeff Motske advocates a special kind of date with your spouse – “a financial date night” – to discuss the family’s finances…
Jeff Motske advocates a special kind of date with your spouse – “a financial date night” – to discuss the family’s finances…
Congratulations! You just completed one of life’s greatest milestones: marriage.
Whether you had an elegant reception or a lovely, intimate ceremony, you and your spouse are likely making plans for the life you two will build together. And that’s how it should be.
Unfortunately, some newlyweds lose this level of excitement and bliss early on because they fail to be on the same page when it comes to finances.
According to the 2017 Divorce and Debt Survey conducted by MagnifyMoney, 21 percent of U.S. adults who were polled said money was the main reason for their divorce.
Finances can be tricky to manage, and having another person in the mix can make it even more of a challenge. To help you and your new spouse, we asked a few experts for their top finance tips for newlyweds.
Focus on communication
“In general, be open about finances with your spouse. Money is one of the biggest causes of divorce in the United States. Specifically, lack of communication or total one-sidedness (i.e., one spouse being controlling) when it comes to finances can lead to marital stress. Each spouse is going to come to the table with different feelings and experiences with money, but that is not necessarily a bad thing. The important thing is to have frank, honest discussions about money and to make sure you are maintaining open airwaves of communication during the inevitable periods of disagreement.” — Taylor Jessee, Director of Financial Planning at Taylor Hoffman Wealth Management
“As newlyweds, it's more important than ever to get on the same page with your finances. Preferably you do this in your pre-marriage counseling through your church. Things to talk about include long-term goals, spending habits, monthly budget, retirement, investments, and more. The best thing you can do for your marriage is to have open communication and that is especially important when it comes to money. Talk about your finances early and often for a successful marriage.” — Kelan and Brittany Kline, The Savvy Couple
“You need to be talking about everything related to your finances: your goals, your debt, your dreams for retirement. You need to talk about the good stuff and the rough stuff. You need to talk — and a monthly financial date night with your partner can provide you with that opportunity.
If you need ideas on what to talk about, you can go through my financial compatibility quiz, which covers topics from spending, saving, childcare, mortgages, charitable giving, aging parents, and expectations for retirements. You’ll find topics to agree on, but you’ll undoubtedly find things you don’t agree on. When you discover these topics you don’t see eye-to-eye on, then you have to see how much both of you are willing to compromise on.
Perhaps your idea of retirement is traveling the country in an RV, but your partner wants to see the world in top-rated resorts. Or perhaps your parent is in failing health and you want them to move in with you, but your partner is willing to take a second job to afford for them to stay somewhere else. I’ve seen these situations, and because they were brought up early enough, the couples were able to discuss their views, their options and find a compromise that worked for everyone.” — Jeff Motske, CFP, President, and CEO of Trilogy Financial
“One major financial tip for newlyweds is to get comfortable talking about your financial health with your new spouse. In fact, not talking about money can hurt your relationship.
A Policygenius survey found 17.5 percent of couples who don't know each other’s credit score plan to leave their partner due to money issues, compared to 2.5 percent of couples who do. Just over half — 53 percent — of survey respondents said they had shared their credit score with their partner.
This friction comes in part from a lack of communication or transparency about financial wellness. For example, if one spouse has bad credit, it could impact the couple’s ability to get joint financing for major purchases, like a home.
It’s important to be open and honest about your money with your partner. Set aside a regular time to have a conversation with your significant other about your financial health. Go over short-term and long-term spending goals to ensure you’re both on the same page.” — Hanna Horvath, Personal Finance Reporter at Policygenius
“Finances can be a touchy subject. It may be that the love of your life has a completely different view about how to handle finances. This can be a big strain on a new relationship, and it is said to be the number one reason for divorce. So, do your relationship a favor and address this topic early. Many people think that marriage means joint everything. However, this is a personal choice and needs to be discussed.
You may decide on separate accounts but what cannot be separate is your financial plan and the discussion you have about it. You are partners, which means you need to share and the other person has a right to know. Business partners cannot hide things from one another and neither should marriage partners.” — Justin Lavelle, Chief Communications Officer for BeenVerified
Set goals together
“After you’ve tied the knot, take some time to discuss your current financial situation with your spouse.
You’ll likely have done this well before the ceremony, but there’s a good chance that the celebration and its accompanying events took a serious financial toll, too, so it’s best to factor that into the mix once things have actually settled down.
Explore your mutual financial goals, and see if they’ve changed since before your marriage. If they have, consider adjusting your budget accordingly. This may require you to reconfigure the way you approach a number of major financial factors, such as savings, debt, or investments.
If either of you is struggling with debt, try to come up with a joint approach to eliminate it and build both of your credit scores. The higher your scores, the more likely you are to be able to rent desirable properties and secure large loans with appealing rates, and these may be fundamental for your future if you’re aiming to buy a house or a new vehicle.” — Sean Messier, Credit Industry Analyst at Credit Card Insider
“Life goals translate directly to financial priorities. If one spouse wants to create a work environment that allows her to train for a marathon every year, and her husband feels strongly they be fully focused on working to build up savings before starting a family, there can be issues. Whether the goals are to take a vacation or fund a future child’s college education, discuss them and write them down.” — Sean Fox, Consumer Finance Expert and Co-President of Freedom Debt Relief
“When the officiant said ‘and now you are one’, you didn't stop having your own ideas, dreams, and goals. You have to intentionally decide what to do with your money and when you'll do it, and discuss the specifics. Just like in Kindergarten, when you share, you don't always get your way, so be prepared to compromise.” — Christian Barnes, Ramsey Preferred Financial Coach for Do Better Financial
Consider getting joint health insurance plans
“If both employed, take a close look at your company health insurance benefits. It may make sense for one spouse to switch over to the other’s health plan, or to continue keeping separate plans. The employer of one spouse might offer better/cheaper benefits than the others.
If you are both covered by High Deductible health plans, and you have access to a Health Savings Account, then the amount you can save into the Health Savings Account doubles.” — Taylor Jessee, Director of Financial Planning at Taylor Hoffman Wealth Management
Consider creating a joint budget and joint financial accounts
“Working with newlyweds and engaged couples, I have noticed that budgeting and spending plans are few and far between. Many couples are unaware of how much they are spending. I sympathize with them because society makes it very easy to spend using credit cards, shopping online, and very little use of checkbooks or cash.
The most important step that I think all newlyweds, engaged couples, or people in long-term partnerships should do is to figure out how much they are spending each month. Then, figure out how much is coming in each month. If you have funds leftover — great. Now you can figure out where to put those additional funds to help accomplish your goals. If you find that you have more month than money, a serious look at your expenditures will allow you to see where you can cut back.” — Tiffany Welka, Financial Advisor and Accredited Wealth Management Advisor at VFG Associates
“If you don’t want money to become a worn-out subject in your marriage, try sharing it. Sharing money, when done with a budget, will eliminate 99 percent of all money arguments instantly. Create a shared budget with your spouse, give it full control of the money, and you’re done. So if you want a new pair of jeans, don’t get into heated conversations with your spouse. You have a budget — you and your spouse have already agreed on the ideal way to spend your money. Instead, ask your budget if it’s ok to buy jeans. You’ll get an unbiased answer based on your finances. If it says you can afford jeans, buy them without hesitation. If your budget says you can't, listen to it. Let a budget be in charge of your spending, and you will eliminate the source of money arguments between you and your spouse.” — Evan Sutherland, Co-founder of Budgeting Couple
Budgets get a bad rap for being straight-jackets, but in reality, they are a plan for telling your money where to go and ensuring it doesn’t wander off without you even realizing it. Create a plan for each month before the money comes in so you’re both striving towards the same goals and not pulling in different directions. — Ben Watson, CPA and Personal Finance Expert for DollarSprout.com
“One of the best finance tips for newlyweds is to get on a budget as soon as possible. But it needs to be a joint budget, where both parties have input. You should get the budget set up with the basics, like fixed expenses, for cable TV, smartphone, and Internet, and then look at the subjective categories, especially entertainment and discretionary spending. For the latter category, consider setting a rule whereby any purchases that surpass a certain dollar amount, approval is needed from the other spouse.” — David Bakke, Personal Finance Expert at Money Crashers
“Switch all of your savings to a joint high-yield savings account. It's a good excuse when you get married to do some spring cleaning and make sure your money is in the best spot.” — Kevin, Manager of Just Start Investing
“The purpose of a joint bank account is for you both to have access to the same assets. Take on a ‘what’s mine is yours’ mentality. Just as it’s important to discuss your debts, make sure your partner knows what assets you have and be open to sharing. Communicate and check in with each other often to ensure you’re sticking to your budget and not overspending the assets you share.” — Erin Ellis, Accredited Financial Counselor at Philadelphia Federal Credit Union (PFCU)
Be smart about your marital income
“The best financial advice that we've ever gotten was from my father-in-law, and it's helped us maintain a debt-free lifestyle for the last 18 years.
The advice was this: If you ever plan on living on one income during your married life, always life just off of that income and save the other. Is one of you going to stay home and raise kids? If you are, then don't live a lifestyle that's based on needing both incomes to keep it up. If someone's going to take eight years off of work to raise kids until school age, it's difficult to keep up with house payments and expensive car payments when one whole income goes away.
We've lived by this rule our entire marriage, and we've had savings when we needed it and could pay cash for things like cars and vacations without incurring more debt.” — David Gafford, Co-founder and Director of Marketing of Shift Processing
“It's time to invest (if you don't already), and take advantage of as many tax-deferrals as possible, while also saving up for the next big life event.
This order is all about what types of accounts to invest money in, in the best order, to take advantage of as many tax-deferrals as possible. The best order to save for retirement is
• Contribute to your 401k up to the company match
• Max out your IRA to the annual contribution limit
Go back and max out your 401k to the annual contribution limit
• If you qualify for a Health Savings Account (HSA), contribute to the max and treat it like an IRA
• If you earn a side income, take advantage of a SEP IRA or Solo 401k
• Save any excess in a standard brokerage account
After you have your investments set up, you should also be saving for the next big life event.” — Robert Farrington, America’s Millennial Money Expert and the Creator of The College Finance Investor
“Start saving now, not tomorrow. Time is something you cannot get back, and the longer you save, the better. Research compound interest and see how much you could have. I understand that for most people, retirement seems like a million years away. I am now 56 and have no idea where the time went. If you start saving when you are young, your retirement can be full of choices.” — Jay Ferrans, President of JM Financial & Accounting Services
Create an emergency fund
“Whether it’s three or six months’ worth of daily living expenses is up to you, but start to put away some cash in an easily accessible account, in case of unemployment, major illness, or another unforeseen event. Those with less stable income, like freelance and contract workers, are urged to save more.” — Sara Skirboll, Shopping and Trends Expert for RetailMeNot
Consider getting life insurance
“Now that you have someone else depending on you, you need to arm yourself in the event something bad happens. Life insurance is often overlooked, despite how important it is. There are many different kinds from many different companies, but the main thing is to make sure you leave enough behind for your loved ones to pay for final expenses, replace your income for a certain number of years, put your kids (or future kids) through college, etc.
Your loved ones will already be overwhelmed and saddened as is when you do pass away, so this will help relieve a huge burden and create more peace of mind. Further, life insurance is cheaper and easier to acquire the younger and healthier you are.” — Chase Lawson, Author of Financial Freedom: Breaking the Chains to Independence and Creating Massive Wealth
“Even if one or both of you have life insurance through your employer, it's crucial to get a term life insurance policy on both spouses separate from an employer. When you change jobs or get laid off, your life insurance terminates immediately. Since rates for term life insurance are set according to your age and health status, you could end up paying more than a few years from now for the same policy. — Lingke Wang, Co-founder of Ethos
Meet with a finance professional
“I recommend talking to a financial planner around life events. The reason? The same financial plan should work during the same period of the life event. For example, if you create a financial plan as a newlywed, the same plan should work for you until you have children (if you don't have them already).” — Robert Farrington, America’s Millennial Money Expert and the Creator of The College Finance Investor
“Meet with a financial planner and possibly a mortgage broker if a home purchase is in the near future. Getting an outside perspective really helps to understand how to lay out your goals together. Meet with the financial planner even if you don’t meet with the mortgage broker.” — D. Shane Whitteker, Owner and Chief Mortgage Broker at Principle Home Mortgage
Keep your taxes in mind
“Make sure to adjust your W-4 elections to 0 and single to prevent taxes being owed from the ‘marriage penalty’ since you will be filing jointly for the first time. Many couples are shocked to see their taxes go up, so to avoid owing money, make this adjustment to your withholdings. — Jacqueline Devereux, Finance and Credit Expert with SproutCents
Be dedicated to credit
“A newly married couple may have recently exchanged wedding vows but have they exchanged their credit reports? Financial transparency is important to establish with your spouse and one of the ways of accomplishing this is for each person to request their credit report and review it together. Consider it as an opportunity for the couple to address any concerns and identify what they may need to work on in order to create financial stability and wellness in their marriage.”
“Frequently, couples think they will share credit reports and scores once they get married. The reality is that each spouse has his or her own credit reports and scores. These are based on accounts each person maintains in his or her name (even if they share the same last name). Each person needs to obtain his/her own credit reports, review for accuracy regularly, and correct errors on his/her own credit report.” — Sean Fox, Consumer Finance Expert and Co-president of Freedom Debt Relief
“Do not jump the gun to start fresh and cancel your credit cards. This may impact your credit score since it is established based on things such as length of time a card has been held by a user. Instead, look to add each other to your desired accounts. This also removes the need to explore alternative credit options, which can additionally impact your credit score.” — Jared Weitz CEO and Founder of United Capital Source Inc.
“Build your spouse's credit. If you haven't already had the money talk, do it now. If one or both of you has credit card debt, it's time to formulate a plan for paying that off together. You may also learn that you have better credit than your partner. If your spouse has a lower credit score than you, consider opening a credit card and making your partner an authorized user.
As you and your partner use the card responsibly — by paying your bill on time, every time and by using 30 percent or less of the credit available to you — you both will enjoy the benefits. Your strong score will only get stronger, and your spouse's score will improve over time as well. A higher credit score will matter when it comes time to buy that first house, as you'll be eligible for lower interest rates and more favorable terms.” — Michael Cetera, Finance Analyst at FitSmallBusiness.com
The bottom line
In the end, it’s up to you and your spouse to determine how to handle finances in your marriage. Ideally, you should aim to have financial conversations with your significant other even before
you get married. Knowing where they stand and what they believe in when it comes to finances early on can save you and your spouse a significant amount of stress, heartache, and time.
To sum it up, you and your new spouse should take the following steps:
• Focus on communication
• Set both financial and non-financial goals together
• Consider getting joint health insurance plans
• Consider creating a joint budget and joint financial accounts
• Be smart about your marital income
• Create an emergency fund
• Consider getting life insurance
• Meet with a finance professional
• Keep your taxes in mind
• Be dedicated to credit
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For most people, retirement planning is a critical, but often overlooked, a step that they don’t face until later in life. Just like most things on Wall Street, there are several ways to successfully plan for your retirement, the key is to find one that works for you. That said, here are three timeless lessons for your consideration:
1. Enough Money Is Not Enough – Your Living Expenses Will Be Higher Than You Think When You Retire
Most people create a plan that will give them “enough” money when they retire. The problem with that mindset is that it does not account for the unexpected (and often expensive) surprises that happen in life. Some of these surprises can be unforeseen medical costs (including LTC), unavoidable travel, income taxes (For most people, Social Security is considered taxable income), unplanned debt (most retirees today still have a huge mortgage or other debt), and inflation. So, it is not enough to plan for enough money when you retire, to be safe, you want to have more than enough money.
2. Always Respect Risk – Your Portfolio Is Probably Taking On More Risk Than You Realize
Respecting risk is one of the most important components of a proper retirement plan. Most people invest 100% of their retirement portfolio into the stock market. In up markets, that is a great investment because your portfolio grows steadily but in bear markets that is a very risky proposition. Remember, a bear market is defined by a decline of at least 20% or more from a recent high. Over the past 100 years, there have been 8 devastating bear markets, ranging from -21.8% to -83.4%. The last bear market was in 2008-2009 and the market was cut in half. It is important to note that another bear market will happen, it is just a matter of when, not if. The key is to prepare for it now before it happens. Not after the fact.
3. Update Your Retirement Plan Frequently – The retirement plan you created just 5 years ago is probably obsolete or needs to be updated.
Think about everything that has changed in your life in the last 5 years. For most people, their occupation, income, spending, health, or even geography may have changed. That’s why it is imperative to update your retirement plan to make sure your plan stays aligned with your current (and future) needs. I spoke to Stephen A. Hartel, AIF® Wealth Advisor at Trilogy that has $3 billion in assets under management*, and he told me, “Your plan needs to be a living, breathing thing that you and your advisor work on every quarter or at least every year.” Steve told me that he does not believe in cookie-cutter financial plans because everyone’s needs and goals are different and that inspired this article.
Bottom Line:
These are just a few points to consider when planning for your retirement. The key is to plan early and make sure you are way ahead of the curve so you can retire comfortably.
* Correction: Trilogy Financial has over $2 billion in assets, rather than the $3 billion referenced in the Forbes article, “3 Timeless Lessons for Your Retirement”.
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