Congrats! You met your soulmate and tied the knot. You made it through the engagement, wedding planning, house or apartment shopping, possibly moving, unpacking, the excitement (and fatigue!) of the wedding day, possibly the travel of the honeymoon…and now you’re landed in real life. Swept away from the daily count-down to your wedding, you’re now engulfed in paperwork to change your name, hectic work days and learning to merge your life with your partner. It’s a process, but the journey is one of the coolest and most amazing ones you’ll take. However, it’s not without bumps along the way.
Did you know that according to the American Psychological Association, between 40-50% of marriages end in divorce? According to a 2009 Centers for Disease Control and Prevention study, approximately 41% of first marriages end in divorce, 60% of second marriages end in divorce and 73% of third marriages end in divorce. CNBC did a study in 2015 that related that approximately 35% of divorcees reported that they divorced because of money issues. Scary, huh?
As a blissful newlywed (or a veteran married trooper who has figured out the secret to a happy marriage and are still “newlywed in love”), you may be wondering why I’m bringing up this topic of divorce and the statistics that a high percentage of people in circles you live in will get a divorce at some point. Why would I want to bring the grim-reaper of reality to your happy new life? Because one of the largest causes of divorce can be mitigated with awareness and team work: financial handling and management.
No, you can’t always control the amount of money coming into your household. Jobs are lost, promotions don’t come through and bills arrive on a consistent basis. However, as a wiser person once said, “Loving is not just looking at each other; it’s looking in the same direction together”. With a common focus, you and your partner can work together, build together and reach your financial goals…together.
You might think, “Easy for you to say! You don’t know the debt we have”, or, “well, it would be easier if we just had better jobs or made more money”. Honestly? The truth of the matter is that with a common, shared focus, regardless of the debit you’ve accumulated, the earning potential of your current job, or your current financial position, you can work together as a team to get from where you are to where you want to be. You just have to be looking in the same direction.
In working with couples, I have found several key points to financial planning and getting on the same page with your family plan. Check out these 5 Tips For Financial Success For Newlyweds:
1- ) Sit down, remove all distractions and talk with your partner. To get where you want to be, you have to know where you are starting. Grab a legal pad, jot down any debits that you both currently have. Make a list of monthly expenses. Make a list of all monthly income. Make a list of any investments, retirement accounts or other savings. This should give you a snap shot of where you are starting. Next, in this meeting, talk about what you both want to accomplish. Do you want to be debt free? Do you want to pay off student loans? Do you have a dollar amount you’d like to be earning as a household by a set time? Do you want to buy a new car or take a luxury vacation? Write it down along with the timeline that you want to accomplish these goals in. The surest way to miss the target is to not be aiming at one.
2-) Finance is a family word: Budgeting, retirement, insurance policies, money management, paying off debt, taking on a second job, job changes…all are a family conversation. You and your partner need to bite the bullet and be on the same page. You may decide that it works better for your dynamics to have one person handling the day-to-day functions of finances, but there needs to be a periodic, reoccurring meeting together so both of you are aware of what is coming in, what is going out and where you are in your financial plan. Make it a set time on your calendar. Sit down, grab your note pads and calculator and see where you are. If money stresses you out, reward yourself after. Tell yourself, “Ok, if we sit down and do this family budget meeting, we’ll get dinner out tonight” (or whatever motivates you and keeps you on track).
3-) Make a budget…and stick with it. Rent/ mortgage, groceries, utilities, phone bills, cable, car payments, student loans, entertainment, etc. all need to be tracked. Once you know what your bills are each month, you know how much you need to be bringing in each month to cover those expenses. For example, if your monthly expenses are $7,000, then you know at a glance, that to simply break even with your expenses each month, $7,000 will need to be earning (not accounting for savings or retirement contributions). If you are looking at your legal pad thinking, “there is no way I can bring in enough each month to cover these expenses, much less save or pay off debt!” Good news? You have several options.
First, you can review your current expenses and decide what areas you want to change to reduce expenses. This could mean calling your cable company and asking for a loyalty discount, reviewing your insurance for savings, cooking at home a few days a week, etc. Decreasing your out-going expenses helps free up cash.
Second, you can look at options to increase your income. Would an extra $500 per month turbo-boost your debit pay-off or help cover the luxury upgrade on the vacation you’re planning? Figure out a way to make it happen. Does your job offer over-time? Can you freelance on the side? Can you turn a hobby into an income source?
Third, you can do both of the above. This is the option that I recommend and personally utilize in my family.
4-) Contribute to retirement. Retirement may seem like a long way off. But it’s going to be even farther away if you don’t plan for it (as in…you might not get to retire). It is never too early to start contributing to retirement. This needs to be a line item in your team budget. If you are earning together as a household $184,000 or less per year, you are able to contribute a max of $5,500 per person per year to a ROTH IRA. You don’t have to max out your contributions each year (although that would be ideal). $11,000 to contribute each year for a couple is a lot of money. I get that. Start where you can. For example: $500 contributed per person ($1,000/yr.) contributed breaks down to $83.33/month. $1,000 per person per year breaks down to $166.66/month. There are tons of options that allow you to automatically transfer a set amount each month to your retirement account. Work with what you can do, but keep in mind that compound interest works strongly in your favor the younger you start contributing. I wish that I had known about retirement contributions long before I did. I would have started years sooner.
5-) Work hard, play hard. The foundation of a strong financial plan is the strength of your marriage with your partner. If you don’t share the plan with your partner, it’s very hard to achieve your goals. Life is not linear and neither is marriage. Finances can be overwhelming. You are both different people with different habits and preferences on money. Be patient, be consistent, work as a team. Take (responsible) breaks from the budget. This might mean trying that new restaurant you’ve always wanted to try or buying yourself something you’ve been wanting for a while (again, within budget) once you hit a specific financial goal. For me, this “thing” that I’d wanted was a cordless, hand-held vacuum 😉 It’s the little things.
These are the fundamental basics of getting started. If you need in-depth planning coaching or planning help, we are happy to be a resource. Do you need input on investments? Advise on how to pick your retirement contribution vehicle? We offer free consultations as a resource to help you PLAN. ACHIEVE. & PROTECT your future.
Again, congratulations on your new adventure together!
Plan well. Live well.
Kelley Carter, CPIA
The Choice Insurance Agency, Nationwide
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