Broker Check

Financial Conversations Newlyweds MUST Have

October 08, 2019
Share |

As a continuation of our “Newlywed Checklist”, we wanted to take a more in depth look at some of the most prominent financial issues we help our married clients work through.  

Money touches and affects everything in our lives. And for married couples it can be the number one cause of stress in their relationships1. A 2015 study by the American Psychological Association showed that almost 75% of Americans felt financial stress some of the time, while about 25% felt extreme financial tension.2 

You can make finances a strength in your marriage instead of a weakness by working together to understand how you both think about money, what your goals are, and what you want money to do for you. Here are just a few of the most popular issues we discuss and make sure to download our Newlywed Checklist for the complete list. 

Spenders vs. Savers 

It is quite common for us to begin working with couples that are ‘opposites’ in terms of what brings them financial satisfaction. One spouse may bring the perspective of ‘life is short, enjoy it to the fullest!’, while the other may have a more long-term goal of retiring early and comfortably that makes them want to save aggressively.  

Both sides have merit, but the appropriate strategy is probably somewhere in the middle for most couples. We recommend setting savings goals FIRST, hit those goals, and then be free to spend on vacations, experiences, hobbies and interests.  

Budgeting 

To budget or not to budget? We have found that without hiring a private bookkeeper, it is highly unlikely that people will maintain a written budget for the long term. What we recommend is setting realistic savings and investing goals such as maxing retirement accounts or 401(k)’s, then setting a ‘life enjoyment’ amount, and then determine where to save if money is leftover.  

Joint or Separate Bank Accounts 

“How do we combine our money? Or should we keep separate bank accounts?” We hear these questions quite frequently and our opinion is that your core spending account should be a joint account. It will force you both to communicate, to know how much each person makes (if both working), and to discuss major purchases.  

Separate accounts can possibly lead to resentment if there is lopsided or one-sided income and over all we have seen it cause nothing but confusion and disagreement. Remember it is NOT your money or your spouses’ money – it is OUR money. 

How Much Insurance Should We Have? 

Risk Management is an often-overlooked component of wealth planning, but we are attempting to help clients understand its importance. What if one of you becomes seriously ill? What if one of you died? It sounds morbid and most people don’t like talking about it, but the unfortunate nature of life is that bad things can happen. We have direct experience working with widows and widowers, those who have suffered short and long term disabilities, and long-term care events that can cause a massive financial strain. 

There are some boiler plate ideas of how much insurance coverage you should have – 10x current income, 70% of your income for disability, etc. We couldn’t disagree more with these dangerous assumptions, because the truth is that it completely depends on your unique current and future plans 

Contact us for a complimentary Risk Management Evaluation where we look at your financial situation and current contracts to determine if there are gaps in coverage amounts. 

In closing, dealing with money in marriage doesn’t have to be an uncomfortable, negative discussion. Proactively scheduling a time each month or quarter to discuss your finances and goals is a great start. If you would like to take a deeper dive and work with a professional, contact us to discuss our ‘Marriage and Money’ consulting course where we help you understand financial values and where they came from, emotional financial triggers, and set your financial agreements together.  

 

 

The opinions voiced in this information are for general material only and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material, and are not intended to provide specific advice or recommendations for any individual.