Money is one of the most common reasons for marriage problems, yet it’s something many couples don’t talk nearly enough about. It’s critical to be on the same page with money, and to talk about it regularly with your partner.
My wife and I made it a point to talk about our finances while we were dating, and we continue to do so now that we’re married. Here are some important things we discuss that we recommend for other couples.
Talk about spending habits
It’s important that you and your partner discuss spending habits. If one person is always saving, and the other is always spending, that will inevitably cause problems down the road. How important is it to have nice, expensive things? Does one of you spend too much on things you don’t need? Or can’t afford? These are all important things to discuss together when you’re married.
Don’t keep secrets
Before we got married, my wife and I created an Excel sheet with all of our income, debt, and savings. This way, we put everything out in the open and neither of us was hiding anything. It’s important that both partners have insights into the other person’s financial situation.
After you get married is not the time to let your partner know about the huge amount of student debt, you have (and that you expect them to help pay off), or that you have no money set aside for retirement.
It’s a good idea to regularly update your financial scorecard, and to review it together. My wife and I have a finance meeting once every three months to review our finances.
Differences in income between you and your partner can end up causing issues, so it’s important to be transparent around what you make, and to talk about it. My wife is an anesthesiologist, and I love that she makes more than me — but for some people, a partner who makes more is an issue.
So it’s important that you’re transparent with it and talk about it so it doesn’t become an issue down the road.
Have individual and shared accounts
Growing up, my dad controlled all the money and gave my mom a monthly amount to spend. I never liked this and wanted to make sure I didn’t do it the same way. In the same way that my wife and I share cooking and house chores, we also share equal responsibility for money.
While we both have individual checking and savings account, we also have a joint checking account.
We have two debit cards for the join checking account, and use the account for shared expenses like rent, groceries, and when we go out to eat a restaurant. We have our own individual credit cards and checking account for individual purchases, when we go out with friends, etc.
For us, it’s been important to have our own individual accounts, but to also share a join account. It’s something we talked through before we got married, and it’s helped us immensely now that we’re partners.
Discuss your short and long term financial goals
It’s important that you talk through what your short and long-term goals are. Do you plan on buying a new car, purchasing a house, buying a vacation property, or having kids and paying for their education?
With retirement accounts and investing, how much risk are you willing to take? For retirement, discuss with your partner what age you plan on working until, and what kind of lifestyle you want to have in retirement. These are all things that will have a big impact on decisions you’ll make together down the road.
Talk about how you’ll share money with others
It’s important to talk through how you view giving money to others. Are you on the same page with charitable donations? What about giving to religious organizations? Are you on the same page about lending money to family, or giving money to friends when they’re in a bad place?
Talk about these things now and make sure you’re on the same page. Good communication now about this area will help you in the future.
Have an emergency fund
It’s a good idea to have an emergency fund that covers 3–6 months of living expense for you and your partner. The emergency fund is something you can dip into in the case of job loss, a medical emergency, etc. It’s important that both people contribute to the emergency account, and that you’re on the same page about instances when the money can be used.
Some banks I recommend for having an emergency fund savings account:
- 1.8% Annual Percentage Yield (APY). In comparison, the National average is around .1%
- Interest compounded daily
- No monthly maintenance fees or minimum opening deposit
- 1.82% APY
- No fees
- Unlimited transfers allowed (You can move money in and out of your account as much as you want
- $1 to open
Have a Roth IRA and 401(k)
You should both have these. With a Roth IRA, you pay taxes on the money that goes in— so when you take it out at retirement; you don’t pay any taxes on the interest you’ve accrued. It’s important that both of you have retirement accounts that you’re contributing to.
The annual Roth IRA limit is $6,000 for 2020. If you don’t know where to start, Wealthfront is a great bank to start with to open an account.
A 401(k) is something that many companies offer. Both of you should try to max this out, and most companies will match contributions between 2–4%. You can contribute $19,500 per year to a 401(k).
Set aside money for future purchases
Set a goal of each person setting aside 10% of their income per month. This is money that set’s aside besides what’s put into retirement accounts.
This money is for things you’ll purchase soon, things like:
- Buying a new home
- Getting help to start a family
- Child care
- Down payment on a house
A snapshot of what you should have: For this snapshot, savings = Roth IRA/Regular IRA, 401(k), and any other money set aside for the longer term. Assuming you and your partner make a combined $120k to $300k a year with gradual increases in salary. At a minimum, aim for the following as a couple:
By age 30: Have half of your combined annual salary saved (~$60, to $150k)
By age 35: Have twice your annual salary saved (~$280k to $700k)
By age 45: Have quadruple your combined annual salary saved ($600k to $1.5M)
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Previously published on medium
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