How couples can bulletproof their finances
Building a relationship is a bit like mountaineering. You know it will be worth it in the end, but the climb can be rocky. Money issues are often a major stumbling block. Why not take steps designed to make your finances healthier and your happier relationship? Here are five to implement.
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You can’t know where you are going if you don’t know where you are. Before you can make any financial plan, you need to have a clear idea of your common income and expenses.
As a couple, review the last few months of payments, including those made by cash, credit or debit, check, or automatic withdrawal. As uncomfortable as it may be to remember how much you spend on non-essential items, you need these numbers for build a realistic budget. Together, create a budget that takes into account your regular monthly income, the essentials that need to be paid for each month, and the extras that you want to incorporate into your plan. If you think of your financial life as a pyramid, your budget is the base, the foundation upon which everything else is built.
2. Set goals
You and your partner don’t share a brain, emotions, or an education. You have to have different ideas and feelings about money. In fact, it would be surprising if you were always on the same page. One thing that can move you in the same direction is shared goals. For example, you might both want to plan for an annual vacation, a college children’s fund, a new car in a few years, or retirement. Decide what is important to you as a couple.
The very process of setting these goals together, as well as the goal itself, will mean that you are less likely to take your finances off scenario.
3. Create a safety net
Suppose you will face the unexpected and save for that day by planning at least three to six months of spending in a easy-to-access savings account. That way, job loss, illness, or an economic downturn is less likely to impact your long-term financial plans. If you are a two-income family, practice living on one income, just to get a feel for if you can do it. If you can’t, you’ll know what the income / expense gap is and be able to plan for it.
4. Choose a team captain
Once you’ve created a budget and set financial goals for your future together, determine who will be the keeper of the budget. This person will make sure that the bills are paid on time each month and that the budget is on track.
As a couple, decide who will keep tabs on savings and investments. It can be the same person paying the bills, or you can co-captain by assigning this task to the other partner.
Because you are a team, set aside time together to review the budget every three months or so. If you find that you are budgeting too much for one thing but not enough for another, now is the time to fine-tune your plan. If you find that your current investment schedule will not meet your goals, consider ways to increase investment. The closer your budget is to reality, the easier it is to stick to it and, ultimately, stick to a budget that’s what makes it work.
5. Have fun watching pennies and dimes
Paying a few pennies more for a gallon of gasoline or several dollars a month in parking fees might not seem like much, but for a month, jot down those fees as you pay them. You might be surprised at how much they end up costing you. The fun part is finding ways to save unnecessary fees, whether it’s locating free parking or using an app to find the cheapest gasoline in your area. Make it a contest. The partner who saves the most money each month “wins”. It could mean picking the movie for a movie night, having their favorite meal served by the other partner, or some other award that makes the contest fun. If you’re looking for ways to start saving, here are some ideas that might inspire you:
- Save interest by paying off your credit cards in full each month.
- Save late fees by automating payments, including mortgages, utilities, and credit cards.
- If your bank charges a minimum balance fee, find a bank that doesn’t. Better yet, find a bank or credit union that offers a remunerated current account.
- Avoid overdrafts, but make sure you have overdraft protection… just in case.
- Pay off high interest debt.
- Invest whenever you have the chance, even if it isn’t planned. Suppose you decide to bring a lunch bag to work one day a week rather than spending $ 12 to eat out. $ 12 invested today at 8% interest will be worth nearly $ 56 in 20 years. No, $ 56 won’t give you a comfortable retirement or pay for your child’s education, but every opportunity to invest, even small amounts, will give you more work when the time comes.
There is no way to escape the ups and downs of life, but there are ways to make those ups and downs a little less shocking. And you’ll probably save your relationship a lot of conflict in the process.