If you’ve recently got married chances are that you spent an incredible amount of time on planning your wedding and your honeymoon. That’s great and hopefully you had an excellent time. Much more important than that however is spending the time to plan your financial future together.
The simple fact is, couples who educate themselves about investing, set goals for savings and understand terms like ‘risk tolerance’ not only increase the chance of being able to take a second honeymoon someday but also that they’ll head into retirement not only still together but in excellent shape to enjoy the themselves during their ‘golden years’.
One of the best ways to do this is to take an investing course at night school, read as many books on the subject as you can and regularly look up and read information online. This should be done as a couple so that both of you understand how money works, what investments are best and many other factors that can help you during your working years to put away as much money as possible.
Even more important is to learn how to tune out family and friends that, however well-meaning they may be, offer advice and information that may seem intelligent when first heard but oftentimes can do all sorts of damage to your financial situation. Even worse is the unscrupulous financial advisor who, unbeknownst to the couple, gives them advice that pads their pocket rather than helping them in any meaningful way. Knowing as much as possible about investing will help you to avoid these charlatans.
Couples should also understand each other, what they both bring to the table and where they can start as far as investing is concerned. Wedding gifts, inheritances and excess cash flow, for example, should be identified so that these monies can be turned into excellent investments that bring in money on a regular basis over a long period of time.
Knowing your spouse and the attitudes and biases that they have towards money, investing and financial behavior is vital to making sure that your finances as a couple are always solid. If your attitudes and decisions about money are very different they could cause future problems and, as happens with nearly 40% of all married couples, divorce.
One of the first things that most experts will advise all new married couples to do is establish an emergency fund that, if one or both is unable to work, will cover at least six months’ worth of expenses and, even better, 12 months. These funds should be held in a savings account or, better still, in a liquid money market account so that, when needed, they can be accessed quickly and easily.
Another excellent recommendation for newlywed couples is to put at least 15% of their combined gross income into a 401(k) or other type of investment or savings account.
One way to not only make sure that your finances are in great health as a couple but also to become closer and stronger as a couple is to sit down and set specific investment goals as well as deciding on the manner in which you going to achieve them. Things like retirement savings, income taxes, college funds for any children that you might be planning and so forth should be the subject of your discussions.
Matching your investments to any time frames that you have for purchasing a new home or starting a new business is also vital. For example, if you’re hoping to purchase a home in the next 3 to 5 years you’d best not invest too aggressively in the stock market because, if it takes a downturn, your risk is just too high and you may have to put off purchasing your new home.
Instead, you’d be better off investing in certificates of deposit as they are generally short term and earn a decent interest rate.
A diversified mix of stocks, low-cost index mutual funds and bonds is a great way to make your 5 year or longer goals and, no matter those goals, they should be set up as combined investments rather than individual accounts. This will not only help to balance your portfolio but also to diversify more easily when necessary.
More important than almost any investment advice that we can give is simply to communicate about money, finances and financial goals on a regular basis. While most couples usually have one person that’s in charge of paying the bills and keeping track of where money is going, couples that want to avoid monetary problems really need to be as open and honest with each other about money, spending, saving and investing as much as possible. Doing this will also ensure that, if one of you passes away suddenly, the other won’t be left in the dark and completely unaware of what’s going on financially.
Simply put, the more communication that you have as a couple about money and finances, the better off you will be and, statistically at least, the longer your marriage will last. Follow the advice and suggestions above and, when it’s time to take that second honeymoon, you’ll have plenty of money to do it in style and, more importantly, want to do it together.