Top Financial Planning Tips For Couples

Jun 17, 2022 | Finances, New York Prenuptial Agreements, Relationships

Sure, there’s more to marriage than money. It’s important to communicate well, be honest with one another, create a sense of safety, and have fun together. However, even with all of these factors in place, a marriage can still crumble if financial planning is poor. In fact, finances are the second most common reason for divorce (Jimenez Law Firm, 2021). While there are many important factors that may underscore a happy marriage (many of which could vary from couple to couple), good financial planning is a must for every couple aiming to remain happily wed for the long term. We want your marriage to be strong and last forever, so we’ve compiled a shortlist of our favorite expert tips on financial planning for married couples. 

Prioritize Paying Down Debt

Did you know that close to 50% of couples with more than $50,000 in debt report that money is behind more of their arguments than any other factor? High debt + poor communication = stress, anxiety, and conflict. To make matters worse, 33% of individuals who reported arguing with their partners over finances admitted that they had hidden purchases they suspected their partner wouldn’t approve of. Most marriages (about 66%) start in debt (Jimenez Law Firm, 2021); this is normal and often necessary as a means for getting higher returns later on. However, it’s of utmost importance for marital happiness that couples prioritize paying back debt as quickly as possible. Debt causes stress even for strong couples with good communication skills. 

Paying down debt doesn’t necessarily have to mean living like paupers, but it does mean being smart about your spending. Here are a few ways to minimize the amount of time you spend in debt:

  • Opt for a functional but less flashy car
  • If you’re buying a home together, don’t splurge
  • Take less expensive vacations by visiting less expensive countries/parts of this country, or searching for deals on plane tickets
  • Allocate less of your budget towards discretionary spending and more towards paying back debt

Some of this might seem like a drag while you’re doing it, but you’ll thank yourselves later when you’re debt-free. Your marriage will thank you, too.

Plan for Financial Milestones

Unfortunately, many of us are never taught to plan financially for the future, and inflation and economic woes don’t help. A whopping 64% of Americans are living paycheck to paycheck as of this year. This state of affairs makes it very difficult to save. Nevertheless, we recommend trying the best you can to plan for future financial milestones. Even if you’re one of the millions of Americans for whom it’s difficult to save much right now, making projections for when you’ll be able to save more and planning future events with your financial circumstances in mind can help you make good decisions and avoid unnecessary stress. Getting on the same page about how you spend money is a proven hallmark of happy couples (Kiser, 2022). 

Here are some important financial milestones you should discuss and plan for together:

  • Living debt-free: As discussed above, paying down debt goes a long way towards marital stability as well as a stable financial future (Kiser, 2022).
  • Career changes: Thinking about going back to school, starting a business, or otherwise changing your career? That’s great! Make sure you understand ahead of time how that will affect your finances so that you can plan for it (Kiser, 2022) by setting aside extra savings, decreasing spending during that time period, taking on debt, or a combination of the three. 
  • Having children: Kids sure are cute, but they’re very expensive (Kiser, 2022). If you want to have kids, make sure you carefully calculate and plan for expenses like giving birth, doctor’s visits, diapers, toys, clothes, and food, activities, daycare, time off work, and education. 
  • Hobbies: Some hobbies require the purchase of special equipment (Kiser, 2022). Hunting requires a gun, special clothing, and a hunting license, for example. Travel requires airfare, hotels, and a host of other costs. Rock climbing requires expensive ropes, shoes, and other gear. Make sure you and your partner discuss and agree upon how much it’s acceptable for each of you to spend on your respective hobbies. 
  • Buying a house: This is the biggest financial investment that most people will ever make. It can help many couples to grow their wealth, but it isn’t suitable for everyone. Carefully consider together whether, when, and where you should buy a home, and make sure you save strategically if this is on your radar (Kiser, 2022).
  • Retirement: It might seem like a long way off when you first get married–especially if you’re among the 64% of Americans living paycheck to paycheck…but planning for retirement is more important than ever, especially as our social security funding dwindles. However, even the compound interest from modest savings and skillful investment can go a long way over time, and some couples who start saving early in life are able to achieve financial freedom and retire early (Kiser, 2022).

Create a Budget Together

One of the most important elements in planning for the financial milestones described above is budgeting. Carefully creating a budget together will help you avoid or decrease marital stress and conflict as well as aid in future planning and asset management. 

  1. To start out, make a list of all of your financial goals and then categorize each as ‘short-term’, ‘medium-term’, or ‘long-term’ (Probasco, 2021). 

For context, short-term financial goals are typically projected to take a maximum of two years to achieve. Saving for a special trip, paying off credit card debt, or creating a six-month emergency fund are all examples of short-term goals (Probasco, 2021). Medium-term goals, on the other hand, take between 2-10 years to achieve and might be things like paying off student debt, putting a downpayment on a house, or buying a new car (not just a downpayment) (Probasco, 2021). Long-term goals take anywhere from 10 years+ to reach. Typically, retirement is a long-term goal (Probasco, 2021), but having kids, living debt-free, or many other aspirations could also be long-term goals. 

When setting your financial goals, use the well-known SMART acronym: Specific, measurable, achievable, realistic, time-based (Probasco, 2021). Make sure you hammer out the details of each of these five factors.

    1. To start out, make a list of all of your financial goals and then categorize each as ‘short-term’, ‘medium-term’, or ‘long-term’ (Probasco, 2021). 

    For context, short-term financial goals are typically projected to take a maximum of two years to achieve. Saving for a special trip, paying off credit card debt, or creating a six-month emergency fund are all examples of short-term goals (Probasco, 2021). Medium-term goals, on the other hand, take between 2-10 years to achieve and might be things like paying off student debt, putting a downpayment on a house, or buying a new car (not just a downpayment) (Probasco, 2021). Long-term goals take anywhere from 10 years+ to reach. Typically, retirement is a long-term goal (Probasco, 2021), but having kids, living debt-free, or many other aspirations could also be long-term goals. 

    When setting your financial goals, use the well-known SMART acronym: Specific, measurable, achievable, realistic, time-based (Probasco, 2021). Make sure you hammer out the details of each of these five factors.

    1. After setting your financial goals, you’ll need to determine your monthly income after taxes and other deductions (otherwise known as your net monthly income). If either of you has seasonal work, sales commissions, is self-employed, or has otherwise irregular income, you’ll need to check up on monthly income at least once per month (Probasco, 2021). 
    1. When you’ve determined your net income, you can add up necessary monthly expenses like rent, groceries, insurance payments, utilities and other bills, loan payments, credit card bills, and anything else that you have to pay every month. Subtract this figure from your net income to determine approximately how much money you have available to work with every month (Probasco, 2021). 
    1. Next, refer back to the first couple steps (financial goal-setting and determining net income) to calculate what you need to save each month in order to reach your short, medium, and long-term financial goals (Probasco, 2021).
    1. Now, subtract the amount you need to spend every month from the amount from the previous step (how much you have available to work with every month). Finally, you’ll be ready to discuss how to allocate your discretionary spending (or what you have left over after necessities and savings). Discussing discretionary spending often gives rise to conflict, as no two people are likely to have the same ideas about how to most appropriately allocate what’s left over (Probasco, 2021). One simple way to combat this is to categorize some discretionary spending as ‘individual’ and some as ‘joint’. Joint discretionary spending might be used to date nights and other excursions done together, furniture or home goods, and other items that you both use. Individual discretionary spending can be used for individual hobbies and purchases. 

Financial Disclosure

Luckily, full financial disclosure is an essential part of the prenup process, but even couples who opt not to get prenups (although we really think everyone should) stand to benefit from full financial disclosure well before marriage. Here are a few of the things you should discuss when you start thinking about marriage, or before (this list is by no means exhaustive!):

  • How many credit cards do you each have?
  • What costly habits or hobbies do you each indulge in?
  • How does each of you tend to spend your money?
  • Are you more of a spender, a saver, an investor, or somewhere in the middle?
  • How much and which debt do you each have? 
  • How do you plan to manage debt together? Will you keep part or all of your finances separate until individual debt is paid off? Will pre-existing debt be classified as marital, or separate? (This part you only get to decide for yourselves if you do indeed opt for a prenup).

Check Out HelloPrenup

Careful and skillful spending and saving is integral to both financial and marital wellbeing, and HelloPrenup aims to be a part of that by helping to drastically decrease the cost of a prenup and take some of the stress out of the process. Our personalized platform guides you separately through the different clauses and stipulations available to you, and then you negotiate any differences together. You can do this online from anywhere, which means that instead of sitting in a cold, impersonal lawyer’s office stressing out about the high price tag of a prenup, you can sit on your sofa with your cat on your lap and draft your prenup for a fraction of the cost. 

By choosing to use Hello Prenup, you’ll save at least $1,900 compared to if you use attorneys, and you’ll save yourself a lot of stress along the way. Imagine everything else you could do with the $1,900 you save by using Hello Prenup. You could invest it, put it towards a downpayment on a house, treat yourselves to a nice vacation, or put it towards education. We hope that by offering this service at such an affordable rate, that’s one less money-oriented argument you’ll have to have. Here’s how it works

References

Dickler, J. 2022. As inflation heats up, 64% of Americans are now living paycheck to paycheck. Retrieved from: https://www.cnbc.com/2022/03/08/as-prices-rise-64-percent-of-americans-live-paycheck-to-paycheck.html

Kiser, D. 2022. Financial Playbook for Married Couples. Retrieved from: https://www.moneygeek.com/financial-planning/finances-after-marriage/

Jimenez Law Firm, 2021. How Finances Affect Divorce Rates in America. Retrieved from: https://thejimenezlawfirm.com/how-finances-affect-divorce-rates-in-america/#:~:text=Money%20arguments%20are%20the%20second,their%20top%20reason%20for%20arguing.

Probasco, J. 2021. How to Create a Budget With Your Spouse (In 7 Steps). Retrieved from: https://www.investopedia.com/articles/personal-finance/120315/how-create-budget-your-spouse.asp

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