AMONG ALL THE HUSTLE, bustle, and excitement that comes with planning your wedding, it’s important to keep in mind that the Big Day is just the first day of the rest of your lives (as they say). Ensuring the success of the days to follow requires a bit of planning and forward thinking on your part.
Open communication is a crucial part of any successful marriage, and open communication about the family finances is paramount. Let’s go over some family finance basics, in no particular order, that are important for you to consider as you embark on your new life together.
If your parents were anything like mine, the traditional way to manage the family finances was to have joint everything. All of the income went into one kitty, and from there, all the bills were paid. We are not our parents, and many couples are finding that having separated finances works the best for them.
Having separated finances generally means that money is divided into “yours, mine, and ours”. Joint bills (the mortgage, utilities and groceries, for example) are paid with “our” money, while car payments, credit cards, etc. are kept separate. Each partner contributes their share of the joint expenses, and what they do with the rest of their money is up to them. The beauty of this setup is that even if one partner is a bit of a spendthrift, it shouldn’t matter since the bills are being paid. This eliminates the possibility of quarrels over the joint account being raided for something frivolous or, for that matter, quarrels over what qualifies as “frivolous.”
You’re not alone anymore, and it’s important to understand that if you were to become disabled, or pass away prematurely, there will be an economic impact on your family. Making sure that your family is adequately insured against death or disability is vitally important. Maximize the disability insurance you have available at work, or purchase a supplemental policy privately to protect your family’s cash flow. Likewise, consider purchasing a term life policy, which is the most economical form of life insurance, to be sure that your family can continue to succeed in the event of your passing. It’s not a thought anyone likes to have, but it’s important to be prepared for the unexpected.
Start saving for retirement early. Very few people love their job enough to want to work forever, so plan for the day you can stop working. Budget savings as if it was any other household expense, to ensure that you’re putting enough away. Your employer may offer a 401(k) or other savings plan, which you can contribute to through your paycheck, without a second thought. Many 401(k)s will even match a portion of your contributions, giving you “free” money in your account. You should also consider a Roth IRA for additional savings, since it will provide tax-free income to you when you retire.
When it comes time to buy a home, remember to use a good agent, and be sure to have it inspected thoroughly. Don’t stretch your budget. Larger homes require more maintenance and more time to clean, which translate into less time and money to spend doing the things you enjoy.
To protect your home, be sure to purchase homeowner’s insurance, and an umbrella policy. Let’s say someone slips in your driveway and sues you for a million dollars, but your homeowner’s policy doesn’t go high enough to cover that; where’s the rest come from? The answer is your umbrella policy. An umbrella policy is liability insurance that goes above-and-beyond your other insurance.
When it comes time to buy a new car, try to arrange financing through your bank or credit union, rather than letting the dealer arrange your financing. It may add an extra step, but you’ll probably save money in the long run since many dealers will add to the interest rate you’d otherwise qualify for, as a way to increase their profit on the sale.
Take vacations. Even if you can’t afford to go somewhere exotic, be sure to take time off together to travel, or even just to complete a project together at home. It helps to break up the monotony of your normal routine and allows you to reconnect and catch-up on what’s happening in each-other’s life. This is especially important if you choose to have children; be sure to leave them with grandma from time to time.
Kids are expensive. Contrary to what your mother says, children are optional. Some couples were made to be parents, and a child completes their family. For other couples, a black lab is a better complement to their lifestyle. Know which you are, and pursue the course that makes you happiest. If you do decide to have children, be sure you’re financially stable enough to provide for their every need, so that finances don’t add unnecessary burden to your happy family.
As you begin this new chapter in your lives, remember that financial wealth is not as important to a happy, successful marriage as financial stability is, and financial stability starts with making smart decisions about your money every day. Every choice you make will have a financial impact well into the future. Remember, you’re not just planning a day, you’re planning a life. Working with an independent financial advisor can help provide objective 3rd-party advice to help you plan for the future.
Stephen Kyne is a partner at Sterling Manor Financial, LLC in Saratoga Springs and Rhinebeck.
Securities offered through Cadaret, Grant & Co., Inc. Member FINRA/SIPC. Advisory services offered through Sterling Manor Financial, LLC, an SEC registered investment advisor or Cadaret Grant & Co., Inc. Sterling Manor Financial and Cadaret, Grant are separate entities.
