A successful marriage takes two individuals who are willing to work together based on shared goals and vision. One challenging area for couples to navigate, especially early in marriage is the issue of finances. As a financial advisor, I find that there is typically one individual in the marriage who is the driver of that conversation. However, it is important that both individuals in the marriage have a voice when it comes to finances. You want to be sure that there is clear communication and couple compatibility on this issue.
The first thing is understanding how your partner views money. Everyone's relationship with money is not the same. Some people grew up having those conversations in the house, while other did not. You cannot assume that your spouse knows what you know about money. Talk about expectations. Review experiences. Share stories honestly about what you did growing up and what your parents taught you or did not teach you. You'll find that this is a great foundation to build upon.
Life insurance is critical to the conversation. Nobody likes to think about it, but if something were to happen to either of you, how would the needs of the surviving spouse be taken care of? Life insurance planning is one of the best ways to demonstrate your love for someone. Life insurance is the final love letter to a spouse who cannot replace you, but at least won't have to worry financially about how to upend their life without you.
Please discuss debt. When I say discuss debt I mean talk about how you use debt and what debt you have. You cannot begin to imagine how stressful it is getting married only to find out that your spouse is drowning in debt. I will say, it does not have to be a deal breaker. Again, going back to our experiences with money, some people were not given the tools for success as it pertains to debt. This could be an opportunity for the two of you to set a new course; one that is mindful of the way in which you both want to approach it as a team.
If you plan on having children, please discuss the cost. A question once posed by Jesus was, which one of you if considering to build a tower would not first sit down and consider the cost? Essentially, don't just say you want to have children without also considering the cost. It doesn't mean if you suddenly have a baby on the way, you are doomed, but discussing the financial obligations children will bring matters. There are studies which suggest parents spend close to $238,000 on a child from birth to age 18. You better be on the same page with your spouse on that.
Make sure you discuss both short and long-term goals. It’s hard to achieve your goals if you don’t know what they are—or realize what the other person wants. Do you want to buy your first home? Do you want to go back to school? Would you like to travel more often? Discussing your goals is the first step to making them come true. After you discuss the goals, take the Nike approach; just do it. More plans have been derailed by procrastination than anything. Insist on taking action. That's where the value of a financial advisor comes in.
Finally, when you say I do, you likely have a goal of growing old together. If that's the case, you should be planning for retirement. Assuming an inflation rate of 4% and a conservative after-tax rate of return of 5%, you should aim for a savings target of $1.3 million to fund a 30-year retirement that begins at age 67. Between the two of you, this is a shared goal. You should also factor in what might happen if either of you required care in your home or where you would go if staying at home is no longer viable. We can also factor in social security and any possible pension income you might have access to as a part of an overall retirement strategy.
If you or anyone you know is married or getting married and would like help discussing these very important financial topics, reach out to us here at Kobo Wealth Strategies. We are intent on helping couples budget, insure, and invest wisely.