By: Tasha Hardy
There are many opinions and articles available for partners-to-be and newlyweds about how to handle their joint finances and financial future goals. But, the question still remains, “What is the best way for you (and your new snug a bug) to handle one of the biggest causes of anger, separation and the god-awful “D” word?” Well, here are some tips for you from a financial planner, an accountant, and a 20+ years marriage veteran.
I think we will have to start off this article with some background and my perspective. Most of us have heard of the saying “happy wife, happy life”, but I am going to give you a new saying today “happy bae, happy day” and I will explain what I mean. You may think that I am being facetious, but I am not. If you understand the philosophy behind most wives/mothers it is driven by the saying “happy wife, happy life”. Women tend to plan everything all the way through to practically the end of their lives! In short, this is overwhelming for most men, so they change the motto to “happy bae, happy day” because there is no way they can get past the upcoming weekend of video gaming and football, let alone a lifetime. The goal of buying a video game versus purchasing shelter for there family is a much greater and immediately satisfying venture, so they change the motto to “happy bae, happy day” for THEMSELVES! So with this perspective, know that everyone does not have the same motto and you must learn to discuss your goals and compromise.
As we all know, one of the main causes of divorce is lack of FINANCIAL HARMONY. From my perspective there are four main ways marital partners address how they handle joint finances:
1) No discussion period with a “what you don’t know won’t hurt you“ philosophy;
2) Keep everything separate or “your bills are your bills and my bills are my bills” philosophy;
3) Each partner pays specific bills (this is determined haphazardly); or
4) Combine all the debt and plan to figure out how to pay them off together.
With that in mind, here are a few tips to begin your wonderful new life and adventure together. So, will your marriage survive the financial test of time? Only time will tell!
From my perspective, teamwork makes the dream work! First, identify who will be the “financial controller”. The financial controller should be the person with certain skills and the person that is the financially stronger individual. This person has to be able to push the family agenda, create goals and also be a disciplinarian. This person has to track spending and also curb spending. Ultimately, this role is not for the faint of heart. The upside to this role is that if achieving financial goals are important to the financial controller it gives them the ability to control the destiny of their family and ensure the stability of their loved ones during most financial hardships.
Once you have designated who will be the financial controller that person should determine and prioritize the short-term and long-term goals, with consultation with their partner (make sure to incorporate fun goals as well!). The most important goals should cover creating an emergency savings plan, a retirement saving plan, paying down debt, the purchase of your next home, and savings goals for your children’s education.
First, emergency savings should be a minimum of three months but optimally six months of monthly expenses (this amount can always be increased for a better financial cushion). Secondly, one should incorporate saving for retirement. Review your employer’s retirement savings plans that may be available to you and maximize the use of this plan. For example, if your employer matches the first fifty cents up to six percent of your income, start at a minimum saving at least six percent of your income to maximize the employer contribution. In your savings profile, include an automatic yearly increase around the time that you typically receive a pay increase at one or two percent until you reach the maximum percentage that you are allowed to contribute. This is an easy way for you and your spouse to slowly increase your retirement savings and lessen the effect of the increases [Note: Both spouses should be enrolled in each of their retirement savings plans, if available].
Now that you have your emergency fund and your retirement savings initiated, take a tally of your overall debt. Create a spreadsheet that lists ALL of your debt, including information on interest rates that are charged and begin paying extra on the debt with the highest interest rate first, this saves you more in the long run. Once you have paid the debt off with the highest interest rate have a little celebration and then begin taking any money used for the monthly payment on the first debt and pay it on the next one plus its normal monthly payment. Continue this process until you are debt free! Paying off debt will begin to help you with keeping your credit score high and decreasing your debt-to-income ratio, which enables you to prepare for the purchase of a home, if, you don’t already have one. Now that you are well established, do some research on the cost of colleges and determine a savings strategy. There are a number of ways you can initiate this plan through a 529-college plan, an IRA, or another type of investment vehicle.
Finally, at the beginning of this journey and throughout the journey have open discussions with your partner; and the key is to compromise, compromise and then compromise again. Remember, the following tips 1) determine a financial controller; 2) create common goals; 3) determine a plan of action; and lastly, revisit the plan annually.
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| Tasha Hardy, CPA |
This post was written for She’s Wright by financial planner and accountant Tasha Hardy of Hardy Financials. Tasha has gained her experience working for top accounting firms in Chicago and supplying financial advice to her personal clients for the past 15 years. Hardy Financials can help you set and maintain a budget, establishing a plan to pay off debt and help you accomplish any of your financial goals. Hardy Financials also helps with small business bookkeeping. Reach out to Tasha via email at HardyFinancials@gmail.com to set up a consultation and visit the Hardy Financials Facebook page for more information.
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Wow, so many great suggestions! I have unwittingly ended up the financial controller in my marriage, but neither of us are happy about it. We need to work together to formulate some goals…
This was a big thing for us to adjust to and I still feel like it’s up for discussion 7 years later. Great suggestions though!
These are wonderful tips! Thank you so much for sharing!