Financial advice for young couples

2024 Author: Malcolm Clapton | [email protected]. Last modified: 2023-12-17 03:44

Trent Hamm, creator of the Simple Dollar blog, provides financial advice to newly married couples and shares the secrets of family happiness. The article is useful not only for newlyweds, but also for any couple who strives for financial well-being and harmony in relationships.

A few weeks ago, I was a guest at the wedding of a friend I have known for about 20 years. I was not among the best men and did not know some of them at all, but I had the opportunity to chat a little with them.

The groom introduced me as a writer, and then the usual questions followed. What are you writing about? Where do you publish? And so on, you get the idea. When the best men realized that I was writing about personal finance, one of them chuckled and asked me a million dollar question:

- Hey, do you have financial advice for newlyweds?

I thought for a couple of seconds, and then just gave out the first thing that came into my head. There was a fairly positive reaction to my response, but then we switched to other topics of conversation.

However, this question got stuck in my head. What advice on finance can I give to newlyweds? I know that several couples I know are going to get married this year. So I decided to write an article that could be useful to all of them. In it, I summarized my own more than a decade of married experience, the conclusions I came to after talking with much more mature couples and reading countless books on the topic of finance. Here are ten valuable financial tips for newly married couples.

Council number 1. Do not hide from your spouse not a single, do you hear, not a single dollar spent

This is the most important advice I can give to newlyweds. Never, never hide a single dollar spent from your halves. Point.

Do not misunderstand me. I believe that both spouses should have money for personal expenses, which they could spend freely without asking permission from each other. But this amount should be reasonably limited and well known to both husband and wife. Failure to follow these simple rules is very likely to lead your family to financial problems and ultimately relationship problems.

If you got a secret credit card, you are making a huge mistake. If you quietly withdraw money through an ATM and hope that your spouse does not notice it, your mistake is no less huge.

Why? Your significant other is planning a budget, assuming that they know all the household costs and that the money will not go anywhere from your bank account. All your joint money plans, whether it's something serious like saving money for a new home or retirement, or running expenses like paying bills or buying groceries, rely on funds that are supposed to be present in your account. …

If you start to secretly spend more and more money on paying bills, hobbies, or shopping that you hide from your soul mate, this destroys not only your joint plans, but also the trust between you.

It's not worth it. Unless, of course, you want to ruin your marriage.

Again, this does not mean that you have to account to your spouse for every cent you spend. What I'm saying is that you need to set some reasonable cap on individual spending. Perhaps you will agree on giving each other $ 100 per month (more or less, depending on your income), which you can spend at your discretion, including on gifts to each other. You can spend this money at any time without asking permission from anyone. If you exceed this limit, it will need to be discussed.

Tip # 2. Discuss your overall goals as often as possible

When it comes to common goals, it is very important that your views on what those goals are and how your income relates to achieving them are aligned. If you are not working to achieve the same goals, then you are literally working against each other. In this case, with your money and time, you will only interfere with each other to achieve what you want.

Let's say, for example, that one of you wants to save money for retirement, while the other wants to save for a trip abroad. If, at the same time, both of you are simultaneously pulling money from the common pot, then neither of you will achieve the goal, no matter how hard you try.

The best solution is to sit down at the negotiating table and figure out which of your goals overlap, and then make a plan to move towards those goals.

It may not be easy. Chances are, you may not even be able to decide which goals are most important to you. This also needs to be discussed.

During this important conversation about goals, I suggest simply talking about what each of you would like to change in your life over the next five years, then ten, then the rest of your life. How would you like to see your life in five years (if you try to be at least a little realistic)? And in ten or twenty years? And in old age, what will you do?

Then note for yourself where your ideas coincide. Based on this, formulate general goals. Make these goals paramount to both of you. Then make a plan to achieve them.

However, remember that this is not a one-off event. Your general and personal goals and priorities will change. Return to this conversation regularly to make sure both of you are still focused on achieving common goals. Don't be afraid to give up on some goals, as you both change over time. And don't be afraid to set new goals for yourself.

Tip # 3. Sometimes your spouse will piss you off. Forgive her or him for this

Someday it will happen. You will have disagreements. After five or ten years of living together, you will find traits in your soul mate that will greatly annoy you.

It's very easy to get hung up on these shortcomings. You focus your attention on some small flaw, and in your eyes it begins to grow, and in the end it becomes simply unbearable for you.

Maybe your husband leaves things on the floor outside the bathroom door. Maybe your wife loves to command sometimes. Perhaps the husband does not like your daughter, but he is more strict with his son. Maybe you feel like your wife spends 24 hours watching her favorite endlessly repeating TV shows.

Don't dwell on the flaws of your soul mate. Instead, think about how many wonderful features she has. Focus on what you love about your spouse and find the strength to forgive him for his imperfections.

If your husband throws things around, just throw them in the basket instead of him. If your wife wants to give orders about a question that is not important to you, then let her give a little command. If the husband gets away with everything for one of the children, show some harshness and, if necessary, be more strict with this child. If your wife likes to watch TV shows, just turn over and read the book for now.

Forgive your soul mate for these shortcomings. Find a way not to focus on them. Instead, focus on the positive traits of your spouse. You will see, it will be much better.

Tip # 4. To avoid fearful retirement, start making plans now

It doesn't matter how old you are now. In the end, you will get old anyway. You will find it difficult to keep working, and you will want to spend some of your life as long as your health allows, enjoying your retirement.

The trick is that the younger you are now, the easier it will be for you to secure a peaceful retirement. You can already start saving a little money, and then in retirement you will not have any problems. But if you wait until you turn 40 or 50, you will have to start saving much larger amounts.

So think about how you would like to spend the years after retirement, and talk it over with your significant other. Then start saving money. This is directly related to the next tip.

Tip # 5: Both of you should be saving money for retirement independently

When you are seriously interested in the issue of retirement savings, you may be faced with the fact that the employer of one of you offers a more profitable corporate retirement plan. Or maybe one of you (or both of you) doesn't offer such a program at all.

With this in mind, you may be tempted to shift the issue of retirement savings to one of the spouses in order to take advantage of a better offer.

Don't fall into this trap.

The reality is that perhaps at some point you will no longer be husband and wife. In this case, one of you will be left without pension savings and will be very sorry about it. There is a chance that you will receive some of this money in the divorce proceedings, but there is no point in exposing yourself to such risks.

The best solution for each of you is to start your own retirement savings account.

Each of you should use your own individual retirement plan. If your place of work offers such plans that include the possibility of forming counter-funds, then use them. If not, open an IRA and start saving for retirement.

Each of you should strive to save 10% of your personal income, whatever its size. If you start doing this before age 35, you will not have money problems in retirement, whether you will be together or not.

Tip # 6. There will come a time when, for one reason or another, you have to take on the cash costs. Accept this fact (and plan how you will proceed)

In 2008, I decided to devote myself entirely to the work on The Simple Dollar website. My wife and I understood that this decision was associated with certain risks: if the site were not popular, then for some time she would have to provide for her family herself. Fortunately, the case was a success, so it didn't.

My wife took the opportunity to take leave for health and family reasons and did not work for most of 2010. This vacation was not paid. Medical expenses fell on me, and for a while we lived quite modestly.

In 2014, my wife went to graduate school and studied on weekends, and sometimes on weekday evenings. The training was not cheap. This meant that I needed to take on more parenting costs and spend more time with the children. But my wife will soon have great career opportunities.

In a year or two, I myself am seriously planning to continue my studies in order to get a master's degree. Most of my free time will go to study when I'm not busy working on The Simple Dollar.

In each of these cases, the employment of one of us affected the financial (and not only financial) costs of the other. This is fine. It so happens that your significant other has to go through tough times of unemployment. Sometimes it becomes necessary to continue training. At times, one of the spouses decides to just sit at home with the children for a while or to educate the children at home. Or do something else.

This will happen sooner or later. Don't let this throw you off balance. When any changes take place in your soul mate's life, you can support her, and she will support you when something changes in your life. Because change is inevitable.

Tip # 7. Create a family contingency fund. You will never regret it

What exactly is meant by a reserve fund? They are simply funds that you set aside in case of any contingencies. Usually a special savings account is opened for this.

A contingency fund can come in handy if any of you lose your job or crash your car. It will be very useful during any difficult situations in the family, practically in case of any surprises that are associated with certain monetary costs.

Why shouldn't you use a credit card for this? Due to the fact that in case of unforeseen circumstances, credit cards often become completely useless. For example, in case of identity theft, if your wallet is pulled out of your pocket, when the bank blocks your card or reduces the limit on it, and so on. All of the above refers to unforeseen circumstances in which a credit card will not save you. But cash will save you.

To do this, you need to create a family reserve fund. Open a savings account for two names at once (if possible). Ideally, this account should be opened with a bank whose services you do not use (to gain access to the account was a little harder than usual), and set up an automatic transfer of money to this account. Choose an account so that you will not be able to use the card and withdraw money from it at any time. This will help you avoid the temptation to spend your saved money.

Over time, the amount of money in the account will slowly grow. Just forget about this account. Use it only when absolutely necessary.

With such a reserve fund, unexpected problems will not be catastrophic for you. You will be able to live without much upheaval.

Tip # 8. You don't need a house as big as you think

Many young couples want to buy a big house for themselves. They imagine a kind of advertised version of the house from the American Dream: a large beautiful cottage in a quiet area with ideal neighbors, a picturesque courtyard where kids frolic …

The problem is that this dream is very expensive. The larger the house, the larger the bills. The longer it takes to pay off the mortgage. The more are utility costs, insurance costs, property tax payments, and house maintenance costs.

Another problem is that a big house ends up being a bunch of rooms where you store things. Most people regularly use only a few rooms: a bedroom, a kitchen, a bathroom, and maybe a living room with a TV or computer. In the rest of the rooms, in the end, all rubbish simply begins to accumulate, or they are kept in case guests arrive.

A large house has more space to fill with things. It takes a lot of money to furnish it.

Instead of looking for a huge dream home, settle for a small one. Find an inexpensive house, spend a little on renovations to make it look your own way, and your bills don't grow daunting. It will be much easier for you to find funds for something else that brings you joy.

Tip # 9. You don't really need an expensive new car

The above reasons for buying a small home also apply to cars. A brand new luxury car will not come cheap. You will pay off the loan longer. You will also have to pay an order of magnitude more for insurance. In sum, all this translates into significant costs.

To get the best possible result at the lowest cost when buying a car, buy a used car of the latest model from a reputable dealer. Use it until you have any problems. Then replace that car with another latest used used car from a reputable dealer. To find such a seller, I use the site. First of all, I consider Toyota and Honda cars.

This way you can pay much less for the car, and the money saved can be set aside in a savings account so that when it comes time to replace the car, make a large down payment or pay the entire cost of the car right away. Enter this cycle and you will never have to buy a car on credit again.

In addition, the service and insurance fees for a used car are not that high either.

Tip # 10. Spend as much time as possible together. And do it productively

My final piece of advice has to do with maintaining a married relationship. The reality is that in America, about half of all marriages end in divorce. The statistics are unpleasant, but what can you do.

There is another side to divorce. This is a very expensive process. Payment for the services of lawyers, court fees, drastic changes in lifestyle and distribution of costs … All this is associated with large, very large costs.

The best thing a young couple can do to maintain a good financial situation is to strengthen their family relationships. If your marriage is strong, then you won't have to divorce, and this is the best way to save money.

How to work on a relationship as a couple? It's best to spend more time together. It is desirable that this is not a passive pastime such as watching TV together. Do something active. Talk to each other often.

Every day, my wife Sarah and I make sure to find time to talk. Yes, there are days when we do not have the opportunity to talk until the children go to bed. But after that we will definitely tell each other how the day went. We discuss our goals, the state of affairs in the world. We talk about what interests both of us.

In addition, we often do something together: play board games, walk, sometimes do exercises. We are making plans to improve our home.

We love to clean up the house together. When working together, it only takes us 20 minutes to clean the kitchen and living room. All this time we communicate with each other. This brings us together in an amazing way, because we not only have a wonderful conversation, but also work together to make our house even more beautiful and more comfortable.

Do something together. Set aside time for this, if necessary. This can be especially helpful if you have children. Being together will only strengthen your marriage.

And finally …

Your life changes dramatically for the better when someone appears in it you can rely on, who truly loves you and helps you make important life decisions.

But that doesn't mean you can just relax and have fun. Things won't always go smoothly. And solving financial issues is of the utmost importance to your marriage.

If you take these tips seriously and use them, you will find that it is much easier for you to deal with financial (and sometimes not only financial) difficulties.

Good luck!