It is a great privilege to get married to the person that you love and spend the rest of your life with that person but you need to remember that you have financial priorities to keep your relationships fruitful and strong. It is one of the most important aspects of a household that married couples need to take very seriously.
Not to take away anything from other aspects of marriage but keeping finances intact will certainly help lower the stress level of married couples. According to Statisticbrain.com, there are about 2 million people who get married every year in the country. That number of people who get hitched needs to know how to prioritize their finances.
Some people might not put much attention to what their financial priorities are in marriage because they feel that it will be a lot easier now that there are two of them handling their money. And if you are one of them, you need to remember that although you do combine your income as a couple, you also increase your expenses in the household.
Apart from knowing how to use extra funds in your budget as a couple, you need to know how you will get started in planning your finances now that you are consolidating two totally different set of finances. It might seem like an easy task but it will have its own set of ups and downs that at times you might start to doubt yourself if you did the right thing.
Financial discussions between couples
When you are trying to work around what you need to do with your finances as a couple, here are few things you might want to consider when talking about finances with your significant other. You do not have to be afraid when talking about money because you need to agree with how you manage your finances.
- Establish what your credit score is. As a couple, you need to establish what your scores are and even check if you have financial practices that ruin your credit scores. You need to determine credit scores because this will help the both of you get better deals when you choose to take out consumer loans like mortgage loans and even auto loans. If you have high credit scores, you might qualify for pre-approval or even low interest rates on these loans. The idea is to know what your score is and improve on them as you go along.
- Create your household budget together. Investopedia.com explains that a household budget is simply matching the income and expense and plotting them over a certain periodof time. It sounds easy but in truth, it is one of the most challenging financial tools you will ever get to do. But when you get married, you need to know that doing it together makes it a little bit easier and also helps the both of you set your financial priorities in order. Doing it together makes a great check-and-balance of your finances and makes for better planning.
- Talk about loans and debt as you go along. As you go along and progress in your married life, you will come to realize that you will need to take out a few loans along the way to help you provide a better life for your family. It can be a mortgage loan to have a house for you and your children or even an auto loan to help get you to the office and the kids to school as well. Whatever your financial needs maybe, do not decide on it alone. Include your husband or your wife in the thought process and make the decision as a couple.
- Lay down your long-term financial goals. Financial priorities usually vary in the amount of time it will take you to achieve them. Short term goals could be getting your savings to a certain level or buying that new lense for your camera to shoot over the weekends. But more importantly, you need to discuss some of your long-term goals like having kids and paying-off a mortgage loan or even retiring to a different country. The important thing is that you are on the same page with your husband or wife and that you reach for your financial goals as a couple.
Financial priorities for a couple
When you marry a person, you will share all your life plans together and for the both of you to reach those goals, you have to work together. Here are some of the priorities in your finances that you might want to seriously consider when you get married.
- Strengthening reserve funds. One way to deal with financial challenges is to have a pretty decent amount on the reserve funds to deal with financial emergencies. You might have started with a target amount for your reserve funds when you were still single but you need to adjust that amount because your lifestyle will be different now and you have to take into consideration both of your expenses as a couple.
- Starting early with retirement funds. The sooner you start putting money into your retirement fund, the more the compound interest will work on your favor. Planning early for retirement also allows the both of you to retire at an age that you want and not at an age that you need to. There are some people who holds off retirement for a few more years and sometimes even works part-time well into retirement because they need the money. You have the chance to work hard and save hard so you can retire early.
- Saving for the children’s college fund. SEC.gov shares that a 529 plan is a great tool to save a college fund for your children because it is a tax-advantaged savings plan. It will help you take care of your children and pay for cost of attendance as they decide on higher education. One thing you might be forgetting is that making sure that your kids have college funds reduces the possibility of putting your retirement fund on the line because they might ask money for college and you might get it from your 501(k). Some even get the money from a home equity line of credit and start repaying their mortgage loan all over again.
- Paying off debts before retirement. One of the things that you need to prioritize is that as you plan for your retirement, you need to plan your finances in such a way that you do not have debt payments once you leave work for good. Try to pay-off all your debts leading into retirement and if you need to leave one out for the long-haul, it might be better to choose your mortgage loan. This is because mortgage loans tend to have the smallest interest rate and you only pay a small amount to it compared to credit card debt.
Financial priorities will most definitely be different from the time your were single to the time that you tied the knot. You need to carefully reassess your goals starting from consolidating your household budget to looking at both of your long term goals. The idea is to handle your finances as a couple and not leave one partner out of your money decisions.