S.T.E.P.S. – Smart, Tailored, Event-Driven, Packaged Solutions
Starting Off Smart — Part II
Before you and your new spouse can get down to the business of planning your financial future, it’s important to discuss a few fundamentals first. Surely before you walked down the aisle you visited the topic of money, but coming back to it again now and being absolutely clear about each others’ financial goals and personal money strategies is key to your success as a team. Be sure to understand:
Financial objectives
Once you have a clear picture of where you both plan to be, a clear and hopefully quick route to take you there will become more obvious. If you haven’t already, now is the time to clarify each other’s financial objectives and current financial situations. Issues such as debts either of you may carry, responsibilities to ex-husbands and wives, and the scope of major life purchases such as homes and cars are among the considerations that need to be visited now. Remember that these are the kinds of obligations that will impact you significantly in the future, so take care to be on solid footing here.
HerTip
: If you have incurred big bills from a wedding, taking care of them right away should be a priority. The last thing you want to do is start off your marriage in debt. Visit our debt center for more information on how to manage and ultimately pay off your debts.
Dividing financial responsibilities
Who pays which bills? The cable? Car payments? Who balances the checkbook? If you haven’t already shared the responsibility of paying the day-to-day bills with your new spouse, you undoubtedly will now that you are officially a team. There is much to be done in keeping your financial life running smoothly, and acclimating to a new style of bill management can be tricky. It comes as no surprise that arguments over late payments can quickly become a source of tension among married couples.
Again, communication is key to your success. Each of you will have strengths and weaknesses when it comes to paying and managing bills. Know what they are first and develop a system around them. Set up clear and realistic responsibilities for each of you, and be sure to let your partner know when you’ve missed a payment or need a hand. If you’re having trouble managing your finances alone, don’t hesitate to enlist the services of a financial planner. Keep in mind that financial planners do typically charge a small fee. Remember — this is about starting off smart.
HerTip : It is the time value of money — the earnings over the years — that make regular deposits to savings, investments, cash value life insurance, etc. more valuable. Even if you start small, start saving early and time will help you keep ahead of inflation.
Budgeting
If the idea of making a budget and sticking to it seems too rigid for the way you like to live your life, it may be time to adopt some new attitudes about budgeting. First, understand that budgeting doesn’t have to involve spreadsheets and exact amounts carried out two decimal places.
Calculations in your head using big, round numbers can also give you a fine picture of your finances. The important thing is to have a clear sense of where your money is going so you can make informed choices.
Budgeting doesn’t equal deprivation.
Budgeting doesn’t mean you have to deprive yourself of the things you want. Just the opposite, in fact. By developing a spending plan, you avoid frittering money away on the things that aren’t important to you so you can buy what you really want. For example, would you rather buy two lattés every day or enjoy a fabulous restaurant meal once a month? Would you rather eat out several times a week or save up for a really great vacation? Would you rather pay a cleaning service once a week or save up for a new couch? These are your choices to make.
The want list.
The first step in the process is to think about what you really want and write those things down in order of priority. We’re not talking about major life goals like college or retirement, which are covered in other Plan Ahead Basics articles. What we’re talking about here are things that will enhance the quality of your life—items you must plan for or you’ll never be able to afford. A new refrigerator. A week in the Bahamas. A new computer. A cleaning service. Let’s call this your “want list.”
Cutting out the fat.
Next, see how much fat you can cut out of your normal spending and allocate that amount to your want list. Again, it’s all about making choices. If you really must have your daily latté, maybe you’d be willing to cut back on clothes or lunches out. Now use whatever system works for you to set aside those extra funds, whether you put cash into an envelope marked “new refrigerator” or transfer funds from checking into a special savings account earmarked for your want list. The key to conscious spending is to have a carefully designed want list and a workable plan for accumulating the necessary funds. This will help you avoid impulse purchases and ensure that every dollar is thoughtfully spent on the things you really want to have in your life.
Continue on to:Part III: Tax implications.