Are you marrying soon? Have you recently married? As you begin your life together, it’s important for you to start planning your financial future together and putting your finances on the same page. Here are some priorities you might want to write down on your financial to-do list.
Plan for retirement. There is a chance that decades from now, many of us who are currently saving and investing for the future might end up millionaires. Actually, we may all need to become millionaires.
Consider this: according to current Social Security Administration projections, the average 63-year-old in 2010 is projected to live until age 84.1 So today’s typical retiree is looking at a retirement of approximately 20 years. Some of these people will live past 100 many more than in previous generations.
Given ongoing advances in health care, how long might you live? Living to be 90 or 100 might become commonplace for the members of Gen X and Gen Y. Factor in inflation’s effect on the cost of goods and services, and you can see a possible scenario ahead where you might need, say, $100,000 or more a year for 30 years to have a nice retirement in which you don’t outlive your money.
This (strong) possibility means you may want to make saving for retirement NOW a higher priority.
In a typical couple, one spouse is more risk-averse than the other (sometimes dramatically so). So you need to agree on the investment approach you take, preferably with the help of a financial consultant who can help you determine how much money you might need for certain life goals or financial objectives.
Manage debt. Many of us go through life shouldering five-figure or even six-figure debts. When couples marry, the danger is that one spouse’s debt will be seen as his debt or her debt. Arguments may start because your debt is hurting us.
Debt management should be a priority for any newly married couple. There are good debts which we assume on the way to a positive result (such as a mortgage), but there are also bad ones we assume through our credit cards and other channels.
Live within your means. An established, mutually-agreed-upon budget can be very helpful in this regard. Different people have different levels of thrift, and different perceptions of what a bargain looks like. This perception gap can result in some interesting financial moments in your life your spouse may pick up a bargain that you would call an extravagance.
Save for college. If you plan to raise children, it’s never too soon to start. You can do it a little at a time, a little per month. You can open a college savings account using different investment vehicles stocks, funds, or investments with lower risks. 529 plans in particular offer you some fine tax breaks.
Insure yourself. If you are under 40, you may not have any kind of disability or life insurance. You may feel you don’t need it yet. However, getting a policy early can be cost-efficient: if you buy a term life policy (or even a permanent life policy) when you are young and healthy, chances are you will pay less expensive premiums than people in their 40s and 50s who may be obese, diabetic, heavy smokers or drinkers.
Communicate to avoid surprises. No matter how much of a we a couple becomes, there is always the need for some private space, some individual pursuits and me time. That’s great, but that’s probably not the best approach when it comes to your shared financial life. When a spouse starts to hide a money-related matter or omit it from conversations, it may open the door to troubles. Open, frank conversations about money may be the best way to avoid problems in your finances (as well as your relationship.)
Build an emergency fund. You’ve probably watched or read a number of stories about couples who were hit hard by the downturn nice, once-affluent people who suddenly had to live in their car or a motel. When things got rough, many had no emergency fund to sustain them and ended up homeless.
Consider building up a cash reserve (gradually, if necessary) that you could tap into should something go wrong. You won’t regret having it around.
Deanna Pickering is a Representative with 1st Global Capital Corp.
This material was prepared by Peter Montoya Inc., and does not necessarily represent the views of the presenting Representative or the Representative’s Broker/Dealer. This information should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.
For more complete information about the 529 savings plan, including investment objectives, risks, fees and expenses associated with it, please read the issuer’s official statement. The issuer’s official statement can be obtained from your financial advisor. Please read it carefully before investing.
Please consider, before investing, whether your home state offers any state tax or other benefits that are only available for investments in your state’s qualified tuition program. Other benefits may include reduced or waived program fees, matching grants, and scholarships to state colleges. Any state-based benefit offered with respect to a particular 529 college savings plan should be one of many appropriately weighted factors to be considered in making an investment decision. You should consult with your financial, tax or other adviser to learn more about how state-based benefits (including any limitations) would apply to your specific circumstances and you also may wish to contact your home state or any other 529 college savings plan to learn more about the features, benefits and limitations of that state’s 529 college savings plan.
Citations
1 chicagotribune.com/business/sc-cons-0819-journey-20100819,0,1141623.story [8/19/10]
