Knowing that many of those who read our blog are in retirement, or nearing retirement, you might have children or other relatives that might find this post interesting or even helpful.
Earlier in my career, I counseled young married couples (or soon to be married couples) regarding family finances and budgeting. Most studies find that money issues are the number one reason for divorce. A recent University of Denver study found that money is the number one reason for relationship arguments. An American Express survey showed that finances are the top source of anxiety among couples.
Below are several suggestions couples can implement to make sure financial matters don’t become financial arguments.
Communicate: Communication leads to understanding. Work as a team. Men are known to buy larger expensive items, while woman are known to buy numerous less expensive items. Spending excessively can become a game of one-upmanship. Talk about your spending and discuss out of the ordinary purchases.
Create a budget: Remember, the definition of a budget is your annual expenses divided by twelve. Many couples forget the quarterly, semi-annual and yearly payments. Don’t forget to budget for your vacations. When paying bills, sit down and write the checks (or pay them online) together. Have your young kids watch and explain to them what you are doing. If you fail to plan, your plan will fail.
Debt Payoff: Many young couples have built up quite a bit of debt. It could be retail credit cards, school loans, etc. Start using cash for general shopping and certain budget items. Studies have shown people spend 37% less on average when cash is used versus a credit card. Pay off your balance monthly. If you have high balances, pay off smaller debts first. The sense of accomplishment will sustain you through the entire process. Don’t let your total debt exceed 35% of your monthly income. And yes, that includes your mortgage payment.
You aren’t the Jones’s: I know, I know….you would have plenty of money if your neighbors would stop buying things you can’t afford. Live within your means. Consumption of high-priced material things eventually becomes tomorrow’s low-valued out of date things. Then the vicious cycle starts all over again.
Keep an emergency fund: New tires, washer/dryer, medical bills, etc. Keep enough in a boring old savings account to cover emergency needs. Three months of monthly income at least.
Finally……Save and invest wisely and consistently. Save for retirement as if your long-term return averaged 3%. Be conservative in your assumptions. Too many have come up short in their retirement savings because of overly optimistic return projections.