I recently had a meeting with a couple I've been working with for over a year now and I was delighted to hear that they no longer fight about money. That may not seem like a big issue, but disagreements over money is the second biggest reason for divorce in America, only behind infidelity. So let's discuss some of the ways to get on the same page when it comes to your finances.
- Talk about money: This is the most basic component to help couples become financially responsible together. The old adage “ignorance is bliss” is not likely to help most couples achieve financial bliss. Many of my couple clients have a spender and a saver, and in order to increase their chances of achieving their goals and objectives, the two need to balance each other and discuss their goals, dreams and what’s most important to their happiness. Often times, after these discussions couples realize that planning for their long term financial objectives is more important than the material goods and are willing to make some short term sacrifices to save and invest for their longer term goals such as vacationing, buying a home for their family and one day retiring. Having your spouse as an accountability partner is one of the great benefits to being in a relationship.The alternative is chaos and potentially major strife. Which would you prefer?
- Write down specific goals: The first step to pursuing any sort of goal is to figure out precisely what it is you’re after. What do you and your partner want? It could be a vacation home, more wealth, or being able to travel the world together. Make your goals specific, detailed, and with a finish line. Next, write them down. Numerous studies have shown that people who write down their goals are generally more likely to achieve them. Many people don’t bother to change their spending habits or start saving simply because their future doesn’t seem compelling enough to motivate them. But nothing creates leverage and motivation like a dream.
- Create a plan: Failing to plan together is the same as planning to fail together. Simply going through the motions won’t cut it — pursuing your financial goals requires a written financial plan to outline your budget and savings goals. Once you’re organized, don’t stop there, in order to stay on track from your starting point to your destination, you have to monitor your progress. This means revisiting your investments and general financial plan a couple of times a year and adjusting it as needed. I believe your time and effort will be worth it in the end, as you witness the potential benefits of following your plan, as opposed to just hoping good things will happen to your financial situation.
- Check your spending habits: One of the simplest steps towards achieving your financial goals is to save more, which all begins with spending less. This is easier said than done. There’s no getting around it. Money is easy to waste. It’s especially easy to waste on the small stuff when you don’t track your spending on a regular basis. The challenge is that the small stuff adds up — and before you know it, you’ve cost yourself more than you realized.
- Human Capital: The other important but overlooked factor is your human capital. There has been a lot of talk lately about your income potential and the fact that focusing on budgeting alone isn't good enough. You should stay focused on the "top line" or your income generating ability. This means focusing on your skills and the value you bring to the work you do and making sure you are compensated accordingly. The more money you make, the more you can potentially save (with proper planning).
- Compound Interest: Just remember, the cost of waiting is that you lose out on the potential for compound interest. If your money earns interest, and over time your interest earns interest, the sooner you get started means the longer your money has to work hard for you!
- Agree to disagree: Certain priorities might not align with your partner, and that is okay! My husband and I value certain material possessions differently. If we were both given $1,000 to spend any given month he would spend it on car parts and I would rather spend it on a trip to Florida. Make room for both of your hobbies and priorities in your plan. Remember, just because you got married doesn't mean you have to see eye to eye on everything.
This is meant for educational purposes only. It should not be considered investment advice, nor does it constitute a recommendation to take a particular course of action. Please consult with a financial professional regarding your personal situation prior to making any financial related decisions. 03/19