Guide to Financial Planning for Couples

1. Set Financial Goals Together

The first step to financial planning together is determining your goals.

Do you want to prioritize traveling while you’re young, or are you ready to settle down and focus on buying your first home? Will there be kids in the near future, later, or not at all? When you start to develop a picture of your path, you can begin fine-tuning the plan.

A part of that process is looking at your short-term and long-term goals. In the short term, you might want to buy a new car or pay off minor debt. From there, you can start to look further out on the horizon.

Medium-term goals might include saving for your first home purchase or traveling extensively. Long-term planning involves retirement, and while that might sound too far off, it’s better to start as soon as possible.

2. Create a Budget Together

One step many couples take at some point in their relationship is to set up a joint budget. This can be a crucial part of managing your money as a couple, as it will outline your income and spending and how much you plan to spend in different areas.

Determining your joint monthly income and expenses should be your first step to building a budget.

Don’t forget to include unexpected costs that might pop up, like veterinary bills. Then you can subtract the expenses from your income and see what you have left over.

You can enter all of this information in a spreadsheet or use an online budget calculator that does all the work for you. As time passes, you might better understand your expenses and need to adjust accordingly.

Nowadays, most banking and credit card apps give you a breakdown of where you’ve spent your money the past month, which can be a great resource.

Lastly, periodically assessing your income and expenses as they change is essential for pivoting your budget.

3. Create an Emergency Fund

A part of your budget should include setting aside an emergency fund. That means you should have a stash of money you keep on the back burner for unexpected expenses.

As a baseline, you should save at least one month of your expenses in your emergency fund, although three to six is better. It sounds like a lot, but don’t be intimidated.

Start small by saving a little bit every day. Another way to do this is to set up a split direct deposit. That automatically puts a portion of your direct deposit paycheck into a savings account.

Life can throw all sorts of curveballs your way, and when it does, the last thing you want to do is take on more debt from credit cards or loans.

The better prepared you are as a couple for unplanned expenses, the less likely it is to impact your long-term financial goals.

4. Manage Your Debt

Debt can eat into your saving potential, so getting it paid off as quickly as possible should be a top priority in your financial plan together.

That is especially true of high-interest debt such as credit cards and personal loans. One way to tackle this is to get a debt consolidation loan, which compacts all your loans into one debt with a lower interest rate.

Another strategy is to start with the debt that has the highest interest rate and focus on paying that off first, then move on to the next one.

Whatever method you choose, make clearing debt between the two of you a primary concern.

5. Invest as a Couple

One of the ways you can build wealth together is by investing. When you consider your goals, time horizon, and risk tolerance, you can begin to develop a portfolio.

There are many options for investing as a couple. For example, a joint brokerage account allows you to trade assets like mutual funds, stocks, EFTs, CDs, and bonds.

Since you can access your money anytime, it’s a good option for short-term goals.

IRAs are great for the long term as they allow you to invest in high-return assets and often defer taxes on earnings and contributions. However, you generally can’t access the money in an IRA until you’re 59.5 years old.

Most importantly, be sure you’re transparent with each other and agree on what you’re investing in.

You want to be sensitive to each other’s risk tolerances and time horizons. Find a balance between the two you’re both happy with before you start investing.

6. Plan for Your Retirement

Retirement planning is a crucial component of your financial outlook. It may seem far off, but the earlier you can start saving for retirement, the better. A dedicated retirement account is one of the best ways to do this.

Retirement accounts give you tax advantages on your savings. While you can’t open a joint IRA or 401k, having your own retirement accounts will only serve to benefit you as a couple down the road.

If your workplace offers a 401k, you would be wise to take advantage of it. If they don’t, you should look into opening traditional or Roth IRAs.

Retirement planning is more than just saving. It also means you need to think about the future and what your income versus expenses will be.

Ask yourself questions like, will you both want to travel a lot or stay home? Will you be retiring someplace where the cost of living is higher or lower? When you figure out the type of lifestyle you both want to lead, you can start to calculate how much you need to save.

7. Estate Planning

Your estate is everything you own, be it large or small. Once you marry and begin to share your property, the way it gets allocated upon your death changes.

Every state in the US has different laws about marital property, and your assets will get apportioned to the surviving spouse according to such.

But estate planning doesn’t just involve your things. It also determines who will have guardianship over your children and pets.

That’s why making these decisions before you pass is so important. Although discussing these topics with your loved one can feel a little morbid, it’s essential to your financial planning as a couple.