in case of death or an unplanned illness. Anderson did not have insurance coverage before their marriage; Lisa did.
The customized plan also helped the couple understand the importance of income allocation and income-to-debt ratio. The Bynams embarked on a strategy of aggressively eliminating debts, which gave them the cash flow they needed to buy a new home and increase their net worth. They sold Lisa’s previous home and used the cash to create an emergency fund.
Aggressively using their combined cash flow to eliminate debt also helped the couple eliminate about $10,000 in credit card and other debt shortly after the wedding. “They make decisions together on long-term financial goals such as retirement, but split obligations on monthly bills like basic household expenses,” says Creuzot.
Anderson and Lisa maintain joint accounts for such purposes as stock investments, and are beneficiaries on each other’s insurance polices. Their goal: Have a net worth of at least $1 million and the option to both be able to retire by the age of 60. Aware that tension over money is among the biggest causes of marital stress, frustration, and divorce, they talked about their finances before getting married, following the lessons learned in their premarital counseling.
“It’s very important to talk about it in advance, because all of a sudden, your income is no longer just about one person but about both of you,” Anderson says. “Having a plan is helping us reach our pecuniary goals. And if we should decide to have children, I
want Lisa to be in a position where she does not have to work.”
Davenport recommends that couples regularly reevaluate their insurance policies and employee benefits. “Compare existing policies for life, disability, home owner, and auto insurance,” he says. “Eliminate any gaps or overlapping coverage and make appropriate changes and updates to beneficiary designations. Now that both depend on the income of the other, it’s recommended that each spouse be named to receive survivor benefits of insurance and retirement benefits. Leaving assets after your death to someone other than your spouse could cause major problems.”
BUDGET FOR YOUR FUTURE
In setting up a budget, couples should list assets (i.e., income, investments) and liabilities (i.e., mortgage, credit cards) and decide how household expenses will be paid. Typically, it’s suggested that the better money manager handle the finances. Yet, this can be a joint responsibility if couples regularly collaborate to make key decisions, including discussing how credit will be managed. “To get the best results, couples should frankly talk about each other’s financial background on things like their spending and saving habits, sources of income, and their previous credit histories,” says Davenport.
Couples should also list goals, including how to plan should they decide to have children, buy a home, develop a college fund, start a business, and invest in the stock market or real estate. Davenport suggests taking advantage of company-sponsored 401(k) or 403(b) plans, IRAs, and other retirement vehicles. “The more one saves now, the more the monies will grow through the magic of compounding interest