and tax-deferral. The younger the couple, the more they should invest in stocks, which tend to offer the highest returns over the long term,” he says.
In terms of handling cash, financial planners recommend that couples decide who will have the primary responsibility for managing money, paying bills, and balancing the checkbook. They suggest couples determine whether having joint accounts, separate accounts, or both works for them. Each relationship is different. An option: Consider a joint account with combined savings and investments and use it to pay all household bills.
Couples might also consider opening separate accounts with “small amounts” of money to remain “financially independent,” particularly if they’ve been single for many years. If both want to handle the money, professionals suggest they divide financial duties. Regardless of the approach, couples should review the budget and checkbooks monthly to monitor progress. And remember that once you have a financial plan, the strategy can be modified at any time with the help of a financial planner.
In fact, a financial planner can help you navigate through budget issues and differences in investment styles. Talking about investment philosophies is important for couples early on, particularly for those with dual incomes and high salaries. Clashing investment styles are typical in marriages, particularly if the husband is an aggressive investor in stocks and mutual funds, while the wife prefers the more conservative certificates of deposit or money markets accounts.
Freddye Smith suggests diversification–having both types of portfolios. She and other experts advise working with a planner who can offer an objective view of which investments to choose. Such an advisor can also talk to couples about how their different investment styles can complement each other and offer less overall investment risk.
SET UP A SAFETY NET
Even if you start planning early, you have to prepare for all eventualities. Financial advisors advocate setting up a safety net. “An emergency fund equal to three to six months of earnings should be a first priority,” says Davenport. “Keep this cash in a bank savings account or a money market account, a place where it can be accessed quickly.”
But perhaps the best safety net for newlyweds is starting out with a financial planner in your wedding party. That may be the best wedding gift you could ever give yourself and your financial future.
To Do List
- Discuss your financial goals and expectations and create a plan that you both agree on.
- Use your combined incomes to pay off credit card and student-loan debt faster.
- Buy both life and disability insurance for protection in case of unplanned death, injury, or illness.
- Invest in the stock market and buy real estate.
- Take advantage of company-sponsored 401(k) or 403(b) plans and other retirement options, such as IRA accounts.
- Maintain an emergency fund with three to six months of earnings.