Financial Planning for Young Couples !

  

One of the first decisions any couple will have to make is whether to pool assets or maintain financial independence and keep separate accounts.

While situations like second marriages, previous holdings or bad financial habits may warrant the division of money, most financial planners believe a new couple should have a joint account.

"The benefit of a joint account is that both people get all of the information, so that is very beneficial," said Adriane Berg, financial expert, elder attorney and founder of Generation Bold. "Both should be watching carefully and both should be sharing responsibility so it is much easier in a joint account. It informs everybody of what is going on."

To allow a certain amount of flexibility, however, experts also suggest small separate accounts or regular allowances to take care of lunches at work, small discretionary purchases or gifts for your significant other.

"Money is a very emotional issue and trying to make financial decisions about every little purchase can cause a lot of friction in a relationship," said Nathan Gehring, certified financial planner and owner of Couples Financial Planning & Coaching, LLC. "Having that pot of money for this situation takes that concern away."

Getting married is a big step, but personal compatibility may be only part of the equation. Being a financial match can be equally as important, yet many couples do not ask the necessary questions to be sure they're on the same page when it comes to money. Having those conversations about money---accounts, investing, retirement---will help you build your financial future together.

 

The Talk-

Keeping the lines of communication open is important to any relationship---especially marriage. While love would seem to be the overriding factor in the success of a marriage, it can prove to be a weak player when the subject turns to one of the biggest obstacles to marital bliss: Money.

Financial hardships can hit any loving couple and be particularly difficult if they haven't taken the time before saying "I do" to know on which side of the dollar they stand.

"Really, the place you begin as a young couple is what the other expects of you and what you expect of your partner and coming to an agreement on what your financial partnership looks like," said Nathan Gehring, certified financial planner and owner of Appleton, Wisconsin-based Couples Financial Planning & Coaching, LLC.

It's the business side of the plan---and in many ways, the boring side---that helps to lay the foundation on which you will build your future.

"You are going to create your own lifestyle and those necessities you thought were important---eating out, shopping in certain places---may not be necessary at all," said elder attorney and financial expert Adriane Berg, author of "Financial Planning for Couples." "If you set the tone early, you will make much better choices."

If you've picked a china pattern but have yet to decide who's handling the checking account, you may want to slow down, sit down and have that chat.

Whether it is a series of talks or one longer conversation, it is important to discuss your basic philosophy of money and how that has shaped your life. You don't want to dream of owning your own home only to find your prospective spouse is ideologically opposed to property.

"One of the biggest pitfalls is not understanding one another's beliefs around money and about money history," Gehring said. "We've all grown up learning certain lessons about money ... and that is where a lot of friction, a lot of difficulty comes in for partners."

Sharing Responsibility-

With the sharing of information comes the sharing of responsibility. One of you may have the notion you'll control the purse strings, but that may set the stage for problems.

Aside from the trust issues of allowing both partners equal access to the books, there are practical reasons for spouses to share tasks.

Changes in employment can make it necessary for one person to shift time to the daily balancing of accounts, while sickness, disability or death can dramatically alter a household's financial status.

"I think that both parties have to do everything," Berg said. "They have to do it together; they have to have a joint meeting so they know what is going on and not relinquish or abdicate on anything from paying the bills to insurance."

Berg is the founder of the Academy of Elder Law Attorneys and of Generation Bold, which helps companies market to seniors. Her career also has included working with younger couples, however, and that range of experience has enabled her to develop a broader long-term perspective.

"I see people (now) who are much older," Berg said. "I realize how much more wealth they were able to save and accumulate when it was a joint effort on all of it."

Debt: the Elephant in the Room-

Current debts should be fully discussed as you and your partner discuss your financial future. From credit cards to student loans, debts that are ignored can lead to a serious problem for young couples: a low credit score.

"One of the goals that they should set before the actual nuptials is to improve their credit scores," Berg said. "That could mean consolidating a loan, paying off debt or cutting up credit cards."

She said it's better to delay getting married if that means improving each other's scores.

While debts may require regular payments, however, that doesn't necessarily mean you should hold off on starting to save for retirement.

"If your employer is matching 50 percent (on a 401k), that is a whole lot better return than paying off the 6 percent debt," said Martin Keil, wealth manager at Crowell, Weedon & Co. in Los Angeles. "That doesn't mean you ignore that debt, but there has to be an accommodation for your long-term retirement."

Don't Wait to Save-

Your own family may still be on the horizon, but experts urge planning for a time when you're chasing your children's children.

"The earlier they start (saving for retirement), the better off they're going to be. Just do the mathematics of compounding (interest)," Keil said. "So many people delay saving for long term; they need to be immediately saving money."

Keil said a Roth IRA can capitalize on long-term tax benefits and a living trust can protect assets for even a young couple. He said the simplest way to save might be through your employer. Gehring agreed.

"Always think of putting money into any company retirement plan where you can receive an employer match, because that is a part of your salary and if you're not doing that, you're giving money back to your employer," Gehring said.

Your financial planning should include regular short-term and long-term saving, charitable contributions and retirement planning, both at work and independently, Berg said. With realistic management of discretionary spending, such as vacations and cars, the future can be bright.

"People who do this end up incredibly wealthy and can retire very young--40 to 45," Berg said. "Basically, they plan their own pension."