10 Tips for Couples and Young Families to Build Wealth

Knowledge is investing power.

Perhaps talking about money with your partner has felt a little taboo since the term “gold digger” was coined, but it’s healthier than playing fast and loose with your credit card while keeping your spouse in the dark. Most couples (72 percent) say they communicate very well, but in reality, when it comes to financial matters, more than four in 10 (43 percent, up from 27 percent in 2013) don’t really know how much money their partner makes – and of that, 10 percent of those surveyed were off by $25,000 or more, according to a 2015 study by Fidelity. Without knowing how much your spouse makes, you can’t plan how much to invest.

Get on the same page.

Ryan McGuinness, president of CTR Financial in Lincolnshire, Illinois, recently met a couple who were at such extremes with saving and spending that they sought a financial planner to help mediate and devise a plan for their finances. It’s pretty common for couples to have different attitudes towards money,” McGuinness says. “If one person is a spender and the other a saver, this can cause conflict if each is not open about their wants and needs.” But for most people, a simple conversation will do, he says. Just don’t be embarrassed if you’re not used to talking about money.

Plan for the future.

It can be bonding for couples to talk about short- and long-term hopes and dreams. Ask each other questions about career goals, whether you’d like to rent or own a house, how many children you’d like to have, debts that you have or are willing to take on, and when you plan to retire, McGuinness says. “Once you’ve bought the house and had the kids and lost some years it’s much harder to make changes. Plan ahead now so you’re sure you end up where you want to.”

The financial to-do list.

There are the practical concerns that every newlywed and young family should address immediately. Matt Miller, wealth advisor at Hallett Advisors in Port Angeles, Washington, says a variety of things should be updated, including emergency contacts, tax withholdings, health care benefits, wills, retirement plan beneficiaries, life insurance coverage and investment accounts. “Much like your new life together, your financial life will be a long journey. If it is approached with a spirit of sharing and cooperation, doing the right things at the outset can set you up for many fruitful years ahead,” he says.

Know the perks.

There are financial benefits that favor those who are married. Some could include the right to make deductible contributions to a spousal IRA, the ability to receive disability, Medicare, or Social Security benefits for a spouse, tax benefits associated with filing jointly and some estate planning and inheritance benefits.

Pay off all high-interest debt first.

If your investments earn less than 7 percent, and your credit card debt is accruing at 10 percent, it only makes sense to pay the card off first. “Simply put, the interest rate on any debt can be compared to the investment returns you expect to get,” says Rob Bertman, a certified financial planner in St. Louis and founder of MoneyWithImpact.com. “Earning a 7 percent investment return over time means taking on risk and weathering volatility. But by paying off debt at 7 percent, you get that return, risk-free and immediately.”

Save 20 percent of your income.

“It may seem difficult to set aside money for the future when you’re paying off student loan debt and managing other household expenses now, but it’s important to start,” says Jennifer Barrett, chief education officer for the financial site Acorns.com. Consider automating deductions from your bank account so you don’t feel the sting, and always take full advantage of company retirement plans that offer free matching money, she says. Set aside enough savings for at least three to six months of expenses as a cushion in case of job loss or emergencies, such as hospital bills or car repairs.

Learn pros and cons about education savings plans.

529 college savings plans offer tax-advantaged ways to save for education expenses for your children. “You contribute money to the plan, choose your investments, and enjoy tax-free earnings growth,” says Mike Zisa, financial literacy author and educator. “Any interest, dividends, or capital gains you receive on your investments are not taxed, unlike investments within a standard brokerage account. And if you use the money as intended (for qualified education expenses including tuition, room and board, books, and more), the money you withdraw from these accounts is also tax free.”

Do not sacrifice your retirement.

You have less time to earn than your child, so if you’re sacrificing retirement savings to pay college bills, getting student loans may be a better option. “From my experience, the majority of people are not happy with their decision to use their retirement funds to pay for their child’s education,” Zisa says.

Be careful with big expenses.

Your house and car is “where the real money goes out the door,” warns McGuinness. Keep bills small to save more. Keep your lifestyle in check and consider banking or investing your raises. “If you budget like your income is what it was five years ago, you can’t help but save,” McGuinness says.

Take advantage of business cycles.

“Every industry goes through cycles, so industries that are currently underperforming will return to their average, and businesses that are currently outperforming will also return to their average,” says Wilton Risenhoover, who teaches securities analysis at UCLA. Look for underperforming industries as investment opportunities, he says. “Diversify investments by buying some well-diversified, low-cost ETFs as a core holding. Then identify industries that are currently performing poorly and add weight to them by purchasing a low-cost industry-specific ETF, he says. “As those industries return to favor, the ETFs will increase in value.”

Christine Giordano
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