By: Jamie Buerger
Managing your money is kind of like exercise. It can be hard to find the motivation, but once you learn how to budget and save, establish a financial routine, and start seeing the benefits, the more driven you are to stick with it. (Hey, now we know why they call it “financial fitness.") For couples, that begins with scheduling—and keeping—regular dates to hash out your financial situation: where you are, where you want to go, and how to get there. When you can clearly see the road map, the easier it will be for both of you to navigate it. Check out the money management tips below for advice aimed to get couples off the couch and on the path to a more secure future.
1. Talk it Out.
Maintaining an open dialogue about money sounds obvious, but too many couples keep their partner in the dark about their spending habits and debt loads. Sometimes this happens simply because no one in the relationship is prioritizing financial discussions, or it might be that one person is too embarrassed to come clean about how much they owe and what they spend their money on. But this is a mistake either way. How can you expect to pay down debt and build up wealth if you're not on the same page? And if you're actively trying to keep your financial activities secret, it'll probably backfire on you eventually. “Life events, like purchasing a house, leasing a new car or applying for a joint credit card, will inevitably bring the important factors like existing debt obligations and credit scores to light," says Bre Romeo, a wealth management adviser at Fifth Third Bank. Get ahead of the conversation now, so there are no surprises later.
2. Make Financial Decisions Together
Obviously, both of you should know where you stand financially. But you can streamline the process of money management by appointing one person to handle all bill paying and records keeping. And if you set regular money dates to check in with each other—which we absolutely endorse—this person should come prepared with updates on shared progress. That said, the household CFO should never shame his or her partner about how they spend or what they spend it on; acting like the “Budget Police" is a great way to build resentment. “Both parties should be engaged in the financial planning and decision-making process," Romeo says.
3. Take a Balanced Approach to Setting Priorities
Figuring out what you should focus on first—paying off credit cards or building up savings—can feel like a riddle. If you put all your extra money toward debt, then you'll have nothing to fall back on if there's an emergency, which will then force you to rely on credit and frustratingly reverse any progress you've made. Funnel any leftover cash into a savings account, and you'll have to make peace with continually forking over interest payments on your credit card balances (for the average American household, that totals $1,292 a year). For her part, Romeo favors a balanced approach. “Do both simultaneously," she says. Deciding how much to devote to each category, though, comes down to personal preference. Most experts recommend saving 20 percent of your salary, but if hitting that target prevents you from also making more than the minimum payment on your credit cards, it's smarter to save less until you get those balances down. “People may have times in their lives when they are saving 10 percent, and times when they are saving 30 percent," Romeo says. Do whatever works for you at the time.
4. Master Your Credit Score
By law, you're allowed to request one detailed credit report free of charge each year. In addition, many major banks and credit card companies provide your credit score each month on your statement. The magic number here is 700—once you top that, you're considered a reliable borrower and will qualify for lower rates on things like car and home loans. (To raise your score, try not to use more than 30 percent of your available credit.) When it comes to paying down your balances, it helps to be a savvy shopper. If one of your credit cards offers a promotional APR rate of zero percent, then shuffle your other card balances that have high APRs to the promotional one to save on interest payments. Once the promo period ends, transfer it back to another card with the lowest rate, and so on. If you have a handful of credit cards and maintain a good credit score, this strategy might keep you from ever having to pay interest at all. (Note that if you already have several cards in your wallet, you should resist new credit card offers since opening and closing accounts can affect your credit score.)
5. Plan for Retirement.
If your company offers a match on 401(k) contributions, make sure you're contributing enough to take advantage of it. “This is important, because otherwise you're leaving money on the table," Romeo says. For example, if your company matches up to 3 percent, you'll need to contribute at least 3 percent from each paycheck in order to get the full match. For freelancers or other workers without access to a 401(k), open an IRA account, to which you can invest up to $5,500 a year (explore the differences between a Roth IRA and traditional IRA here, to see which is best for your needs).
To learn more about retirement savings options, visit the Fifth Third Retirement Planning page.
6. When in Doubt, Seek Professional Help
A financial adviser or certified financial planner (CFP) can assess your retirement readiness and help you develop a sound savings strategy. For couples just beginning to think about retirement, getting a pro onboard now could be particularly worth it, since they can help you set goals for your long-term future. Of course, hiring a CFP means forking over more of your hard-earned cash—most charge between $150 and $300 an hour, depending on where you live. If you're comfortable choosing investments and allocating assets, you can take the reins yourself. Or if you're looking for just a little bit of backup, consider a so-called robo-advisor, which uses computer algorithms to determine your portfolio and charges much less than a real person does.
No matter which approach you take, just remember that routinely flexing your money-managing muscles will make both your relationship stronger and your financial future healthier. And those are perks anyone would call priceless.
The views expressed by the author are not necessarily those of Fifth Third Bank, National Association, and are solely the opinions of the author. This article is for informational purposes only. It does not constitute the rendering of legal, accounting, or other professional services by Fifth Third Bank, National Association, or any of their subsidiaries or affiliates, and are provided without any warranty whatsoever. Deposit and credit products provided by Fifth Third Bank, National Association. Member FDIC, Equal Housing Lender
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