Forty-three percent of people don’t know how much their spouse earns. There are many financial discussions that too many married couples keep to themselves — and that can set the stage for marital strife. To ensure you and your better half are on the same page about finances, use these tips to start a conversation.
1. Assess Financial Habits
First, examine how you spend your money. Look at how much you spend on the essentials (bills) and extras (entertainment). After, discuss your short- and long-term financial goals, such as eliminating debt, saving for a home down payment or replacing a vehicle. Once you establish your objectives, define specific strategies for accomplishing your goals. Whether you need to cut back on eating out or spend less on your yearly vacation, make sure your plan of action is realistic, and fits your and your spouse’s financial situation.
2. Prepare for an Emergency
Sixty-four percent of people in America do not have $1,000 in case of an emergency. Plan how you’ll work together to prepare for the unexpected. Paying debt is important, but plan to set aside some money every month for your emergency fund. Instead of using your credit card, pull from this fund in case of emergencies. Experts recommend having three to six months of your monthly expenses saved in an emergency fund.
3. Prepare for a Crisis
Review your life insurance needs. You will likely need more than your employer’s standard year of salary benefit. Assuming both spouses work, you should consider purchasing term insurance between 5 to 10 times your annual incomes. You might need more if you are in your thirties with young children or have large debt obligations. Term insurance is affordable and can be purchased for 10, 20 or 30 years.
4. Update your Wills
Discuss how you want your assets distributed once you die. Without a legal will, you could leave your spouse and/or children in a bind when you pass away. A will clearly establishes both of your financial wishes. It’s a good idea to review your will at least every five years and whenever an important life event happens — like becoming parents or buying a home.
5. Revise Beneficiary Information
Along with your will, make sure you name beneficiaries for your retirement accounts. Keep these names updated as you review your will. Revise these beneficiaries as needed based on life events.
This basic framework can help you reach a healthy and stress-free financial future together. Contact a Fifth Third Bank advisor for more financial guidance and solutions to achieve your financial goals.