No matter how much you and your spouse have in common, there are bound to be times when your opinions and preferences don’t match up. But when it comes to money and marriage — and to any couple and their financial planning — it’s important that you agree on a number of crucial points.
While it’s relatively easy to solve a conflict about what to watch on television — maybe he wants Monday Night Football and you are deeply into binge watching the latest season of Orange is the New Black — disagreements surrounding money have the potential for much more upheaval.
“Income and spending are at the heart of any partnership — family as well as business,” says Al Jacobs, an entrepreneur, real estate investor and author of the book Roadway to Prosperity.
“Just as business partners need to be on the same page when it comes to spending company money, spouses need to come together to avoid creating a crisis situation that could ruin a marriage,” he says.
Here are four areas where you and your partner need to be in agreement:
Credit cards. Who hasn’t argued or even wracked up hard-to-manage debt thanks to credit cards? Jacobs advises you use credit cards for convenience only, and pay balances in full every month so you don’t accumulate interest.
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“Both spouses must conduct their lives by this rule,” he says. And if one of you can’t do this, he recommends destroying the cards.
It that’s too extreme, you can always put them in a Ziplock bag with water and freeze them, an old trick recommended by countless advisors. That way, before using them you have to wait for the ice to thaw.
Education. If it’s time to send your child off to college, it’s time to get very serious about considering the end-goal.
“The educational establishment has convinced the nation that a university must appear prestigious and be costly for it to be worthwhile,” Jacobs says. “The result? Untold numbers of college graduates and their parents are in hock big time.”
Jacobs suggests that unless a student has very clear objectives, community college is the place to start. And there’s plenty of evidence supporting this. They cost a fraction of traditional four-year universities, according scholarships.com. They give students time to explore their interests and flexible schedules. And at the end of the two years, it’s easy to transition to a four-year school if appropriate.
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Life insurance. It’s not something that’s pleasant to talk about, but if one or both of you should die, you need a plan for the financial well-being of the others. Jacobs recommends you purchase an inexpensive 20- or 30-year level benefit term policy, with a worth of 10 times your annual income or more. That means if your household income is $55,000 a year, you should get a policy worth at least $550,000. The cost varies, but can be far under $1,000 a year.
Transportation. You would be hard-pressed to find a family who doesn’t need two cars, never mind just one. But it’s easy to get caught up in the hype and spend more of your income than you should to get from one place to another. Jacobs says you shouldn’t finance or lease, but rather pay cash for your car “even if that means you drive a 1984 Toyota Corolla.” If that advice doesn’t suit you, your payment should not be more than 10 percent of your gross income.
In the end...
There are many more factors to consider as a couple doing financial planning. But if you put these four items near the top of the list, right after your weekly budget, you’ve got a jump not only on your family’s finances, but also on a harmonic relationship.
This essay was written by Tracey Dee Rauh.
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