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Start planning for after
the wedding
By Gary N. Garner
Your wedding
should be a happy time, as you and your spouse-to-be
plan your life together. And, as you both think about
your dreams and hopes for the future, you'll realize how
many of them depend on sound financial planning and
strong management of your money.
As newlyweds,
you can take charge of your finances from day one of
your lives together. Here are a few suggestions to help
you along the way:
Agree on priorities
It's quite
common for spenders to marry savers. This doesn't have
to be a problem; your differing perspectives on life can
complement each other. But to achieve your big financial
goals, such as buying a house, you'll need to set
spending and saving priorities together. And you need to
make these decisions as early as possible in your
marriage to avoid conflicts later on.
Get the right accounts
Many newlyweds
wonder whether it's smarter to have joint or separate
checking and savings accounts. You'll probably find that
a joint account will make it easier to track and pay
household bills. On the other hand, separate accounts
may be better if you or your spouse bring very different
amounts of assets or debts into the marriage. Some
couples have a joint account for paying regular bills
and maintain smaller individual accounts for
discretionary spending.
Keep each other informed
It generally
makes sense for one spouse to balance the checkbook and
pay the bills. However, you still need to keep each
other informed. Consider setting aside time - possibly
twice a month - to go over your finances. It doesn't
have to be a big production; you can make it fun by
having dinner or playing music. Just make sure you set a
date and stick to it.
Build an emergency fund
Hold off on
buying furniture or a new car until you've created an
emergency fund containing at least three to six months'
worth of living expenses. The best way to build your
emergency fund is to authorize your bank to
automatically move a designated amount of money each
month from your checking account into something like a
money market account, which yields more than a standard
savings account.
Start investing
After you've
established your emergency fund, you need to start
saving and investing for your long-term goals - a house,
college for your children if you plan on having some,
even retirement.
If you or your
spouse have a 401(k) or other tax-qualified plan where
you work, put in as much as you can afford.
Your
contributions will be made with pre-tax dollars, which
means you will reduce your taxable income, and your
money will grow tax-deferred until you withdraw it,
usually at retirement, when you may be in a lower tax
bracket. You may even be fortunate enough to work for a
company that will match part of your contributions.
After taking
full advantage of your employer's 401(k) or other
tax-qualified retirement plan, what else should you
invest in? You'll want a diversified portfolio
containing many types of investments, but to achieve
your long-term goals, you'll need to put special
emphasis on stocks.
Over the long
term, stocks have always trended up, and they have
significantly outperformed all other types of
investments (bonds, Treasury Bills, etc.). And by
starting to invest when you're young, you'll have plenty
of time to overcome any temporary "down" periods in the
market.
Stay out of debt
As you start
your married life together, you should do everything you
can to avoid the "debt trap" that has caught so many
Americans. A cause of debt for many people is their use
of credit cards. You can avoid this problem by getting
into good habits right away. Pay more than the minimum
amount due each month to lower future finance charges
and to pay off the balance sooner. Better yet, you may
want to consider using a charge card which requires full
payment of the outstanding balance every month.
Don't build your
lifestyle on a "house of cards." The more cards you
have, the greater the potential for debt. However, you
and your spouse might each want to have one credit card
in your own names, so that you can maintain individual
credit ratings. And you might find that a jointly held
card can be useful for household purchases.
Gary N. Garner
is a personal financial advisor with American Express
Financial Advisors in Jackson
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