Review these essential money strategies before taking one of these four steps.
Talk about money. Discussing finances before the big day can help prevent misunderstandings in the future. Studies show that keeping money secrets can lead to divorce.1 Start your marriage with a tone of openness about money.
Get specific. Create a budget, discuss how to pay down outstanding debt, discuss long- and short-term savings goals, like saving for a home, vacation and retirement. Couples who take the time to regularly discuss money do better financially.2
Protect each other. No one wants to think about what would happen in the event of tragedy or loss, but when you are married, it is important to discuss your plans if something unexpected should happen. Your new spouse may depend on your income even if he or she earns as much or more than you do. While nothing can replace a spouse, a term life insurance policy is a way to protect one another financially.
Having a Baby?
You need life insurance. If you have a child, you need life insurance. If you are having an additional child, chances are you need more. Most experts recommend term life insurance, the most common and affordable type of life insurance. Is your family properly protected? Ask your representative for information.
Prepare a will. It is important to legally name a guardian for your children in the event of your death. Without a named guardian, the state could appoint a guardian for your children.
Save for college. The cost of higher education has skyrocketed – 570 percent over the past 30 years.3
The sooner you begin saving – even $100 a month – the more you will have for your child’s future.
Preparing for College?
Resist student loans. As a rule of thumb, try to keep student debt at 50 percent or less than the student’s expected starting salary. Considering a parent PLUS loan? Try not to borrow more than you can repay within 10 years or by retirement, whichever is first.4 Hands off that 401(k)!
Discuss money management. High school graduates may not know how to budget or avoid fees.
Graduate on time. Budgeting for a four-year stay? Most students actually take five or six years to finish.5 Make sure your student carries the maximum course load (not just the minimum for fulltime enrollment). Otherwise you’ll wind up paying for an extra year ($18,000 public, $40,000 private).6
Thinking of Retiring?
Clarify your definition of retirement. To make sure you can truly support the lifestyle you have in mind, estimate your retirement income, then live on it for a year. If you need to adjust, work longer. According to a new study, 34 percent of older Americans are using credit cards to pay for basic living expenses, such as mortgage payments, groceries and utilities.7
Stay healthy. It may sound like a no-brainer, but investing in your health now adds up to big dividends in the future. In fact, the healthier you are in the years leading up to retirement, the easier it is to build up the savings you’ll need: Those among the healthiest 20 percent in their fifties retired with three times the assets of the least healthy.8
Consider long-term care costs. Even the most well-funded retirement savings account could be wiped out in a matter of months if you require a nursing home stay or round-the-clock home health care. Long term care insurance can prevent this from happening. If you are age 50 plus, ask for advice on the best time to purchase long term care insurance.
Before taking any big step, it makes sense to review your finances.
1 “Half of Divorced Couples Blame Financial Infidelity for Uprooting Their Marriage,” Businessinsider.com, May 23, 2012 2 Money,
December 2011 3 American Council of Trustees and Alumni, www.goacta.org, viewed May 7, 2013 4 Money, May 2013 5 Ibid 6 Ibid
7 USA Today, January 15, 2013 8 Money, March 2013