8 Financial Tips for Newlyweds
Interesting article from MSN
8 Financial Tips for Newlyweds
The Basics
8 financial tips for newlyweds
You've embarked on a lifetime of wedded consumer bliss, but your finances won't take a honeymoon. Get any revelations out of the way and create a plan you can live with.
By Lea Goldman, Forbes
Once the wedding bells have stopped ringing, even well-heeled newlyweds like Jessica Simpson and Nick Lachey need to be mindful of their finances. (Remember hubby Nick's horror about his wife's purchase of $1,400 bedsheets?) That's because, of the roughly 2.3 million U.S. couples married annually, the median age of first-timers to the altar is between 25 and 27, according to Divorce magazine.
At that age, many couples are still hitched to student loans and credit-card debt accumulated as singletons. 'They live for the moment and don't think ahead,' says Nancy Langdon Jones, a certified financial planner in Upland, Calif. 'For many couples, this period in their lives has the greatest impact on what will happen in their future.'
Tell all before tying the knot
Revelations about debt, income and bad spending habits can wreak havoc on a new marriage. Pros like Stewart H. Welch III, author of the '10 Minute Guide to Personal Finance for Newlyweds,' advise couples to come clean well before they stroll down the aisle.
Unromantic as it sounds, couples should itemize on paper assets such as checking and savings accounts, 401(k)s, stock or bond investments, real estate, jewelry and other valuable collectibles in their portfolios. Also share information about liabilities, including credit-card balances, personal or car loans outstanding -- even owed income taxes. That kind of disclosure will not only help determine the wedding and honeymoon budget, but also prevent any post-wedding whammies.Check out your options.
Find the best rate
before you borrow.
'Remember, if you're buying a house and applying for a mortgage, the banks will run a credit check on both of you. One spouse's bad credit will have a negative impact on the loan,' warns Welch.
It's never too soon for serious couples to sit down and define their financial goals, be it home ownership, a cushy nest egg or early retirement. Craft a realistic budget in order to determine how much income can be deferred to savings.
Get expert advice
Schedule time with a financial planner for guidance on investment options, like CDs and money market accounts. Even mundane decisions, such as who will pay the bills or whether to have a joint bank account, should be settled in advance.
Consider a joint checking account to pay for joint expenses, such as rent, utilities and mortgage payments, says Michele Steinberg, a financial planner and co-founder of FinanceGrrl, a Los Angeles financial counseling network aimed at twenty- and thirty-somethings. She says it's OK to maintain individual checking accounts as well. 'Everybody likes to have some personal control,' she says. 'I tell couples that the personal checking accounts pay for each other's gifts.'
The experts strongly advise newlyweds to prioritize debt payment concurrent with building an emergency fund, or what Welch calls a 'Power Account.' How much to stow away? At least three months' worth of expenses should provide a cushion in the event of an unanticipated crisis, like a layoff. Building that SOS nest egg isn't easy. Try reducing household expenses 10% by buying generics, conserving energy and cutting back on costly meals out. Then commit that savings to an interest-bearing account and mutual funds. Set up a direct-deposit system so as to avoid the temptation of spending the extra cash.
8 guidelines for after the honeymoon
Ditch the debt
Pay off all or most credit-card debt. Reduce the number of cards both spouses have, paying off the cards with the highest interest rates first. Avoid those supposedly juicy offers from home-electronics and furniture retailers promising no money down and no interest payments -- hidden interest is built into the cost. Put off big purchases until you can pay with cash. (For more articles, see 'Take control of your debt.')
Check your credit
Apply for a credit history. Look for errors that might impinge on applications for credit-card consolidation, mortgages or car loans. If your credit history is checkered, discuss in advance with any lending officers before they learn about it on their own. Paying down debt is a top priority, even before home ownership. (You can request your credit reports online here.)
Don't quit your school debt
No need to fast-track paying off student loans, says Michele Steinberg. The interest on this kind of 'good debt' is tax-deductible. Plus, interest rates are at most 4%, significantly lower and more manageable than that of credit-card debt. (For more, read 'How to blitz your college debts' by Liz Pulliam Weston.)
Budget, budget, budget
Devise a realistic budget! Consider even routine manicures, car washes, charitable contributions. Designate one spouse to oversee the checkbook, so as to avoid confusion. If one spouse makes significantly more than the other, Steinberg suggests earmarking a percentage of the income -- rather than a flat dollar amount -- toward a joint checking account. (You'll find articles on how to budget here.)
Don't raise the roof
Planning on buying a house? Make sure total house payments, including taxes and insurance, don't exceed 25% of your take-home pay, advises Stewart Welch. (Mortgage lenders typically allow payments to equal up to 35% of take-home pay.) Aim for 15% if job security is an issue. (For more, see 'The essential home-buying guide.')
Consider insurance
If the newlyweds boast significant credit-card debt or mortgage payments, they should consider buying term life insurance. In most states, joint property rules apply to married couples. Should tragedy strike, the debt, in addition to the assets, will get transferred to the surviving spouse. Insurance can cushion the blow. (For more on insurance basics, see 'Get the insurance you really need.')
Think about the future
It's never too early to plan for retirement. Contribute the maximum to the 401(k) plan offered at work. In addition, invest in a Roth IRA, if eligible, which usually offers the benefit of tax-deferred earnings. (See 'Build your retirement savings.')
Risk within reason
While newlyweds can often afford more aggressive investment portfolios, don't bet it all on the stock market, notoriously volatile these days. Consult with a financial planner to ensure a diversified portfolio of stocks, mutual funds and other asset classes. If hubby is an avid day trader, the couple should firmly agree on a dollar cap on his investment. (For more, read '4 habits of successful investors.')
8 Financial Tips for Newlyweds
The Basics
8 financial tips for newlyweds
You've embarked on a lifetime of wedded consumer bliss, but your finances won't take a honeymoon. Get any revelations out of the way and create a plan you can live with.
By Lea Goldman, Forbes
Once the wedding bells have stopped ringing, even well-heeled newlyweds like Jessica Simpson and Nick Lachey need to be mindful of their finances. (Remember hubby Nick's horror about his wife's purchase of $1,400 bedsheets?) That's because, of the roughly 2.3 million U.S. couples married annually, the median age of first-timers to the altar is between 25 and 27, according to Divorce magazine.
At that age, many couples are still hitched to student loans and credit-card debt accumulated as singletons. 'They live for the moment and don't think ahead,' says Nancy Langdon Jones, a certified financial planner in Upland, Calif. 'For many couples, this period in their lives has the greatest impact on what will happen in their future.'
Tell all before tying the knot
Revelations about debt, income and bad spending habits can wreak havoc on a new marriage. Pros like Stewart H. Welch III, author of the '10 Minute Guide to Personal Finance for Newlyweds,' advise couples to come clean well before they stroll down the aisle.
Unromantic as it sounds, couples should itemize on paper assets such as checking and savings accounts, 401(k)s, stock or bond investments, real estate, jewelry and other valuable collectibles in their portfolios. Also share information about liabilities, including credit-card balances, personal or car loans outstanding -- even owed income taxes. That kind of disclosure will not only help determine the wedding and honeymoon budget, but also prevent any post-wedding whammies.Check out your options.
Find the best rate
before you borrow.
'Remember, if you're buying a house and applying for a mortgage, the banks will run a credit check on both of you. One spouse's bad credit will have a negative impact on the loan,' warns Welch.
It's never too soon for serious couples to sit down and define their financial goals, be it home ownership, a cushy nest egg or early retirement. Craft a realistic budget in order to determine how much income can be deferred to savings.
Get expert advice
Schedule time with a financial planner for guidance on investment options, like CDs and money market accounts. Even mundane decisions, such as who will pay the bills or whether to have a joint bank account, should be settled in advance.
Consider a joint checking account to pay for joint expenses, such as rent, utilities and mortgage payments, says Michele Steinberg, a financial planner and co-founder of FinanceGrrl, a Los Angeles financial counseling network aimed at twenty- and thirty-somethings. She says it's OK to maintain individual checking accounts as well. 'Everybody likes to have some personal control,' she says. 'I tell couples that the personal checking accounts pay for each other's gifts.'
The experts strongly advise newlyweds to prioritize debt payment concurrent with building an emergency fund, or what Welch calls a 'Power Account.' How much to stow away? At least three months' worth of expenses should provide a cushion in the event of an unanticipated crisis, like a layoff. Building that SOS nest egg isn't easy. Try reducing household expenses 10% by buying generics, conserving energy and cutting back on costly meals out. Then commit that savings to an interest-bearing account and mutual funds. Set up a direct-deposit system so as to avoid the temptation of spending the extra cash.
8 guidelines for after the honeymoon
Ditch the debt
Pay off all or most credit-card debt. Reduce the number of cards both spouses have, paying off the cards with the highest interest rates first. Avoid those supposedly juicy offers from home-electronics and furniture retailers promising no money down and no interest payments -- hidden interest is built into the cost. Put off big purchases until you can pay with cash. (For more articles, see 'Take control of your debt.')
Check your credit
Apply for a credit history. Look for errors that might impinge on applications for credit-card consolidation, mortgages or car loans. If your credit history is checkered, discuss in advance with any lending officers before they learn about it on their own. Paying down debt is a top priority, even before home ownership. (You can request your credit reports online here.)
Don't quit your school debt
No need to fast-track paying off student loans, says Michele Steinberg. The interest on this kind of 'good debt' is tax-deductible. Plus, interest rates are at most 4%, significantly lower and more manageable than that of credit-card debt. (For more, read 'How to blitz your college debts' by Liz Pulliam Weston.)
Budget, budget, budget
Devise a realistic budget! Consider even routine manicures, car washes, charitable contributions. Designate one spouse to oversee the checkbook, so as to avoid confusion. If one spouse makes significantly more than the other, Steinberg suggests earmarking a percentage of the income -- rather than a flat dollar amount -- toward a joint checking account. (You'll find articles on how to budget here.)
Don't raise the roof
Planning on buying a house? Make sure total house payments, including taxes and insurance, don't exceed 25% of your take-home pay, advises Stewart Welch. (Mortgage lenders typically allow payments to equal up to 35% of take-home pay.) Aim for 15% if job security is an issue. (For more, see 'The essential home-buying guide.')
Consider insurance
If the newlyweds boast significant credit-card debt or mortgage payments, they should consider buying term life insurance. In most states, joint property rules apply to married couples. Should tragedy strike, the debt, in addition to the assets, will get transferred to the surviving spouse. Insurance can cushion the blow. (For more on insurance basics, see 'Get the insurance you really need.')
Think about the future
It's never too early to plan for retirement. Contribute the maximum to the 401(k) plan offered at work. In addition, invest in a Roth IRA, if eligible, which usually offers the benefit of tax-deferred earnings. (See 'Build your retirement savings.')
Risk within reason
While newlyweds can often afford more aggressive investment portfolios, don't bet it all on the stock market, notoriously volatile these days. Consult with a financial planner to ensure a diversified portfolio of stocks, mutual funds and other asset classes. If hubby is an avid day trader, the couple should firmly agree on a dollar cap on his investment. (For more, read '4 habits of successful investors.')
