Love & money: Tips for every stage of a relationship

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Now that the Valentine’s Day glow has passed, now is a good time to address the financial conversations that you’ll experience at different milestones of a relationship. As a relationship continues to grow, you will need to be open to discussing how you and your partner’s finances will grow together. Addressing key financial issues in advance can help you avoid unnecessary stress and cultivate a closer bond. To tackle these important discussions, we’ve mapped out some tips to help you:

The dating phase
Address debt – When seriously considering the idea of a committed, long-term relationship, it’s important to put the relationship on the best possible footing from the start.  One key way to do this is to make sure you are not bringing too much debt into the relationship. How much is too much?  Each individual should be in a position where they can financially live on their own.  It is unfair and unloving to saddle someone you care about with excessive debt. A good rule of thumb for determining how much debt is too much: no more than 40 percent of your income should be needed to make debt payments.
Overspending is a red flag– Swiping a credit card is an easy way to spend money. However, be alert to anyone who is prone to relying on credit cards.  In addition to piling up an expensive source of debt, it can foster a high level of consumption, which can be a costly habit to maintain and difficult to break.

 Moving in together/getting married
Discuss money management – Sharing your lives means sharing your resources. Discuss how you will split living expenses and mortgage payments. While it would be ideal to split household costs equally (as well as household responsibilities), few couples both earn the same amount of income.  This may warrant a proportional split, so that no one bears more than they can reasonably support.  Whether equally or proportionately, the couple should have an agreement or contract on how bills – and responsibilities – are split.  Unstated assumptions and unreasonable expectations invite conflict; for this reason, it is important that couples put everything on the table and be attentive to how money is spent.
Maximize your 401(k) contribution – The most expensive thing that you’ll ever buy isn’t a house or a car, no matter how expensive. It is your retirement. Investments made at the beginning of your career will have a big impact on your retirement because they have a long time to grow.

Having your first child
– Realize your commitments – Having a child is a life-changing event.  Your decisions – about time and money – now affect someone who is completely dependent upon you.  Caring for a child requires an enormous investment of time and effort.  It is more important than ever to collaborate with your partner to make sure that the child – and both of you – are receiving the needed care.   Whether one parent stays home or both parents work full-time, you will need to revisit the finances and day-to-day responsibilities, making continuous adjustments as your financial and personal resources permit.
Save for college funds – The price of a college education has increased at twice the rate of inflation, making it incredibly expensive. Parents should begin to save for the cost of college as early as possible. Consider investing in a 529 Plan.  529 Plans are investment accounts designed to help you build the wealth needed to pay for college.  You may also wish to open a custodial account for money that your child receives or earns.

Protecting your spouse
Consider disability and life insurance – Insurance is important for couples with children. It is even more important when one spouse who earns more income than the other.  Both disability and life policies can replace resources that would be otherwise be lost.  To avoid adding financial grief to personal grief, you will want to make sure that you have suitable disability and life insurance policies.
 Estate planning – It’s important to have an estate plan in place to take care of your spouse and children. This can eliminate uncertainties and provide peace of mind that, should anything happen to you, your family will be protected.

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