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Finance

Planning a wedding and reception can be one of the busiest times in a couple’s life. After getting engaged, couples can be overwhelmed with the planning aspect of their big day and forget to discuss something as important as finances. Oftentimes, couples create a wedding/reception budget but do not discuss their financial situation post-wedding. Having a financial blueprint in place can make married life easier.

When To Discuss Finances

While it might not be a romantic topic, Judy Loy, a Registered Investment Advisor with Nestlerode & Loy Inc., recommends couples begin discussing their financial situations after their engagement. Numerous studies have shown that the number one trigger of arguments among spouses stems from money issues. Now is the time to discuss whether assets will be combined and how money will be spent.

Couples should learn if their partner is a saver or a spender. Discussing each other’s spending habits can help couples not only plan for their wedding but for the future. Learning a spouse is a large saver or spender once married can lead to arguments, especially if assets are combined. In cases of combined assets, spouses must know how their partner is managing money.

After discussing finances, there are several steps that couples need to take to secure their financial future. The first of these steps is establishing an Emergency Cash Reserve Fund.

Emergency Cash Reserve

Loy suggests couples open a money market or high-yield savings account to deposit extra money each month. Ideally, the account should have enough money in it to cover three to six months of expenses in case someone loses their job, gets sick, etc. Being able to pay bills while out of work will keep couple’s credit scores intact. Once numerous late payments, especially delinquent mortgage payments, are placed on credit reports, it can take couples years to restore their credit rating.

Money market accounts are easy to set-up and are also a good place to put money being saved to purchase a home, boat, trip, etc. These accounts are easy to access and rates will not fluctuate meaning couples do not have to worry about losing money. Newly engaged couples can open individual/joint accounts and start each account by having as little as $10/week automatically deposited into the account. Having the money direct deposited is the easiest way to make sure the money finds its way into the savings account.

Life Insurance Policies

After establishing a cash reserve account, homeowners and parents should purchase a life insurance policy according to Loy. A flat rate, premium term life insurance policy can help a spouse cover a mortgage payment and provide financial assistance for children. The younger couples are when they apply for term life insurance, the cheaper the annual policy will be.

The purpose of term life insurance is to cover mortgage payments and other expenses in the event a spouse or parent should unexpectedly pass away. Term life insurance will normally cover couples’ financial expenses to retirement. When the policy expires at retirement, couples should have had enough time to save money for retirement and any other outstanding expenses. Permanent life insurance policies are also available but are more expensive than term policies.

Paying Off Credit Card Debt

The next financial topic that couples need to address is credit card debt. Learn how much debt a future spouse currently carries on credit cards. Before beginning to save money for retirement, couples should work on putting any extra money each month towards large credit card balances. Most cards carry high interest rates and paying only the minimum balance due each month can keep couples in debt for years. Credit cards should be used only in emergency situations and paid off each month.

Open A Retirement Account

Finally, couples need to address their retirement situation. Loy suggests if couples have an employer who matches retirement contributions to take advantage of the account offered. In cases where retirement accounts are not offered through employers or there are no matching contributions, couples should meet with a financial planner to discuss the various types of retirement accounts available.

The sooner couples open a retirement account, the better. Couples should not assume they cannot afford to place money into a retirement plan. Most retirement plans only require a $50 monthly deposit. Once again, the money should be automatically deposited into the retirement account. An automatic withdrawal from a checking account ensures the money will not be spent elsewhere. As salaries increase, couples can increase their monthly contribution to maximize their returns. The recommended amount to deposit into a retirement account is 10% of one’s gross income. Couples looking to live a more extravagant style of life in retirement should contribute more than the recommended 10% into their accounts.

Younger couples can benefit from opening a Roth IRA. Contributions that are placed into the account can be pulled out in case of an emergency. The idea of this style of account though is to not pull from it before the age of 59 ½. Taxes are not paid when withdrawing money from the account after the age of 59 ½.

Choosing A Financial Planner

When choosing a financial planner, Loy suggests finding a financial planner that can work on a fee basis, meaning that the financial planner will be paid on the performance of their customers’ accounts. Couples should look for a financial planner who is willing to spend time with new customers and thoroughly explain the positives and negatives of different investment accounts. Financial planners and investment services can also be researched on the Internet at www.finra.org. Any complaints against individuals or companies will be listed on this site.

After finding a financial planner, it is important to meet with them once a year to review assets. Jobs and salaries can change meaning monthly contributions towards assets may need changed. Another benefit of a financial planner is that he/she will watch the performance of a couple’s assets and contact them if there are any drastic changes in performance or value. Loy also suggests couples complete a retirement planner every five years with their financial advisor so they can see their projected retirement assets.

Even people with retirement accounts through their employers can benefit by visiting a financial planner. Employers may not offer any assistance on how to allocate funds in company retirement accounts. A financial planner can review the best way to allocate funds in a company plan and explain the risks involved with investing.

Brides and grooms interested in more information regarding their financial future can call Judy Loy at 814-238-6249.