If you are an "average" American couple, you just dropped $27,000 on your wedding, not including your honeymoon, and you have both credit card and student loan debt, but you did not spend one minute on personal financial planning prior to the big day. Your bouquet is drying in garage; your ring is a bit less shiny; and your wedding album has found its home on your coffee table. So what's next?
Welcome to the marriage. It is time to talk about what your life will be about and how you will manage your money in order to achieve the vision. Relatively speaking, the wedding vision was easy-date, dress, rings, color scheme, guest list, venue, music, etc. The marriage vision is a bit more complicated, and maybe you just expected "happily ever after" now that the big day is over, but you must have heard that terrible marriage statistic, right? Fifty to sixty-percent of marriages end in divorce during the first five years.
Yikes! Fear not---couples that have a mission and some basic financial literacy and planning beat the odds.
So, what is a marriage mission and how do you get one? Your marriage mission is similar to a strategic military mission, a religious mission, and a corporate mission statement. Like a military mission, you need a target: who and what do you want to focus your life on together? Like the religious mission, you will want to focus your target on serving something larger than yourselves and your own interests. Finally, like a good corporate mission statement, you need to summarize the mission in a sentence or two, complete with action verbs, value words, and the targeted people group. For example, "Our mission is to serve and educate homeless children in Los Angeles."
This is a mission. It is clear. It is specific. It is focused on two action verbs, one people group, and one location. Ideally, it matches up with your shared values, talents, careers, passions, and interests. Wow! Suddenly your life is about something specific, which takes the focus off of looking towards each other fulfillment, and looking for ways to serve and grow in the same direction. And, because this mission is so laser focused, it makes it easy for you to know where to spend your two most valuable treasures-time and money.
Without a mission, time and money are generally scattered in all directions. This mission dictates where you will live, what you will do in your spare time, and on what you will spend or save your extra money. So, how do we actually achieve this mission?
There are ten basic money management tricks to help you live your mission and lead a fulfilling marriage:
1) Get out of debt-list your debts from least to greatest, and pay the minimum payment on all debts, except the smallest one. Once that smallest one is paid off, apply the money you were paying on the smallest one to the next debt on the list. You cannot live your mission if you are a slave to financial institutions.
2) Make sure you save as much as possible in your long-term retirement accounts, so that you can retire sooner and start working on your mission full-time. If you have a corporate job, you likely have a 401(k). If you are with a small firm, you might have a Simple-IRA. If you work for a government agency, like a school district, you likely have a 403(b) or other pension plan. If you are self-employed, you need to set up an SEP (self-employed pension) if you do not already have one. These are tax-advantaged accounts, meaning they allow you to grow your money tax-deferred or tax-free. This allows you to increase your after-tax-income, which is like giving yourselves immediate raises.
3) Set up a Health Savings Account (HSA), not a Medical Savings Account (MSA), and you will give yourself an immediate tax break, equivalent to a serious pay raise. This account allows you to spend less on your health care coverage premiums by increasing your deductibles, but you will pay your deductibles out of this tax-free account. This money grows tax-free, and you can use it on qualified medical expenses, and unlike an MSA it does not expire at the end of each year. It continues to grow.
4) Create a monthly budget, and stick to it. You will save thousands of dollars annually by tracking expenses closely. We like Themint.com, but there are many money management tools online and possible free services available through your financial institution.
5) Save six months' worth of living expenses in a bank account for emergencies only. Sorry, Christmas is not an emergency!
6) Start a Donor Advised Fund Account (DAF), which gives you the ability to invest and grow funds that you plan to donate to your mission. You get an immediate tax-deduction when you make the contribution to the account, and you may grow it tax-free over time, allowing you to make one huge lump sum donation to your cause. This is like having your own personal foundation, without the legal fees or the multi-million minimum balances.
7) Put money for major expenses including home maintenance, car payments, home purchases, and vacations into a liquid investment account, like an Exchange Traded Funds account (ETF), and put stop-losses on it. An ETF is like a mutual fund, except with stop-losses, you can pre-set it to sell before it falls to your specific minimum dollar value. For example, if you buy at the ETF at $40 per share, and you set a stop-loss at $30, it will automatically prevent you from a free fall. Also, you can set it to adjust the stop-loss automatically. If your fund grows from $40 to $50, you can arrange for the new stop loss to automatically change from $30 to $40. This gives you access to the highest performing asset class (stocks) while minimizing the volatility.
8) Only pay cash for cars, and buy slightly used vehicles to avoid luxury taxes. Save for your car every month; instead of paying that $450 to the dealership, pay it to your own savings account. When your car needs to be replaced, you will be ready. Also, extend the life of your car by one or two years, and you could save hundreds of thousands over your lifetime.
9) Only buy a house when you are convinced that you plan to live in that location for five or more years, and when you have saved for a 20% down payment. Look for the value property-an older house in a newer, up-and-coming neighborhood.
10) Make regular dates to talk about and plan your financial life. Set and agenda, go somewhere beautiful, order your favorite drinks, and spend time reviewing your mission beforehand to keep you on track.
The pursuit of the mission will automatically prioritize your spending, saving, and giving. It will contribute to greater levels of intimacy in your relationship, and you will make a difference together in your corner of the world. In order for the mission to give you this momentum, it must be based on ideas about which you are both passionate.
Robbye Schroeder is a wife, mother, and recovering spend-a-holic. Drawing on her copywriting background for the financial services industry, she distills complex lingo into manageable action steps towards a "revised version of the American Dream," which includes the pursuit of successful life-long marriage. Robbye is passionate about helping newlyweds gain tools to avoid potholes on the path to marital bliss.
Find out more at: http://www.themarriagepurse.com/
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