I get a lot of questions from people on how couples should handle their money. Is it better to have both people involved in everything or to divide and rule over investment and budgeting? Should you combine finances or keep them separate? My answer? Yes. Each couple will have a unique answer and what will work best.
The problem I see is the little consideration that can sometimes be given to these issues.
This week my husband and I are celebrating 10 years of marriage, and with that in mind, I’ll be sharing 10 practices that have worked for us. Perhaps these practices can serve as a starting point for a conversation to get couples on the path of co-managing finances with intention.
The caveat here is if you find yourself married for 50 years and wondering how I can possibly give advice after just 10 points taken. I offer this column from a place of the greatest humility and with full disclosure that my husband and I have not done everything well with our money.
We are constantly learning. Indeed, we have adopted new practices on the advice of long-time married readers.
Here are the Gutierrez 10:
â¢ We combined the finances. We were entering our marriage with our own financial lives intact and could have made an argument to divide our savings, our investments and even our budget. You take the mortgage. I’ll take the utilities. While it might work, the separate finances seemed too, well, to be working. I have a feeling some people think the finance division is easier, which might be true if the division was all about invoices. The more obscure issue is with common experiences like dining out, vacations, etc. Who takes what and how much? The different wages and who contributes in what ratios further complicate the issue when comparing the magnitude of various household costs.
â¢ We believe in saving for our future and that of our children. This is fundamental because we could certainly enjoy more money right now in our present – a home remodel, the Tesla, a new wardrobe, a vacation home, and the list goes on and on. . What keeps us focused? We value our time. We want to be elective to work in our fifties. Our ultimate goal of freedom is time.
â¢ We pay each other first and last. Let me explain. As a household of two entrepreneurs, we have seen income become a moving target in the past. So we first save in our retirement plans each month as a payroll deposit in our respective company 401 (k) plans. But like all entrepreneurs, the big question is: what if you do more? My concern has always been that lifestyle drift increases along with corporate profitability. My husband has developed a perfect antidote for this problem. We have a habit of depositing our “budget” only on the current account of our household of each of our companies. This means that if we have an advantage in our respective businesses, that advantage accumulates and can be invested in brokerage or retirement accounts throughout the year. Our savings rate has increased with this practice without us ever feeling deprived. This would be a great practice for people who work on commission or have variable bonuses.
â¢ We are on the same wavelength when it comes to investing. Fortunately, we have a passionate commitment to not timing the market. We do this by averaging all the market conditions with all the savings we have available to invest. The majority of our investments are in passive mutual funds. We generally avoid investments that we do not understand, investments wrapped in insurance products or purchases of individual stocks. We have opted for our concentrated and undiversified risk to be in our individual activities.
â¢ We are aggressively saving in our children’s 529 accounts. When we see the option of saving evenly over 18 years or aggressively for 10 years in a 529 account, the calculations appear to favor aggressive early savings. The 529s operate like a Roth as their income grows tax-free. These 529s need to be de-risked by the time your child is in college to protect against a prolonged market downturn, so saving early and aggressively seems to have the potential to capture market returns most advantageously.
â¢ We live on a weekly spending budget. I often speak of this practice because it is miraculous. The same amount of spending goes to a separate checking account, and we each use debit cards to pay for our weekly needs like gas, food, dry cleaning, and miscellaneous expenses. This weekly budget tells us how much we have to spend and takes all the guesswork out of it. Plus, it’s radically simple, which is preferable to a budgeting system where you have to spend a lot of time recording or categorizing expenses.
â¢ We save in advance for future expenses. Holidays, auto repairs, home repairs, gifts, clothing, health care, and college expenses have a thrift house that gets funded every month. Every six months or so, we reassess how much to put into these savings accounts each month. For example, when we made that last child care payment in August, we increased our education savings for each child accordingly. Whenever a large monthly expense goes missing, my favorite practice is to give that budget injection a home.
â¢ The future of health care is a concern. It could disrupt our plans over the course of our working years due to cost and illness, both of which are beyond our control and arguably out of control in this country. We do our best to sort out what we can control. We eat our vegetables and are both quite active. On cost, we are building a defense to crush the costs of health care in retirement. But we already feel the crush (if you detect panic, you are right). Like others in small business America, we pay over $ 1,300 per month in premiums for our family for a high deductible health care plan. Despite this mind-boggling expense, we’re saving more in a health savings account knowing that as bad as it is now, it will be exponentially worse in two decades. We pay our deductible expenses out of pocket, leaving our health savings account intact. Our health savings account, therefore, is a de facto retirement health care account, as it will be available to pay the premiums and costs of our retirement. We put that money into the mutual fund health savings account in the hope that we can grow that nest egg at least to beat inflation.
â¢ We are talking about money. Before I hear a collective “duh”, I just want to reveal that this is not our favorite talk. Sometimes it can be strained when we don’t agree. Money is emotional. We intentionally talk about our money a few times a year, going through our balance sheet and budget for the next few months.
â¢ Our favorite discussion is time. We love spending time together, with our children, with our families. We like a slower pace. Time is our most precious possession. Every few months, we’ll find ourselves lingering at the table after the kids have run away, going through the list of every lifestyle item we’d give up to save our time. Turns out it’s a long list.
This is not marriage financial advice, and I don’t want it to be misinterpreted. These are the practices that I am glad we adopted in our first decade of marriage. Maybe this list will be different if I’m still here to write a column in 10 more years.
The only advice I would give is to make conscious decisions as a team. Otherwise, your decisions could be made for you via the Joneses (as in, keeping pace), via unintentional lifestyle adjustment or inertia.
Sarah Catherine Gutierrez is Founder, Partner and CEO of Aptus Financial in Little Rock. She is also the author of the book “But First, Save 10: The One Simple Money Move That Will Change Your Life”, published by Et Alia Press. Contact her at [email protected]