Reaching your goals starts with saving for it.
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Do a quick search for #RelationshipGoals and you’ll find plenty of social media posts with picture-perfect couples strolling hand-in-hand on the beach or doing something adorable in an exotic vacation spot.
But you know what else should be a part of relationship goals? Financial planning. Talking about money may trigger instant dread. But it’s important for young couples to get on the same page when it comes to their finances because what’s worse than talking about money is fighting about money.
Whether it’s marriage or a long-term partnership, couples who share their lives together often have to tackle their finances together too. Your savings, debts and financial goals may not be just your own any more.
Of course, every couple has their own approach to managing finances. Some combine everything, while some choose to manage their money separately. According to a 2018 Policygenius survey, one in five people take the latter approach. Then there are others who take the hybrid option, merging only certain accounts.
Regardless of the approach you choose, for the purposes of this article, we’re assuming you have some desire to save together as a couple and to combine at least some aspects of your financial life. So here are five tips to help young couples manage their savings together.
Whether it’s feelings or finances, being able to talk openly with your partner is key to a healthy relationship. “While not romantic, these conversations can save a lot of future heartache,” said Jill Schlesinger, CFP® and host of the Jill on Money podcast.
No doubt love and money is a combustible combo. Relationship experts have noted that the issue of money is consistently among the top reasons why couples fight. But talking about money doesn’t always have to result in an argument. According to Schlesinger, “communication and empathy are the go-to tools that will help you navigate the process.”
A part of this means making sure you’re both on the same page when it comes to your savings priorities, financial goals and respective financial responsibilities. Schlesinger has suggested sharing some essential numbers with each other like how much money and debt you’re each bringing to the table. Having a clear picture of your financial circumstances could help you better plan for shared goals, including saving for vacations, buying a house or raising children.
Need a referee when talking about this stuff? Consider bringing in a financial advisor to provide some professional guidance.
Now that you’re sharing your life with another person, it’s time to revisit your budget. As you draw up a new plan to see how much of your money is going where, this is a good time to discuss how you and your partner will cover expenses and where to direct your savings each month.
In short, who is going to be responsible for what?
There are different approaches to this question. For example, when it comes to expenses, one option for couples who have chosen not to combine everything would be to open one joint account to which you both contribute equally and then that account would be used to pay for shared essentials like rent, utilities and groceries.
Ok, so you don’t actually have to bust out a whiteboard and draw a half-baked pie chart when it comes to budgeting. You can get an assist from the budgeting apps that are out there. Having a budget can help you determine how much will be left over each month to allocate to your savings accounts.
Reaching your goals starts with saving for it.
Now that you’re operating as a power couple, you and your partner should sit down and figure out your savings goals. First, you should make sure your rainy day fund is where it needs to be. Remember, the general rule of thumb is to save enough to cover three to six months of your living expenses.
For your other savings goals – like buying a home or saving for a baby – consider opening up additional savings accounts and set up a recurring deposit. By automating your savings, you don’t even have to think about putting money aside each month. In addition, you may also want to look into opening a certificate of deposit (CD) account and deploying a CD laddering strategy to maximize your savings.
Thoughts about retirement might take a backseat while you and your significant other are thinking about more immediate plans like buying a home and starting a family. But don’t let retirement savings fall off the radar completely. Remember, the sooner you put money away for retirement the better, as your money will have more time to grow. Compound interest, anyone?
Hopefully by now, you’re earning more than you did when you were first starting out in your career. If your budget allows, kick those retirement savings into high gear and max out your contributions whenever possible (if you’ve already maxed out your 401(k), consider opening an IRA).
Even if you can’t max out, try to dial up those contribution amounts gradually. Some 401(k) plans include an “automatic escalation” feature that will automatically increase your contributions by a certain percentage over time. Take advantage of that as well as any employer match arrangements. Every little bit helps.
With the increasing cost of higher education, there’s a chance you and your significant other might still be paying off undergraduate or post-graduate debt.
Financial freedom is elusive as long as these bills are still hanging over you. That’s why a part of your budget should be dedicated toward paying off debt. Keep in mind, too, that it is also just as important to avoid taking on any unnecessary debt. So yes, treat yourselves, but try to avoid lifestyle inflation.
Sitting down together at the kitchen table crunching numbers and looking over financial statements may not be the most romantic thing you do as a couple. But getting a clear picture of where you and your partner are when it comes to savings and debts may save you from bad surprises and marital tensions down the road.
Once you get to know each other financially, you can better divide up your financial responsibilities. For example, maybe one of you is more skilled at handling investments while the other is more disciplined when it comes to keeping everyone on budget. Being able to talk openly about money and tackle your financial goals together head-on will help set a positive and supportive tone in your marriage for the years to come. Now that’s #relationshipgoals.
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