Couple’s Finance Guide
Couple’s finance is a critical topic of discussion to ensure a happy, healthy relationship. How financially fit are you?
With money cited as a top-three reason for divorce, it’s time to breach a subject that Ryan and I have wanted to talk about for a long time: finance for couples.
couple’s finance guide
First off, I don’t adhere to the belief that money talk is ‘taboo.’ Studies show that if we spoke more openly to friends and colleagues about our money, salary, and financial health, there’d be more equality, trust, and satisfaction.
I grew up in a family where we discussed finances openly and objectively. Once I graduated from college, my parents sent me on my way with a full set of William Bernstein’s finance books to manage my finances on my own.
While sometimes daunting, having a fundamental understanding of money management is imperative because finance for couples only gets more complicated.
So, while there are many resources online for getting your finances in order, let’s dive into some sticky topics that specifically surround couple’s finance. Note that I’m not a certified, financial advisor (although there are many out there who would be happy to help!) This is just what we have done, personally, but know that all couples are different. Here’s our story.
1. Get Skeleton-Debts Out Of The Closet
Once, Ryan and I were at a wedding where the happy bride joked, “He got me – and all of my student debt!” As you might have guessed, I didn’t laugh.
With nearly two-thirds of Americans graduating with student debt over $30,000, it’s a big issue. But, there are ways to review your finances tactfully. Honesty is essential, and if you’re building a life with someone, you need to be clear about your debts.
Once everything is out on the table, pay off the highest interest rate debts first (usually credit card debt), and go from there.
2. Be Clear About Financial Goals And Money-Handling Styles
This couple’s finance tip comes from Duo Lifer, Rebecca S.:
As a couple, it’s important to be transparent – about debt, savings, styles, and fears.
Some people stomach riskier investments while others play it safe with bonds and well-padded emergency funds. Whatever your financial management style is, have an upfront discussion as a couple. Find a compromise that works best for you.
In addition to a discussion about debts, talking about your assets is crucial. Assets include your salary, savings, investments, properties, etc. Once you’ve listed everything out, it’s easier to make a retirement and life spending plan that makes sense for the two of you.
3. Save Early And Often For Retirement
While saving for retirement can be done individually, like with your company’s 401(k) policy and an IRA, get on the same page. You never want a rude awakening if your partner has no retirement savings while you’ve saved diligently for years.
When Ryan and I were dating, we agreed to save 25% of our income after taxes for retirement, in addition to maxing out our companies’ 401(k) matching programs and HSA. Of course, this is just what we did. What works for you may be different.
We calculated our target retirement savings goal by using online calculators (like this one from Vanguard) which factor in lifestyle, target retirement age, and expected investment returns.
For ultimate simplicity (but with returns statistically stronger than actively managed funds) we recommend Vanguard’s low fee, passively managed index funds. We personally invest in the Vanguard Target Retirement 2050 Fund, which is comprised of a mix of stocks and bonds. The mix is periodically rebalanced and the stock to bond ratio adjusted as the target year approaches (in our case 2050 when we’re 62 years old).
Another perk with index funds like this is that your money isn’t “officially” tied up, like it is with an IRA which imposes fees if you cash out early. Again, this is what has worked for us personally and is a common route recommended by many financial authors and advisors. Whatever you choose, make sure it makes sense for you and your partner.
4. Schedule Money Talks With Your Partner
Some couple’s finance advice from Duo Lifer, Gunjan B.:
Schedule a time every quarter to talk about finance as a couple. Keep a spreadsheet of updated numbers for all of your accounts to talk about them together.
Having periodic, big-picture reviews is key to an organized, optimized financial life. After squaring away for daily living, retirement and emergency funds, think next about other investments (Vanguard’s index funds are still great options).
Ryan and I have a document to track our finance as a couple. The spreadsheet includes our current accounts and our anticipated, future contributions. It covers situations like buying a house, purchasing a car, having children, saving for their college educations, and general living expenses.
We get it. It’s daunting to talk about financing these future events as a young, married couple. However, it’s something that we had to discuss before quitting our corporate jobs. We knew that we would be leaving behind stability and taking a pay cut while building our business, so big-picture planning became necessary. It has brought us peace of mind.
5. The Role Of Personal Versus Joint Accounts
One of the biggest couple’s finance talks is if and when you should create a joint bank account. This is a personal decision, and we know lots of married couples who go both ways. Some do. Some don’t.
Ryan and I maintain personal bank accounts as well as a single joint account.
Before we started our business, our salaries were deposited into our personal bank accounts. We transferred an agreed-upon percentage (50% for us) that went into our joint account. This joint account covered expenses like rent, restaurants, vacations together, and bills. The remaining 50% of our salaries were divided evenly into personal spending and our Vanguard Target Retirement 2050 Index Funds.
Our Favorite Bank
Shop around for the best bank accounts with the highest interest rates. We strongly recommend Aspiration Banking, the favorite of Leonardo DiCaprio as well. Aspiration savings accounts give 1.0% APY interest rate on accounts that deposit at least $1000 a month into them or have a balance over $10,000.
Additionally, they reward you when you buy from socially and environmentally-conscious companies, promoting your financial health and the health of the planet. Aspiration is done all online and through your phone, but will reimburse you for any ATM fees worldwide. In our biggest month, they reimbursed us on over $200 spent on ATMs in Argentina!
Does your checking account give you $15+ of interest each month? Here is our referral code with Aspiration Banking which gives you $25 into your account and an additional $25 towards a charity of your choice. Happy banking!
6. Know Where Your Money Goes.
This couple’s finance tip comes from fellow Duo Lifer, Josh Y.:
While tedious, tracking finances as a couple is a necessary first step in managing your money. The good news is, technology can monitor this for you. As we always say, you can’t optimize without knowing your data.
We use Mint.com and the mobile app to monitor our finances as a couple. You can sign up for a free account here. Next, link all of your accounts to keep them in one place (bank accounts, investment accounts, debit cards, credit cards, loans, mortgages, etc.) Then, Mint will automatically share how much you spend on categories like restaurants, travel, groceries, gas, entertainment, and beauty.
Why Tracking Couple’s Finance Is Essential
There are three reasons.
1. First off, having a place where all of your transactions are kept is like keeping a money journal. It is a wake-up call if you’re spending more in one area than you thought. Or, you may find hidden monthly fees or monthly subscriptions that you can cut out.
Speaking of monthly subscriptions, the $2.99 per month that we spend on 1Password is money well spent. If you’re not encrypting your passwords as a couple, we highly recommend you start.
2. Secondly, it allows you to optimize credit card rewards. If most of your money is spent on travel, it’s wise to find a credit card that gives the most cash back on gas, flights, and hotels. The Mint app has a handy calculator that automatically recommends the best credit card for your spending.
3) Finally, a couple’s spending record helps you set up a realistic monthly budget. Ryan and I haven’t always kept a budget, but now that we consistently do, it helps us optimize our living and cut out unnecessary expenses. Plus, we don’t ever have to “feel bad” about buying tamarind margaritas at a rooftop bar. As long as it’s in our budget, we can do what makes us happy while staying responsibly on track.
7. The Big P: Prenups
While prenups used to be the ultimate taboo, we’re pleased to share that they’ve become more and more common amongst millennials.
Prenuptial agreements, in a word, are prudent. They are for everyone’s protection, and no, they don’t mean you’re any less committed to the marriage. We wish prenups were more prevalent and an open topic of discussion.
One understated benefit? Prenups are a fast-track way of learning about each other’s finances and planning for the future. While filing our prenup, we not only shared our debts and assets but clarified which accounts were individual versus shared, and which accounts would pay for what.
Whether you like the idea of a prenup or not, it forces financial discussion as a couple and hashing out the nitty-gritty details of how you’ll manage your money moving forward.
Yes, there is a cost to prenups as both parties need different lawyers. Depending on the complexity of your accounts, expect to pay one or two thousand dollars on the low end. Don’t worry, it is money well spent.
8. How To Approach An Income Disparity.
If one partner earns significantly more than the other, it can breed discontentment and power struggles. Managing money is a family affair, and therefore financial decisions should be made as a couple. Don’t roll over and let the other person “win” because it’s “their” money. No, it doesn’t work like that.
While I am the official “family money manager” — managing bills, curtailing unnecessary spending, and tracking investments — all financial decisions are made together.
An easy way to approach income disparity is by splitting everything (from longterm investments to daily expenses) proportionally. If your household income is $300,000, comprised of your $100,000 salary and your wife’s $200,000 salary, then you pay 33% of the bills while your wife contributes 67%.
Truth is, you can get as granular as you’d like with this, and many money strategists dive into details on this topic. For example, if one person uses the majority of an item (like a subscription to ESPN), then they might pay a more substantial proportion. Or, you might make blanket terms like one person covers housing expenses while the other covers transportation.
Whatever you choose, it’s crucial that it feels even and fair.
Some couple’s finance advice from Duo Lifer, Alvin Z.:
Diversify yo’ bonds.
We agree, and also say diversify everything else while you’re at it. Diversify your investment portfolio and your income streams. We’ve talked about why you need a side gig before as a way to explore a passion-project-turned-job (hello, Ryan and Alex Duo Life) as well as investing in yourself and your ideas. Additionally, we’ve been transparent about how we are making money online. There is a world of opportunity!
As famed personal finance advisor Ramit Sethi says, “Forget frugality: focus on earning more.”
Think outside the box on ways to diversify your income, your investments, and savings. Whether that means house sitting while traveling, creating passive income online, selling your craft, investing in real estate, earning money from decluttering your home, or focusing on new investments, get creative.
And, of course, start by asking your boss for a raise and use that money to fund your new project.
10. Ask a Financial Advisor
Some couple’s finance advice from Duo Lifer, Jenna S.:
Many people think that having an advisor is just for the rich, or that meeting with one is scary, but that’s simply not the case. An advisor should be transparent and should focus on education so you have the information necessary to make sound financial decisions for your unique situation. Ultimately, the client should trust working with their advisor and should feel good about the relationship that they’ll hopefully have for decades to come.
Your financial decisions as a couple is a very personal topic, one that both you and your partner must be comfortable with. Asking for help, guidance and advice from a professional, certified financial advisor is a smart idea no matter where you are in your financial planning journey.
11. Get Well Read
Want to dive deeper and gain financial knowledge in your coupledom? Here are a few of our favorite finance and money management books and resources. Do you have a favorite to recommend? Comment below. We’re all ears.
Rich Bitch by Nicole Lapin
The Four Pillars of Investing by William Bernstein
Rich Dad Poor Dad by Robert Kiyosaki
I Will Teach You To Be Rich by Ramit Sethi
Make Your Kids A Money Genius Even If You’re Not by Beth Kobliner
Think And Grow Rich by Napoleon Hill
The Total Money Makeover by Dave Ramsey
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Hey we’re Ryan and Alex
The creators of Ryan and Alex Duo Life. We are a husband-wife duo and “lifestyle engineers.”
After eight years working in the corporate world, originally as engineers, we left our high-powered jobs to tackle our true passion — helping couples engineer their best lives.
The synergy of our engineering minds and ten years of health coaching experience produced Ryan and Alex Duo Life. Our mission is to help you transform your bodies, minds, and relationship, as a couple.