Working towards financial goals as a couple means having a shared goal, something to work towards, to encourage each other and hold each other accountable.
In this guest post, Karen Hackman, a finance coach and the founder of Money and Marriage will cover five powerful financial goals for couples.
1. Talk about money
I firmly believe that you have to talk about money BEFORE you get married. If you are talking about marriage but haven’t talked about money, then press pause on your marriage talks and talk about money!
What are your earliest money memories?
How much do you save and invest each month?
Do you have any debt?
What does your rich life look like?
It’s by getting to know each other’s thoughts and values when it comes to money, that you can really get to know each other.
What if your spouse doesn’t want to talk about money?
If you are struggling to talk to your spouse about money, my FREE E-book How To Get On The Same Financial Page as Your Spouse is a great resource to get started. It’s designed to help you navigate the complexities of money management and create a unified approach to your finances.
And then, when you are both on the same financial page…
2. Set financial goals as a couple
I know that goal setting is not everyone’s cup of tea and that’s ok, but just bear with me for a moment.
When you set financial goals as a couple, you are working towards something as a team. You are encouraging each other and holding each other accountable.
Short-term financial goals
Your short-term goals should consist of creating a budget, clearing your debts, and starting an emergency fund.
Once you figure out a budget, it’s important to start thinking about how you can reduce your debt. Once your debt has been cleared, you could then put that money towards some of your mid-term and long-term goals.
Mid-term financial goals
Mid-term goals are what tie your short-term and long-term goals together. Some mid-term goals may be to finish paying off your student loans, save for your first home, or save for your dream holiday!
Keeping with your budget and paying off the majority of your debt during your short-term goals, will give you more cash flow to set aside into a savings account to make some of your mid-term goals a reality.
Something that is often overlooked is to plan for the unexpected and ensure you have adequate and appropriate insurance for your needs (such as life and disability insurance). This way, if the unexpected happens, you are covered, which can offer you some peace of mind.
Long-term financial goals
Some examples of long-term goals include: paying off your mortgage, saving for your child(ren)’s education, and retirement.
When you have children, you always feel like you have forever to start saving for their education fund; however, in the blink of an eye, they are eighteen and graduating from school! Setting up an investment account as a long-term goal will help you prepare for that day.
A popular long-term goal is to be mortgage-free before retiring. Once that financial freedom happens, it allows you to set more money away, allowing you to enjoy your retirement years to the full.
Lastly, saving for retirement is the most important long-term goal. When you are twenty with your first job, retirement seems so far away, but before you know it, the day is here! Setting up a pension at a young age ensures that you’ll have a more comfortable retirement and the financial freedom to enjoy it!
3. Make a budget together and track your spending
Once you’ve set up your financial goals as a couple, it’s important to make a budget. A budget is telling your money where to go instead of wondering where it went!
When we started budgeting together, we could clearly see the bigger picture and how much money was being wasted on unnecessary things.
We were able to channel our money into the things that were important to us.
To get started with your budgeting journey, you might find my ready-made budgeting spreadsheet template useful.
4. Live on less than you earn
Living below your means is the cornerstone of financial stability and another important financial goal for couples. It ensures that you have a buffer to handle unexpected expenses, emergencies, and unplanned life events. When you’re not spending everything you earn, you’re better prepared to navigate financial challenges without going into debt.
When you consistently live within your means, you have the opportunity to allocate extra funds toward paying down existing debt. Whether it’s student loans, credit card debt, or a mortgage, reducing debt is a critical step toward achieving financial freedom.
By spending less than you earn, you create extra income that can be allocated towards savings and investments. This allows your money to grow over time, helping you achieve financial goals like retirement, buying a home, or starting a business.
Financial stress is a common source of anxiety for many people. Living within your means helps alleviate this stress by providing a sense of financial security. You’re less likely to worry about making ends meet when you have a financial cushion.
It sounds so simple, doesn’t it? But the truth is that not many people live on less than they earn. Make it your goal to review your numbers and live on less than you earn!
5. Make getting out of debt a priority
When facing the challenge of dealing with debt, it’s crucial to prioritise your path to financial freedom. There are two primary strategies to consider: the snowball method and the avalanche method. Let’s delve into these approaches in more detail.
The Snowball Method
The snowball method involves tackling your smallest debts first and paying them off as rapidly as possible. Once you’ve successfully cleared a small debt, you redirect the funds you were allocating to that debt toward the next-smallest debt on your list. This process will continue until all your debts are fully paid. As you transfer the money from the smallest balance to the next one, the amount accumulates or “snowballs,” accelerating the rate at which you reduce your debt.
Many people prefer the snowball method due to its psychological benefits. Witnessing debts being eliminated quickly gives you a sense of accomplishment and positively impacts mental well-being.
The Avalanche Method
In contrast, the avalanche method focuses on prioritising debts with the highest interest rates. With this approach, you target the debts that are incurring the most significant interest expenses first. Once you’ve paid off the debt with the highest interest rate, you allocate the freed-up funds to the next debt with the next highest interest rate, and so forth, until all your debts are paid off. This method is designed to minimise the total interest paid over time by addressing the most expensive debts first.
The avalanche method is beneficial for those who want to minimise the long-term financial cost of their debts. It is a strategic approach that can result in significant interest savings.
Ultimately, the choice between these methods depends on your financial goals, preferences, and the specific nature of your debts. The snowball method offers a psychological boost by quickly eliminating smaller debts, while the avalanche method is more financially efficient by targeting higher-interest debts. Carefully consider your financial situation and mindset when selecting the most suitable approach to conquer your debt.
Work with a finance coach
So, in summary, working with your spouse on these financial goals for couples can be great for your marriage. You are communicating, working together, supporting each other, holding each other accountable and working towards a better financial future. What’s not to like?
But if you struggle with your shared goals, it might be worth working with a finance coach. While finance coaches aren’t marriage counsellors, working with one might be one way to help keep the financial part of your relationship healthy. For example, a finance coach can help you with the following:
- Create a budget
- Establish and prioritise your financial goals and provide you with a solid plan to achieve them
- Stay on track with regular reviews and reminders
- Provide strategies to manage debt
- Adjust your budget, goals and strategies as your life changes
If you’re tired of living paycheck to paycheck, you can’t seem to save anything, you have no plan for your money and you’re ready to make a positive difference with your finances, email Karen at Hello@moneyandmarriage.net . She can help you create a plan for your money, that includes clearing your debt, building an emergency fund and saving for something fun!