Finances can be a major source of contention between couples and a common reason for divorce. What are some of the typical mistakes couples make and how do you avoid them?
Tips on investing wisely as a married couple:
1. You have separate advisors when you get married and over time you work with only one advisor, but both of you do not attend the meetings.
> Both spouses should attend these meetings to ensure both of you are aware and participate in all investment and financial planning decisions.
2. You have too many accounts, including IRA’s from various employers, 401 k plans, investment accounts, etc.
> Simplify your accounts by using financial planning principles so that both spouses are knowledgable about how each account plays a role in your financial plan.
3. You think your family is doing fine financially because you are able to pay bills and other expenses, save money, and contribute to your retirement accounts. But you do not know your overall financial picture.
> Meet annually as a couple and have a business meeting to review your financial progress for the past year, including preparing a net worth statement, discussing your family budget, and writing your short and long term goals.
4. You commingle your inheritances.
> These inheritances are now part of the community you have built with your spouse and are very difficult to extract in divorce.
5. You do not have a systematic savings plan to meet your goals for retirement, vacations, gifts, etc.
> It is critical to have a financial plan that includes a clear roadmap for retirement as well as a realistic budget that the family can manage.
6. Your cash is in various institutions, and you don’t have a plan to invest or save this money which may be earning low interest rates on your funds.
> Review the performance of your accounts at least annually and reevaluate your financial plan to ensure your investments match your goals.
7. As a couple you did not choose your financial advisor by interviewing this person and determining together the services you will receive.
> It is critical to select a financial advisor that you trust and can work with both of you to achieve your financial goals. The services advisors offer vary greatly and include how the adviser is paid, creating an investment policy statement, having an annual review, and setting the diversification and asset allocation strategy for your money based on your risk tolerance.
8. You do not know how your spouse views money and finances.
> Finances are often a problem area for many couples. Knowing each of your money personalities is crucial to understanding how each of you view and spend money. Your risk tolerance also reflects how you make decisions about saving and spending as an individual and as a family.