When you commit to a long-term partnership or marriage, you’re essentially committing to join forces to work towards shared goals and to build a future together.
But research shows that many couples struggle with openly discussing finances and planning their financial future as a team.
According to the “Everyday Wealth in America” 2022 report, only 37% of couples actually delve into the details of their financial goals, and 38% regularly talk about their day-to-day finances.
This lack of communication makes it hard to accumulate wealth together when partners have different money habits and perspectives.
As a Certified Financial Planner, I’ve worked with many couples over the years. Here are some of the best strategies to help couples align and build wealth together:
1. Communicate
If you and your partner are committed to accumulating wealth, you need to first prioritize transparent communication, align your financial goals, and establish a joint strategy that respects both of your perspectives.
It’s nearly impossible to have a shared vision and overcome the challenges to achieve long-term financial success if you’re not working together as a team.
2. Live Below Your Means
One of the most effective ways to build wealth is to live below your combined income.
Agree on a reasonable budget that lets you to save a significant portion of your income each month for investments. Avoid lifestyle inflation as your income rise over time.
3. Pay Off High-Interest Debt
Before investing aggressively, focus on paying off any high-interest debt like credit cards. The interest rates on this debt can easily outpace potential investment returns, which is a major drain on your finances.
4. Max Out Retirement Accounts
Maximize all of your tax-advantaged retirement accounts like 401(k)s and IRAs.
Contribute enough to receive any employer matching funds, which is essentially free money. Invest in stocks for growth while you have a long time horizon.
5. Invest for the Long-Term
If you’re under 40, you can afford to take on more risk for higher potential returns. Invest the majority of your portfolio in stocks, stock mutual funds, and ETFs that track the overall market. This gives your money more time to grow and recover from any market fluctuations.
And if you’re over 40, you still need your portfolio to grow so that you don’t outlive your investment savings. You’ll want to have at least half of your portfolio invested in stocks, but you may want to consider a more balanced approach.
Consider allocating some of your investment to bonds, which are generally less risky than stocks. This can help provide stability and protect your principal during market downturns.
6. Diversify Investments
Although it’s a cliche, it’s also true — don’t put all your eggs in one basket.
Maintain a diversified portfolio across different asset classes like stocks, bonds, and real estate. This can help manage risk while letting you benefit from different market cycles.
7. Automate Investments
Set up automatic transfers from your checking account into investment accounts each month.
This way, you’ll consistently invest without having to think about it. Automating makes it easier to stick to your plan.
8. Keep Learning
Continue educating yourselves about personal finance and investing as your goals evolve. You can also get guidance from a financial planner or trusted financial advisor when needed to check in and see that you’re making smart money moves together.
Couples
Research has shown that married or cohabiting couples tend to accumulate more wealth over time than their single counterparts. Several factors for this are:
• Shared resources and economies of scale
• Tax advantages
• Dual incomes
• Life stage — People tend to get married or form committed partnerships later in life when they are more financially established in their careers.
Final Thoughts
If both partners can stay disciplined, keep your communications open, and commit to your shared vision, you’ll have a high chance of accumulating substantial wealth over time as a couple.
