Later on today I’m hosting a contest on Couple Money that I hope will help you reach your own financial goals this year. Before I post that later, I want to take some time on what I mean when I talk about financial freedom as couples on this site.
What is Financial Freedom?
It takes some reflection and it takes time to answer questions that you may have about financial freedom. Some people define financial freedom by their net worth or trips they want to take.
Derek from Past Due Radio had a podcast a few weeks ago that address a big deficiency with people and their finances. People are curious to learn how to reach their goals, but not as many are concern with the whys behind their goals.
Imagine your typical day when you’ve reached your financial goals.
What are you doing?
What work excites you?
What are your new goals now that you’ve reached your financial ones?
When you’ve planned the whole scenario out in your head, you can then ask yourself why you choose this scene. Why does this lifestyle appeal to you? Looking at your current situation, you can also see how much you need to adjust to make it happen.
Defining Financial Freedom as a Couple
Now that you have some questions you’ve consider, it’s time for the fun part – coming up with your goals as a couple! As compatible as you may be, expect some differences. It’s a great opportunity to have an honest discussion with one another. It may take time for you to sit down and it out, but it’s well worth it. Being on the same page can be a huge boost for your next steps of building your financial freedom.
Share with each other a list of your debts and assets. You need to have a clear idea of what your starting point is to have a plan as a married couple. Don’t lie about the amount of debt you have, if you’re on the same page you can both work down on paying down your debt.
Create a budget or spending plan together. Your first couple of times doing a budget together will be wrong. All couples have to go through this as they are merging their money, bills, and goals. My personal tip is to add 15% to your budget for things like car repairs, rental insurance, etc. Both of you should have a say on where the money goes.
Open a joint account together. I know some couple have separate accounts, but having some money pooled together encourages you to talk. consider having a joint savings account for some mutual goals, like a house down payment. I also recommend saving up for at least an annual vacation for the two of you. Our main accounts are joint accounts and we both have access to the individual accounts in case of emergencies.
I really believe that an open conversation between a couple can be beneficial beyond just your finances.
Strategies to Reach Financial Freedom
Now you two have to talk about how you’re going to reach your goals. I’ve listed some steps we’ve taken and others have used in their financial journey.
Create a financial system that works. Find an FDIC bank or CUNA credit union in your neighborhood or online that offers a solid checking account and a high interest rates for savings and watch it grow faster.
Make paying off debt a priority. Look again at your spending plan and see how much money each month goes towards debt. If you can eliminate that, you can spend that money instead on your dreams and goals. Use either a debt snowflake, snowball, or even an avalanche to work your way to being debt free.
Build an emergency fund. Start small and tuck away one months’ expenses and then automate a small deposit into your savings while you eliminate your high interest debt.understand that marriage, just like life, has some unexpected events. An emergency fund can relieve a lot of stress and tension in your relationship.
Rent an affordable apartment. Please try to keep your rent as reasonable as possible. If you are in a marriage with a lot of debt already, having a modest amount for rent can be a huge way for you to have money to pay down debt. You can always upgrade later, but it hard to downgrade. We had a very small first apartment (ask our friends), but we were able to pay off the car loan faster because of it. Later on we upgraded to a more spacious place as we had more breathing room in our budget.
Avoid car loans. I talked about why I regretted ever having a car loan and how I plan on not being stuck for 5 years with car payments. If you’re in debt and behind on some of your financial goals, do you best to void taking out a car loan during this process.
Set up free online bill pay with your bank. Most banks and credit unions offer this money and time saving feature. Spend an hour setting up your free online bill pay with your bills, account numbers, due dates, and amounts, and you’ll only need a few minutes a month to keep it up. Automating our finances has a great step for us.
Thoughts on Reaching Financial Freedom
How many of you are working towards financial freedom? What success stories have you had so far? What hurdles did you overcome?