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Finding an Investment Strategy That Works for Us

investing tips couples

Every so often it pays to go ahead and review your portfolio. With 2014 over, I spent this week checking up on things to make sure we’re staying on course with our investments. Since I’m looking at our accounts, I thought it might be helpful to explain our process and strategy.

Index or Actively Managed

For our accounts we prefer to go with passive investing as our overall strategy. (We cant’t completely acheive this as my husband’s 401(k) has limited options.)

The biggest difference with index and actively managed funds or ETFs are the goals. With index, you are simply trying to track whatever benchmark you’ve chosen. Either all or a representative sample of a specific index are purchased. Most of this is automated.

Actively managed’s goal is to beat the market or at least those similarly constructed funds. A fund manager works with a team to research and try to predict what securities to invest in.

In theory, most people would love to beat the market, but looking at history and the numbers, there are plenty of investors who come out ahead by going the index route. Two big reasons are:

There are exceptions of course, but most people don’t have the time and resources to make active investing a better option over the long term.

What We Invest In

For my retirement portfolio, my overall investments is based on the David Swensen‘s model. He’s Yale University’s Chief Investment Officer and author of Unconventional Success: A Fundamental Approach to Personal Investment.

For personal investors, he recommends a portfolio that includes:

  • Domestic Equity (30%)
  • Real Estate Investment Trusts (20%)
  • Foreign Developed Equity (15%)
  • U.S. Treasury Notes and Bonds (15%)
  • Emerging Market Equity (5%)
  • U.S. Treasury Inflation-Protection Securities (TIPS) (15%)

As you’ve probably figured out, this portfolio’s strength in how diversified it is without having to a ton of securities. In fact you can construct this portfolio with a handful of index funds or ETFs, making it incredibly easy to track and manage.

  • US Total Stock Market (VTI)
  • Emerging Markets (VWO)
  • REIT Index (VNQ)
  • Total Bond Market (BND)
  • Short-term TIPS (VTIP)
  • FTSE All-World ex-US (VEU)

My husband’s retirement portfolio is similarly diverse.

  • US Total Stock Market (VTI)
  • US Large-Cap Value: VTV
  • US Mid-Cap Value: VOE
  • US Small-Cap Value: VBR
  • Developed Markets: VEA
  • Emerging Markets: VWO
  • US High-Quality Bonds: BND

There are other simple portfolios that you can use for your own investments, just make sure you understand the logic behind it.

Where We Invest

My husband has his IRA stashed away at Betterment.  Basically with them, investing is as easy as depositing money into a savings account. I was able to set up his account in about 20 minutes and it takes even less time to manage.

For my husband who checks his account even less frequently than I do, Betterment is a good fit as it automatically re-balances his portfolio. That helps him to stay on his long term plan without having to constantly check in.

While no investment company can be everything to everyone, I believe that Betterment can offer an easy solution if you’re someone who wants to  your IRA up and running quickly without having to hover. Check it out and see if could be the right option for you.

I use Vanguard to handle my investments. I love them; they have numerous funds that have low fees, meaning more of your money goes towards growing for your benefit. Vanguard is known for having great customer service and being a valuable resource when it comes to investing. Check them out today if this sounds like something you’re interested in.

How We Track Our Investments

Even though we are passively investing, we still want to be on top of our finances. That means we have a system to alert of us of our progress and if anything usual happens. Right now my tool of choice is Personal Capital.

Besides offering a free portfolio check-up Personal Capital also has wonderfully useful ones that can help you optimize your investments including a 401(k) fee analyzer, asset allocation tool, and the latest – a retirement calculator to see if you’re on track for your goals.

Here’s a thorough review of Personal Capital, but if you want to jump in and optimize your investments, you can sign up for free here.

Thoughts on Your Investment Strategy

I’d love to see how you’ve come up with your investment strategy. How long did it take for you to get it set up? How often do you manage it? What resources do you recommend on learning more?

2015 – The Year of Growth and Better Habits

couple money grown net worth

With so much going on this upcoming year, I was looking for a fun way to build our finances in 2015. To help keep us accountable for this year, I’ve signed up for MoneyStepper’s 2015 Savings Challenge.  I can’t wait to see how things go this year for us.

In case you haven’t heard of it, the two main goals of the challenge are:

  • Grow Net Worth
  • Save % of Net Income

I already sent in our annual goal and every month we update our progress. Filling out the spreadsheet, I went back and forth a bit with it – I want to be ambitious, yet considering the big changes I was a little hesitant to go crazy.

In the end though, I decided better to be optimistic than play it safe. After all it’s supposed to be a savings challenge :) So for 2015 we’re shooting to increase our net worth by 25% and have a 15% savings rate.

To keep our joint finances easy to manage and respect my husband’s take on things, I came up with a plan that would put us in the ballpark of getting it done.

The Plan to Achieve It in 2015

If you’ve been listening to the podcast this past week you know that I’m into not just making goals, but creating and changing habits. With that in mind, I’m going to get into how we are going to make this happen.

Grow Net Worth by 25%

Pretty much people can increase their net worth  in two ways – increase assets and decrease liabilities. We plan on tackling both this year – we will be saving more in the joint accounts and we will be paying off the last student loan.

Make Savings a Monthly Bill

For the assets we want to bump up savings and we have a couple of reasons why we’d like to have a larger than normal balance.

First off, we are still awaiting the arrival of our second kid (due later this month!). We’ve saved enough to cover the hospital bill and some other essentials. While we have a general idea of what expenses can be based on our first child, there’s still a big unknown as my work schedule will certainly change with two little ones.

We have pseudo-plan for what we’d like to do, but only time will tell if it’s a practical system. Having some money set aside can be a huge stress reliever as we make this transition.

Second. at some point this year we’d like to sell our current place and buy a another house more conveniently located. Our goal is to reduce our monthly expenses in the long run, so it would mean having a substantial down payment for the next place.

Increase Investing

With the new year, it’s time to increase my investment contributions. It won’t be much since I’m focusing on other things, but it’ll be nice to do something productive on this front.

Pay off the Student Loan

With liabilities, this is the year we finish off the student loan. We have been sending in extra payments twice a month in addition to the regular monthly ones, but things have been on automatic and we haven’t pushed ourselves on it.

Things had slowed down and it was mostly due to loss of urgency on our part. The interest rate being as low it is didn’t really make either one of us feel like we had to get rid of it that much faster.

To accomplish this I will be changing the extra payments, bumping them up 20% and making them weekly. That will speed things up, but it won’t be enough to pay it off by itself. What I’m working towards is building up the business income and using the growth to take care of student loan.

Just why are we putting the energy on big quarterly payments with the student loan? I think the main reason is that this year will be a bit hectic and more unpredictable with the new baby and work arrangement. While I have every intention to work hard and get my business growing, I have no idea how things will actually play out and I’d rather have some cushion around to ride out any rough patches.

Save 15% of Income

This is a more direct goal – we just have to commit to the plan. We will dump this money into a high interest savings account and access it as needed for both the student loan and the house down payment.

We’re making this a regular part of our monthly budget by scheduling automatic transfers into joint savings.

Thoughts on 2015

Okay,  shared some of our goals this year; your turn now :) I’d love to hear from you – what are your big goals for this year? How do you plan on achieving it? Are you doing the Money Stepper Savings Challenge?

Change Your Habits and Own Your Finances

couple money change habits

Today’s post is based on a recent Couple Money Podcast episode on Owning 2015 and Your Finances.

Raise your hand if you’ve ever made a goal and before the week or month was over, you quit. Yeah, me too.

Why is it despite some of our best intentions we fail at achieve our goals? While external factors can affect us, if we’re completely honest I think most of us admit that the fault lies with ourselves.

Many times we set ourselves up for failure because we don’t address what really needs to be changed. Most times we don’t need more willpower, we need better habits.

How to Change a Habit

We underestimate the power of habits and one reason is how easily we slip into them. NY Times reporter Charles Duhigg studied the neuroscience and psychological research behind our routines in his book The Power of Habit.

Duhigg cited a study done at Duke University in his book where researchers found that over 40% of the activities we engage in on a daily basis is a habit.

What Makes a Habit a Habit?

In essence there are 3 basic components to habits – cues, routines, and rewards.

  • Cues – triggers for behavior
  • Routine – behavior that you want to change
  • Reward – why you’re doing this behavior

If you want to change the routine, you have to look at how you can adjust the cue and the reward.

Let’s say you want to do a better job with saving for retirement. You want to contribute regularly to your Roth IRA.

What’s Your Cue?

Basically cues fall into a few different categories

  • Time
  • Place
  • Presence of Certain People
  • Emotion
  • Preceding Actions

Most of the time, we’re not immediately aware of what the cue so when you first try it out you may have to play around to see what your personal cue is.

Indulge in Your Rewards

As much as we like to think we achieve goals based on their value, humans tend to seek out rewards for their behavior or at the very least avoid punishment.

To jump-start the new routine you have to use an extrinsic reward to help you through the transition until the intrinsic reward kicks in. Think of it as letting yourself have one of your favorite treats after a workout until you start to notice and feel the difference of being in better shape.

To be most effective, choose a reward that you’d really enjoy and take it quickly so you mind associates it with the new routine.

Let’s say for every month you reach your IRA contribution goal, you go out that night to one of your favorite restaurants and celebrate with friends.

Carefully pick out the restaurant, which friends to invite, and maybe a theme for the evening. The idea is that your excitement at the chance to celebrate will motivate you to make that contribution. No investment, no night out.

Creating New Routines

So just what behavior can you add or change to get you to contribute to your IRA?

If you’re looking to change your behavior, try to make it as easy as possible. So if you haven’t already, open an IRA with a company that allows free automatic transfers and that will allocate that money for you.

Set it up so it will be sent to your IRA as soon as your paycheck clears.

In essence, that’s it. Changing a habit means breaking it down and tweaking the cue and the reward so you will stick with it long enough for the new behavior becomes a part of your routine.

Thoughts on Changing and Making Better Habits

What are some of your financial goals for this year? What habits are you looking to change?

The Best Couple Money Posts of 2014

couple money 2014 top posts

With 2014 coming to end in a couple of weeks, I wanted to take a minute to say thank you so much for your support. Your comments and stories have been so encouraging and motivating to me as we reached our fifth anniversary this year. I truly couldn’t have reached this point without you.

In case you’re a new reader (welcome!) I want to share some of the most popular posts from Couple Money this year.

Family and Finances

Money is simply a tool for us to use and one major goal is to take care of our loved ones. With a toddler and another one one the way, we try to keep our family expenses steady so when things come up (part of life) we can tap into our buffer.

We also look for ways to draw closer with our finances – yes it’s possible. There are some wonderful services and companies that can simplify the essentials.

We’re looking forward to making 2015 an even better year by finally getting rid of our student loan.

Saving and Making Some Cash

Part of building a buffer with your budget is making sure you grow your income and cut back on needless expenses. Easier said than done, right?

That’s why I enjoy writing about both here on Couple Money – so the two of you can find a way to each your financial goals sooner rather than later.

How do you make some more cash on the side?

Money Questions

One of the biggest joys I have writing on Couple Money is hearing from you here on the site, through email, or on social media. Here are just a few questions I received (and some I had myself) about money.

Let me know if you have a question you want me to answer so you can reach your money goals in 2015.

Couple Money Podcast

Before wrapping up my review I have to mention that one of the biggest changes with Couple Money has been the launch of podcast.

Real couples, real stories – that’s my favorite part of the podcast right now.

It’s my hope that the podcast will help you two reach financial freedom together. If you haven’t caught an episode, please download a few or subscribe.

What topics and money questions do you want to see covered on the show? What stories do you want us to cover?

Your Couple Money Favorites in 2014

Thank you again for a fantastic year! Reviewing what I’ve written this year was so much fun. Now, though, I’d love to hear from you – which are your favorite Couple Money posts from 2014? Why? Any topics you’d like to see tackled here in 2015?

Finding Great Deals on Hotels

save on beach vacation hotels

Today’s post is based on a recent Couple Money Podcast episode on Travel Hacks for Your Next Vacation.

One of the biggest hurdles people have with taking a trip or vacation is the costs.  Depending on where you go, the biggest expense can be your lodging. The good news is it doesn’t have to be. There are several ways you can find the perfect spot for you.

Three of my favorite ones include:

I’ll go over each of them so you can decide which options work best for you and your traveling circumstances.

Be Willing to Be Flexible

Besides where you go another huge factor in price is when you go.  Two of the best times to go somewhere is during the off and shoulder seasons.

Off season travel doesn’t mean you have to go when the weather is miserable. Few of my friends travel to Ireland during the winter and loved it.

An alternative that may be more appealing to you is traveling during shoulder season. It’s that in between time between off and peak seasons when the weather is more cooperative and tourists are relatively manageable.
You probably won’t save as much, but it’s still better deal than visiting during the popular seasons.

Decide between yourselves if either works best for your budget and travel temperaments.

Be on Top of Your Hotel Bids

Just like with flights and car rentals, you can bid on your hotel stay. Some people are hesitant about signing-up because they don’t know which hotel they will be getting until the booking is made, but there are ways to make sure you get a great hotel at a fraction of the advertised price.

First off, with Priceline, you have some control as you break down certain locations and cities by zone. That allows you to hone in on areas that you want be within walking distance of, saving you on car rental.

You can also let Priceline know what hotel quality you’re searching for. I find that having a minimum of 3 1/2 stars gives us plenty of options and still be happy with the bid taker.
to help you increase getting the deal and hotel that you want is utilizing sites like Better Bidding. There is a ton of information on which hotels are in what areas and lots of reviews.

Beyond the Big Sites

Finally if you want to maximize your savings and perhaps get a more local feel with your stay, you should explore different rooming arrangements. My sister, who loves to travel outside the country, is always on the hunt for deals. There are some wonderful places that aren’t listed on the popular travel sites.

There are several lesser known ones including Eurocheapo.com and Wimdu. You can also look for bed and breakfast spots and local rentals. Besides the money you can save, you can be living like a native – making your trip even more memorable.  Sites like Airbnb, All The Rooms, and HomeAway can help with that.

Thoughts on Hotel Deals

If you have any questions, please tweet me or send me an email. I hope you have the vacation of your dreams and you enjoy your stay.