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June is the most popular month of the year to get married. If you’re planning on tying the knot this month or recently did, the first thing on your list – after paying off debt for wedding costs – should be devising a mutual investing strategy.
If you openly discuss the topic of finances with your spouse and come up with a unified plan, there’s no reason you can’t enjoy a financially comfortable companionship for life.
1. Have the Money Talk
What happened before this point is immaterial. Whether one of you has saved up more than the other, or if one has some credit card or student loan debt, you are now a team.
Communicate clearly and honestly to create an effective strategy going forward.
This is where you devise strategies to save, pay down any outstanding debts, and decide whether you’re going to invest aggressively or conservatively.
2. Convert Traditional IRA to a Roth
If you’re currently invested in a traditional IRA, you’re going to need to pay taxes on your withdrawals during retirement.
If you expect tax rates to go up in the future – or if you simply like the idea of knowing how much you’re going to have when you call it quits – convert to a Roth IRA, which deducts taxes as you pay into it.
If you convert, however, be aware that you have to pay taxes on the current value of the IRA, as it’s considered taxable income.
This is certainly going to have a significant impact on your short-term finances, but if you’ve got the funds, you can fare better in the long-term.
3. Create a Unified Budget
Regardless of your investment strategy, establishing a budget as a couple is a must.
Decide who’s going to pay the bills and whether or not you want to merge your bank accounts.
Establish spending limits for purchases along with a threshold for when one has to “ask” about a large purchase.
One of the leading causes of divorce in this country is money, so if you don’t want to become a statistic, create a mutually agreed upon budget immediately.
4. Think as a Couple
Although putting one person in charge of finances is generally a good idea, it’s important for both spouses to be involved in all investment decisions. In short, match your investing objectives.
If one of you invests in a 401k plan up to your employer’s match limit, the other should consider doing the same.
Or if your portfolio is invested aggressively while your
Final Thoughts on Newlywed Finances
No matter how much you save along the way to retirement, if you don’t invest it properly, you’re leaving serious cash on the table.
Diversify your portfolio, including all asset classes.
Go with an aggressive strategy when you’re young and transition to a more conservative mindset as you get older.
Invest funds slowly and steadily, and when you reach retirement age you can reap the benefits of a life well-planned.
What tips can you offer up for newlyweds?
David Bakke is a contributor for MoneyCrashers.com – he writes about family budgeting, smart shopping strategies, and investment opportunities.