A couple shares everything from physical and emotional, to financial burdens. However, you and your partner may hold different views about the future of your finances. While some couples may prefer to share the load of managing finances individually, others prefer to do so jointly.
Either way, financial planning is extremely crucial in the success of one’s relationship as well as financial future. Here’s how you can get started with your loved one:
Set financial goals together
The first step to investing as a couple is to set financial goals that you both agree on. This could be saving for a down payment on a home, planning for retirement, or building an emergency fund. Having a shared vision of what you want to achieve will make it easier to work towards your goals together.
Once you’ve come to a conclusion, decide on a budget and commit to it. Set a feasible budget that each party is willing to contribute a reasonable amount to, instead of compelling your partner to pump in every single cent from the joint account.
Remember, investing as a couple involves mutual respect!
Read more: Managing Money as a Couple
Calculate your net worth
Before embarking on any major financial decisions, it is important that you and your partner calculate your net worth, both separately and jointly. Your net worth provides an indication of where you stand financially, and how close you are to attaining your financial goals.
Your net worth is the value of the assets that you own, minus the liabilities you owe. This simple calculation will let you know if you have enough money to start investing, after subtracting the liabilities. To work out your net worth, you can use a net worth calculator to help you do the math.
After calculating your net worth, discuss with your partner which assets can be combined, and which assets should remain separated. For example, you may wish to keep your loans and credit card debts in separate accounts to avoid shared liability.
Your net worth will change over time and it’s crucial to keep an eye on it.
Your net worth will change over time and it’s crucial to keep an eye on it. There are different ways to keep track including spreadsheets or financial planning apps.
Pro tip: Your mobile phone is with you constantly, so it’s often the best choice for this. Download the Planner Bee app to track your expenses and assets across paper and digital statements.
Understand your partner’s ‘money personality’
If you and your partner are ready to take the next step and invest together, it’s time to sit down and have a good talk about your views on money.
Be respectful of each other and accept that your partner’s attitude on money may differ from yours. For instance, someone from a humble background could be more conservative when it comes to money, while someone from a well-to-do family could be more willing to take risks.
Before you start investing, it’s important to understand your risk tolerance. This is the level of risk you are comfortable with when it comes to investing. Talk to your partner about your risk tolerance and make sure you’re both on the same page.
To understand more about yourself and your partner, start with a fun money personality quiz!
Start investing early
Investing early pays off for various reasons.
Starting early on this journey will allow you and your partner to develop the habit of saving. The more you invest together, the more you reap in the future. Following this train of thought could help build discipline in cutting back on unnecessary expenses and diverting the excess money into investments.
Additionally, investing early allows compound interest to work its magic. While the initial amount may seem insignificant when you first start investing, such regular investments can sum up to a huge amount over a 20-year timeframe, putting you ahead of your peers and allowing you greater financial freedom at a later stage in life.
Check out: Comparison of Robo-advisors in Singapore
Choose your investment strategy
There are many different investment strategies you can use as a couple, including investing in stocks, bonds, mutual funds, or real estate. Decide on an investment strategy that aligns with your financial goals and risk tolerance.
Mix up your investments
Circling back to the point on how you and your partner may have different money personalities, fret not. Instead of going for overly conservative or high risk portfolios, consider an appropriate mix of investments that would satisfy both your risk appetites instead.
Consider it the opposite of putting all your eggs in one basket. For instance, one party could opt for a moderately conservative portfolio to preserve most of the portfolio’s total value. The other party could go for an aggressive portfolio that fluctuates widely every day and is meant for long-term growth of capital.
If there isn’t enough risk in your portfolio, your investments may not reap a large enough return.
If there isn’t enough risk in your portfolio, your investments may not reap a large enough return to meet your financial goal. By adopting this mix of investments, you and your partner could still enjoy possible higher returns from the aggressive portfolio while being backed by the conservative one. A total win-win!
Decide how you want to split your investments
Consider how you want to split your investments between the two of you. Some couples choose to split their investments 50/50, while others may choose to allocate investments based on income or other factors.
Keep tabs on your investments
Make sure to keep track of your investments and monitor their performance regularly. This will help you adjust your investment strategy as needed to ensure you’re on track to meet your financial goals.
Review your financial goals
Financial goals change from time to time.
Perhaps you’ve just welcomed a new member into your little family, or you would like to retire a few years earlier. Discuss these new financial goals with your partner to better evaluate the amount of money you require to meet these new goals.
Monitor your existing investments and decide if any action is needed. If your views on money have changed, determine if you wish to take on another portfolio that is more aggressive or conservative.
If you’ve reached your financial goals, consider if it is the right time to liquidate your investments. If your existing investment is getting good returns, decide if you should deploy more funds.
On the flipside, if your current investments are not performing well, perhaps you should rebalance your investment portfolio.
Communication is key when it comes to investing as a couple. Make sure to communicate regularly about your investments and financial goals to ensure you’re both on the same page. Regular check-ins can help you stay motivated and make sure you’re both working towards your shared financial goals.
Draw out a financial roadmap
As with any investment, there is no guarantee that you and your partner will make money.
But if you diligently follow through with a feasible plan and stick to solid principles on saving and investing, you and your partner will be able to enjoy financial security and the benefits of investing your money jointly.
In this roadmap, it should also detail contingency plans in the unfortunate event of decoupling. Jot down the percentage each party should hold, and your respective plans moving forward.
Protip: While you’re putting money aside for investing, don’t forget to figure out how much you need to save for rainy days, by using Planner Bee’s emergency fund calculator.