A couple shares everything from physical, emotional, to financial burdens, but they might also hold different views. 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:
Calculate your net worth
Before embarking on any major financial decisions, it is important that you and your partner calculate your net worth, 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.
On the other hand, daily expenses, your child’s education and investment funds could be better managed through a joint account.
Your net worth will change over time and it’s crucial to keep an eye on it. There are different ways to keep track; some may prefer using spreadsheets, while others prefer financial planning apps.
Protip: 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.
To understand more about yourself and your partner, start with a fun money personality quiz!
Set budgets and goals for different terms
Know the purpose of your investments and set some goals to motivate yourself.
It could be a short-term goal to go on a vacation, a medium-term goal to purchase a car together, or even a long-term goal to retire together.
Set a feasible budget that each party is willing to put in.
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 put in, instead of compelling your partner to pump in every single cent from the joint account.
Remember, investing as a couple involves mutual respect!
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, and the more you invest, 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-adivsors in Singapore
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!
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.
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 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.
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.