Not to scare you, but according to a study conducted by the University of Denver, 55% of the divorces occur due to poor financial planning and circumstances. Scary, isn’t it?
If you and your partner are planning a future together, you must also plan the finances accordingly. It is one of the most critical aspects of future planning that many couples ignore.
You must be wondering, when is the right time for financial planning? There is no straightforward answer to this. Always be open to financial discussions with your partner. Start planning as soon as you decide that you want to spend the rest of your lives together. With that cleared, here is how you should plan your finances as a couple.
Find Financial Goals
Both you and your partner have many financial goals, and chances are, some of them may be common. So, get two sheets of paper (one for each), and start listing the major financial goals. It can include anything from buying a car, going on a world tour, starting a new business, or buying a new house.
Once the lists are complete, compare the two and find out the common ones. These will be the common financial goals that you have to work towards as a team.
As for the remaining goals, they are individual goals that you need to accomplish on your own. The same goes for your partner. Mostly, this includes fun money or hobby oriented goals—the next liter-class sportbike, that designer bag, or investing in your friend’s restaurant.
Figure Out How to Reach There
Once you have both the common and individual financial goals set, you then need to figure out how to get there. The solution is to budget and track your expenses. There are many softwares and excel sheet templates that let you track your finances, including your income and expenses and your investments and savings.
By doing this, you and your partner will be able to ideate your budget efficiently and make plans accordingly. Depending on the goals, you may have to make some compromises here and there, and it is okay. Figure out which goals are high priority and focus on them first. Keep a fair balance between shared and individual goals, though. Otherwise, it can put a strain on your relationship.
Don’t Forget Retirement and Investments
While budgeting and planning your goals, do not forget that both of you will have to retire in a few decades. Plan for that. Set aside some money to invest in the retirement schemes or other forms of investments. Depending on how you want to invest, you can either pool your money and invest as a couple, or you both can invest individually. It is up to you.
Work Out Family Expenses
In the same vein, plan for family expenses. Family is expensive. Your parents will get old and may require financial support. If you and your partner plan to have kids, you need money for their education, too. Plan for all of this, and include this in your budget.
Additionally, plan for family and health insurance. You never know when a medical emergency can strike you, your partner, or your family members. So, it is best to always invest in insurance to safeguard your family against mind-boggling medical expenses in the future.
Discuss Separate vs. Joint Accounts
You and your partner need to discuss how you will save your money. Some couples prefer to have their own separate accounts, some prefer shared bank accounts, and some prefer both.
The ideal way is to have at least three bank accounts between you and your partner—one for shared goals, and the other two for individual goals.
See what works for you and your partner, and choose the same. It is easy to get defensive about money sometimes, and you or your partner may not be able to avoid it. It is okay. If you discuss how you want to save money, you can cut down on finance-related arguments in the future.
And Shared Bills
Similarly, discuss how you are going to pay the bills. Again, this depends on your relationship dynamic. Some couples prefer to alternate the bills, while others prefer to split the bills every month. There are some couples where only one person pays the bills because they have a substantially higher income.
Figure out what works for you and your partner and proceed with the same. Also, think about how these bills may go up or change in the future. Couples did not have to think about streaming subscription bills ten years ago, and 20 years ago, couples did not have to worry about any kind of internet bills!
Plan for Emergency Funds
Even if you have the most effective budget, you never know when you or your partner may face a financial crisis. The COVID-19 pandemic is the prime example of one such instance. So, always have some emergency funds ready in an account. Pool money into this account, and do not touch it. Keep it shared, so when the time comes to use it, you don’t have to worry about who pays what.
Work as a Team
Finances are serious. People work hard to earn money, and Singapore is an expensive country to live in. So, there are always chances of getting defensive about money or not willing to spend your money. In a relationship, arguments happen, and sometimes, they can be about money.
You and your partner must remember that you are a team and must work as a team. Have discussions about your finances every month, and analyze the budget. See where there is room for improvement for you as well as your partner.
Be open. If you or your partner feel that you are getting the short end of the stick, for any reason, always discuss it. There is always room for adjustments in a budget.
Planning a future together can be daunting, but it is worth it. It saves you a lot of personal and financial trouble in the long run and helps both you and your partner achieve your goals together. So, don’t hesitate. Begin now.
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