Smart Saving and Investing

Did you date your spouse when you were young?

Are you in your twenties, in a relationship and thinking about marriage?

Do you think you’ll save and invest by the time you’re 50 as you and your partner create a life together?

Have you made plans to do this? What are your financial plans for 10, 20, 30, 40, or 50 years of marriage?

Maybe you don’t have financial plans but you just know by the time your 50 years old you’ll both have saved so much money, contributed so much to your retirement plan and started other types of investment plans that you’ll be financially okay.

The Story

In the past month I’ve seen three couples I know, in or around 50 year olds and have been together for 25-30 years, who argue about the money they don’t have.

One spouse commenting to me that, “If things don’t change soon, I’ll have to do something.” What does that mean? The way it was told to me, it means resentment. It sounded like possible separation and even divorce.

It means not being part of the relationship that made sure they were saving and investing over the past 25-30 years so it wouldn’t get to this point. No financial plans except hoping for the best.

Disagreements for 25-30 years on where the money should be spent. “We’ll have money like our parents do and have acquired.” Well, these couples are parents of teenagers, college-aged, and working adult kids.

Some attributes these couples shared over their 25-30 years of marriage:

• young
• in love
• always together
• struggling
• in debt
• graduating from college
• new jobs
• employer retirement account
• marriage
• in debt
• kids
• new house
• cars
• vacations
• in debt
• Christmas gifts no one would forget
• up-to-date clothes for the family - no matter what
• paid weddings for their kid(s) by way of second mortgage or any other bad debt vehicle - “Don’t worry, you’ll have a great wedding - no matter what”
• taking care of friends and family in diverse financial ways - buying them something to help them out, etc.
• paying for their adult kids who are married now - their utilities, housing, cars, etc.
• giving to charities
• tithing
• in debt

This kind of story repeats for so many couples and generations it’s kind of crazy to watch and hear about. It’s like a collective, unspoken agreement that this is the way it is.

So what will happen to some of these couples? I don’t know. The love is almost lost with some of them, but not gone. It can be saved, fixed and corrected. It will take work and understanding.

The Future

Young folks can visualize what the future looks like but if you don’t take actions and implement those actions in such a way that covers your financial future long term, you’ll end up carrying out some of the same scenarios that have happened for years, over and over again to many people.

What financial goals do you want to hit and how are you going to get there? What alternative plans can you put into place so you hit them.

How about the plans on how you’re going to feel about your spouse when you don’t hit those financial goals. Are you going to blame them? Ban them for your life as to say, “It’s your fault”?

How do both of you feel about the attributes above? Can you agree on how they should happen? When? How much? Do they have to happen?

Financial problems between couples is one of the most debilitating attributes that cause divorce and destruction in families. Treat it as if a train is coming down the track and your best friend or family member is standing on the tracks. What would you do? You’d do everything you could to get that person off the tracks.

written by Bill Stevens

This is a post in a series about young single, married folks or life partners and their financial lives. How should it look? I call these folks, Mad, Slammin’ & Cheddar!!

So let’s get some definitions out of the way:

1. Mad - as in “Mad Props”, “Extreme”, paying or giving proper respect…to yourself in this context
2. Slammin’ - as in good, great, excellent…as in your bad yourself
3. Cheddar - as in becoming wealthy, having lots of money…as in yourself becoming “Mad Wealthy!!”

Anyway, if you’ve lived under a rock, some of these terms might be new to you. They’re some of today’s best slang that are fun to use at parties and embarrass you, your friends, and family.

When you’re an MS&Cer, you might be wondering, “Hey, do I need or does my counter-part need Life Insurance? How’s a Mad, Slammin’ piece of Cheddar (young folks) suppose to view life insurance?

Well, if you’re young and single, you don’t need life insurance. Not even the life insurance possibly coming out of your paycheck. If nobody depends on you for their livelihood then there’s no reason to have it. So, if you have the option to not have that come out of your paycheck then cancel it and save or invest the extra green twinkies.

And that is the key. If someone (partner or partner with children) is dependent on you for paying stuff, then you need life insurance. Term life insurance only!! Term life insurance is life insurance for 5, 10, 15, 20, or 30 years. That is the only life insurance you need. Just plain old term life insurance and it’s sometimes called level term life insurance because the payments are level over the life time of the term.

How much life insurance should you and your partner have? Browse over to Kiplinger.com and check out the life insurance calculator. Where do I get term life insurance? You can start at SelectQuote and you want to make sure you pay a fixed rate over the course of the term life insurance. Look for solid companies with a minimum of an “A” rating.

If only one person in the relationship is bringing home the bacon, you still need to consider life insurance for the stay-at-home person. If you’re working and you lose your spouse and you have children, then you need to be in a position to pay for help for your children.

There are many suggestions on how much life insurance to have. Some suggest enough to help get through the tough time of surviving the loss of your partner. Some suggest as much as you can afford that will pay off a mortgage, pay for the kids to get through college and allow the survivor to recover from such an event. Your own situation and beliefs will help determine how much term life insurance you need.

When you or your partner collects the life insurance, they would invest that money in a safe investment vehicle that would help pay for the necessities in life for a long time. The ideal situation is being able to invest all of the money from the term life insurance and the money you make off the investment would help pay for everything you need to help pay for without dipping into the actual amount of the term life insurance.

So if you’re a 40 year-old man and you have a $1,000,000.00, 20-year term life insurance policy that you’re paying around $100.00 a month for, then that million is payed out to your spouse if you lost your life. For simplicity sake, let’s say your spouse invests the million in something that returns 10% annually. They could then live off of $100,000.00 annually and not have to use any of the million to survive on. Just the money the million generated in earnings.

One extra step: Wrap your term life insurance up in a revocable living trust as the beneficiary and if both spouse and partner lose their lives at the same time then your wishes will be carried out as you described in the trust. We’ll leave trusts for another time.

I’m going through setting up a trust with my mother-in-law at the moment. It will be interesting to see how everything ends up. I’ll let you know.

So there you go all you MS&Cers. Go out and take care of one another. Remember, that’s part of that love thing you mentioned at the alter.

written by Bill Stevens

When you’re young, married, working and it’s just the two of you, here’s one way to look at your financial life regarding saving money.

Online Savings Account

I’ve explained this in Action One, both husband and wife should have their own online savings account paying 5.05% (2007) at HSBCDirect, EmigrantDirect.com or your choice of any fine, comparable online savings account.

There is another view and it’s having a third account called the “family” account. Where both individuals contribute to the “family” account for “family” oriented savings as well as their own accounts. If you can do all three savings accounts and that’s something that fits your saving style, then that’s just fine.

I do believe each person should have their own account. Sometimes when you’re young and in the early stages of love you do everything together, another view of the “family” account which is fine, but there is another view that involves taking care of one another. Which means, each person in the relationship makes sure the other has opened an online savings account and is contributing to it.

When you work hard, save money and both of you are contributing to a “family” or shared online savings account only, it only takes a wayward purchase made by a spouse to upset the other spouse. Like one spouse decides to buy a new drum set with the savings. This would NOT be a good thing to do if there was only one “family” or shared online savings account being used for “Rainy Day” money or building up emergency money.

I have also seen where the person in the relationship who is making significantly more money than the other contribute to the partner’s savings as well. Again, taking care of that person to make sure they feel secure with their own money.

Now, some of that leaves a lot of room for irresponsibility. These are the things to talk about that I mentioned in 7 Scenarios of Money in Marriage. Again, it sounds so simple but it’s very difficult to sit down and talk through what could happen or how each of you think of money that you’ve saved and how it should be spent.

You should hold savings, rainy day, emergency fund discussions at a minimum of once a year. Quarterly would be best. Ask, “How are we doing with our savings?”, “How much did we tell each other we’d save?”, “How much did we actually save?”, “How much of our savings did we need to use and why?”, etc., etc. I also like money discussions during tax season when everybody loves the mood that tax season puts you in.

If there are issues with saving and spending the savings on frivolous things then there’s no time like the present to put the kabosh on that in some way, communicating until it’s agreed upon and completely resolved. Sometimes this can lead to drastic decisions that should be thoroughly discussed with a marriage relationship counselor over a long period of time.

written by Bill Stevens