4 Tips to Improve Couples’ Long-Term Financial Security
Gifts of flowers and candy are always appreciated, but if you want to give a meaningful gift this Valentine’s Day, consider the gift of financial security. The following tips can help improve your financial security as a couple, which is a valuable gift that enhances your life together year after year.
#1 – Commit to paying down debt.
Some forms of debt are healthy, like low-interest mortgages (which allow you to build equity while also allowing you to invest other money toward your long-term goals). But many kinds of debt can actively work against you. One of the greatest gifts you can give yourself and your partner is the freedom to live free of “bad” debt. Owing money on credit cards, for instance, can make your financial goals take a backseat — and high interest rates and fees reduce the amount of money available for other financial priorities. As a couple, commit to paying off consumer debt as soon as possible so that you can get back to living life on your own terms.
To get started, consider implementing one of these debt-payoff strategies:
- The snowball method, which involves paying off the debt with the smallest balance, then moving on to the debt with the next smallest balance, etc.
- The avalanche method, which prioritizes paying off the debt with the highest interest rate first, then moving on to the debt with the next highest interest rate, etc.
#2 – Make a plan to save toward a future goal.
What’s something you’ve always dreamed of doing together? Taking a vacation overseas? Purchasing a primary residence or second home? Paying for your children’s college education expenses? Dreaming about the future is fun, but having a plan in place to achieve your goals is a true gift.
Commit to automatically saving a designated amount of money each month. Open a separate account to hold your savings so that you’re not tempted to spend it. Regularly remind each other of the goal you hope to achieve, and look for opportunities to increase your savings over time.
#3 – Open (or review) a joint investment account.
If you and your spouse maintain separate investment accounts, it may make sense to pool your funds into a joint account. This can simplify things, improve tax efficiency and better align your assets with your shared goals. Work with your wealth manager to establish an asset allocation that makes sense for both of you, given your risk tolerance, time horizon and goals.
If you already have a joint investment account but haven’t reviewed it in a while, be sure to regularly check in on your portfolio. Over time, your investment allocation can begin to drift off target as some investments outperform others. If you fail to regularly rebalance your portfolio, this drift has the potential to increase your risk exposure over time as one asset class begins to dominate others. (Creative Planning clients can be confident that our advisors aim to strategically rebalance client portfolios as opportunities arise, with the goal of managing risk and optimizing returns.)
#4 – Protect the wealth you’ve built together.
It’s important to have the proper insurance and estate planning documents in place to protect yourself and your loved ones.
You should, at a minimum, have the following coverage:
- Disability insurance – This replaces lost earnings (for those still in the workforce) in the event you’re unable to work due to a disability.
- Home/renters’ insurance – This protects your primary residence and personal property.
- Auto insurance – This protects you and other drivers in an auto accident.
- An umbrella policy – This protects your savings and investments against personal liability claims beyond your existing home/renter’s insurance and auto insurance policies.
If you are married or have children, there are two additional items you should immediately address:
- Estate plan and guardianship documents
- Life insurance
Your wealth manager can help review your insurance policies and estate plan to identify any missing coverage or documents.
