As more couples get married as the pandemic dies down, new spouses need not only to invest in their relationship but in their finances. Here are some key ways to do both.
Fidelity Investments released this month Couples and Money, a study that highlighted where problems are when it comes to couples and their finances, and what steps can be taken to prevent them.
Have Good Communication
Communication is the through-line of financial planning for couples, according to Fidelity's study of 1,713 couples. With 18% of couples identifying money as their biggest relationship challenge, the most important thing couples need to do when it comes to their finances is communicate.
“Openly discussing financial matters helps people feel more confident, more closely aligned, and better equipped to take on the future," said Stacey Watson, senior vice president of Life Event Planning at Fidelity. "For all couples, the best advice for money conversations is that it’s not a competition, so stick with it and keep the dialogue going."
The Fidelity study found that 39% of respondents could not correctly identify their partner's salary, even though 71% of respondents claimed to communicate very well with their partner.
According to this study, 61% of responding couples talk about their finances at least monthly. However, it is not the number of financial talks that is important but the quality of the conversations. When the couple communicates better, they tend to be in a better spot financially.
Use Financial Professionals
To aid in communication and to build a better financial plan, financial professionals are there to help. Since 2018, the number of couples using a financial planner has increased from 45% to 47%. For opposite-sex couples, 48% work with a financial planner. For same-sex couples, that number is only 42%.
Working with a professional could be especially helpful for millennials because 25% of millennial couples claim that money issues are the biggest challenges in their relationships.
For the couples that do have an adviser, they are generally less concerned about possible financial issues. Only 35% of couples with a financial adviser are concerned about having enough saved for retirement compared to 54% of couples who do not have a financial adviser.
Lean on Each Other
Most couples in this study had about the same confidence in themselves as they did their partner when it comes to their ability to have full financial control. For short-term financial issues, about half of respondents have complete faith in themselves or their partner when it comes to decision making. But when it comes to retirement, that’s a different story. Only 4 in 10 feel completely confident about their own or their partner's ability to take full control of their retirement strategy and their current retirement savings.
Plan for Retirement Early
Having a plan for when you and your partner want to retire is extremely important in organizing how you’ll finance your retirement. According to the study, almost half of respondents (48%) disagree with their partner on when they will retire. The estimated funds needed for an opposite-sex couple to retire comfortably, with enough money to cover potential medical costs is $300,000.
Setting plans for retirement early helps a couple be prepared for that cost and allows them to ensure they will retire comfortably. Having a plan and talking about it can only help the situation.
Throughout all these steps, communication with your partner is vitally important. Both members of the relationship should have knowledge of what happens with the financial planner. Currently, only 38% of couples say they work with their financial planner together, with 33% of men and 20% of women saying they take the lead.
By working together to understand their finances, couples will have a stronger base to trust each other when it comes to financial decisions and for building long-lasting financial plans.
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