So you’ve had the big “money talk,” you’ve tied the knot, and now what? Are you dreaming of a big house, kids or even a luxury vacation? It takes a lot of work to reach those goals, and regular “financial checkups” are essential.
What is a “financial checkup”?
A financial checkup involves a regular review of your financial goals and the steps needed to accomplish those goals.
The frequency of your checkups will depend on your individual financial situation and life circumstance, yet we find most couples benefit from a monthly or quarterly review.
You should write your goals down, and make a pact to stick with them. Both partners in the marriage should contribute to goal setting and financial management. What are each of your strengths and weaknesses? How can you play up your strengths to reach your goals? Couples who review their finances – and review them often – are more likely to avoid disagreements and misunderstandings that often erupt with money issues.
Are you on the right track?
There are several universal stepping stones couples should strive to achieve. Initial priorities should include:
- Net Worth: You should aim to increase your net worth every year until retirement. Determine whether you are on track during your financial checkup. Do you need to pay off debt? Do you need to pick up a part-time job? Do you need to increase an automatic deposit into your savings account?
- Credit Scores: Your credit scores should also increase year to year. To monitor your progress, visit AnnualCreditReport.com. You can download a free copy of your credit report annually from each of the three major credit bureaus. Your credit score will be available for a nominal fee. Your score will likely vary slightly with each credit bureau.
- Emergency Fund: An emergency fund containing three to six month’s worth of living expenses is crucial. Creating your emergency fund should take highest priority among your savings goals. This can prevent future financial fires in the event of job loss or illness. Review your progress during your financial checkup. How can you save more? How long will it take to create a comfortable emergency fund?
- Retirement: Your retirement savings should increase every year as well. If your company offers a 401(k) plan, you should contribute enough money to take advantage of the full match, at a minimum. You can also look at Individual Retirement Accounts, or IRAs, as secure and effective place for retirement savings.
Once your net worth, credit scores, emergency fund and annual retirement savings have reached desired levels, then you can brainstorm ways to save for other goals, such as college tuition, new furniture or a romantic cruise.
We advise you continue to save at least 10 percent of your income annually. If you can’t reach that figure, you should reconsider spending on any luxury items like a vacation. A few days of bliss can lead to months or even years of financial stress.