Financial planning as a couple can often be put on the backburner with all the demands of life.
Our guide for financial planning for couples & newlyweds will help you to reach your financial goals.
Financial planning as a couple is a good starting point on your money journey.
This will enable you to get clarity on your values both individually and jointly.
Having the serious-money-talk is going to elevate your relationship further and empower you to achieve more.
When it comes to money and life, you can go fast alone but you can go far together.
How Financial Planning for Couples Works
Ultimately the reason behind this is to move towards being of the same financial mind.
Money is one of the major causes of divorce and separation in relationships.
I’d add onto that and say it’s not really the piece of paper but the lack of financial unity in the relationship.
Imagine if you’d like to buy a house but your spouse wants to go on a 6 month trip around the world. With 2 separate goals how are you going to achieve your desires?
Planning your finances as a couple is vital to your financial intimacy and ensures that you’re both on the same page about money.
Financial planning applies to seasoned couples, newly married couples, and couples making a lifelong commitment to each other.
Discuss Your Financial Goals
One saying that really cuts deep with me is: if you don’t have a plan for yourself you’ll be part of someone else’s.
All of us are on a financial journey, whether we know it or not. This is a lifelong journey as we live in a society that is driven by a financial system.
Without a plan you’re giving permission for someone to drive you where they want you to go.
Early in our relationship Lindie and I were making certain decisions to please those around us or look a certain way on the gram.
I urge you to plan. Plan what your financial future world looks like and what you need to do today to get there.
Having plans for us stopped us from comparing ourselves to other couples and gave us direction with our money. Every financial decision has a reason behind it that fits within our plan.
How To Financially Plan As A Couple
Break down your financial goals into short term and long term time frames. For example:
- ST: 0-6m, LT: 6-18m
- ST: 6-12m, LT: 1-2 years
- ST: 1-2 years, LT: 3-5 years
You can choose a time frame that works for you, do all 3, or your own time frames.
First think about your goals individually, then come together and discuss goals that you both agree with and want. I’d advise to have a maximum of 5 key goals.
You may have personal goals or goals that your partner doesn’t feel are a priority. Talk them through why the goal matters to you and what it will mean when achieved, whilst showing them the same respect for their goals.
Once you’ve discussed your goals agree on a priority based on which ones are most important.
Budgeting As A Couple
A big part of financial planning as a couple is to set up the right budget for it.
Setting up a budget together is one of the best things to do regarding building your financial confidence.
Think of your budget as your plan on how you’re going to achieve your financial goals.
Now that your goals are prioritised, how much are you allocating towards them from your budget.
To answer this you need to set up a budget that works for the both of you.
If you’re creating a budget from scratch then the first place to start is your current expenses. Calculate how much you’ve spent over the last 3 months on every area of your life, then average the total.
The average amounts are the baseline for your budget to have an idea of how much you spend on your living expenses.
Money can make or break a relationship. Learn how to use money to enhance your love and unity with your partner with the Couples Money Starter Kit Workbook.
Budget Basics
List all your income from all the places you get regular money from.
Then take the list from the expenses tracker as your monthly outgoings.
We prefer to use a Zero Based Budget whereby the difference between income and outgoings is 0, meaning every penny has a purpose in the budget.
Use this opportunity to analyse your outgoings and assess whether they are worthwhile r if they can be repurposed.
For instance, you could decide that you’d rather swap your £60 gym membership for a £10 gym, and repurpose the £50 towards your financial goals.
The aim of repurposing your remainder is about ensuring all your money is going towards what matters to you.
You can get the budgeting spreadsheet template to empower you to take control of your finances and have a budget that fuels your goals.
Calculate Your Net Worth
Your net worth is a snapshot of your financial position at a point in time. Similar to getting a car service where they check the status of your car.
The aim of your net worth is really to weigh up your financial position. You do this by adding up all your assets and all your liabilities, then calculate total assets minus total liabilities.
Assets are what you own that has monetary value and this includes property, cars, investments, pensions and savings accounts.
Liabilities are monies that you owe which include credit cards debt, loans, car finance, mortgage and bills in arrears.
This calculation will give you an understanding of where you stand on the financial wealth scale.
Financial Health
In the same way that a car service will highlight the health of your car, your net worth calculation highlights your financial health.
If your liabilities outweigh your assets that’s considered a negative net worth, which is expected for younger people still early in the money journey.
On the flip side if you own more than you owe then you have a positive net worth, which is always the goal.
The biggest point is that every financial decision you make will either build your assets or your liabilities.
Your net worth is a good indicator if you’re heading in the right direction towards your goals, particularly since most goals will result in an increase of your net worth.
Paying off your debts reduces your liabilities and starting to invest builds your assets.
Our budgeting spreadsheet template includes a net worth calculator where you can easily track and measure your financial health.
Other Key Areas to Financial Planning for Couples
Pensions
Pensions are essentially money you’re putting aside for your retirement. Retirement may sound like a world away but starting now is the best thing you can do.
If you’re employed then your employer should have a pension scheme that you can join, and the best part is that they will give you free money towards it.
Usually you’ll contribute some money out of your pay, and your employer will contribute some money on top of your salary.
Let’s say your salary is £50,000 and your contributions are 5% and your employer contributes 10%. Your pension pot is getting £7,500 every year. £2,500 came out of your pocket BUT your employer put in £5,000 which is not from your pay.
If you’re self-employed you can set up your own private pension.
As a couple, you’ll both need a pension pot when you’re older, don’t neglect setting one up.
Tax
Couples can neglect analysing potential tax savings as part of their financial planning, but it’s an area that we should all have basic awareness of our options.
You each have an allowance to earn money tax free, called your Income Tax allowance.
If one of you earns less than that amount you can transfer your allowance to your partner so they pay less tax.
This is called the Marriage Tax Allowance in the UK, and depending on your financial position it can be of financial gain.
Investments
Whether investing is your goal or not, there are so many reasons you should invest.
Investing is a way of making your money work for you.
As a couple you should start investing into your future so you can build long term wealth.
Financial planning is about looking ahead as a couple, investing is one of the best tools for funding your financial future.
Take Action
Financial planning requires dedication, so schedule some time on your calendar right now to go through it.
Save this and refer back to it to guide you in your financial planning discussions.
Check out the Couples Money Workbook for you and your partner to start working as a team with your finances.
Share this with your friend, family, or partner and encourage them on their financial journey.
Let us know how you’re getting along by getting in touch with us, we’d love to hear from you.
Knowledge is powerless without action
So take action, and take care
Thando