Have a Plan For Your Money!
What is the number one cause for divorce in America? Finances.
Many times a couple has very different ideas about saving and spending. If you develop a plan now before you are married, you will save yourselves a lot of useless fighting. The following is an overview of the 1st session of what I use in helping couples who plan to marry.
- “Our money”
You must understand that there’s no such thing as mine and yours. Work together as a team in deciding what to do with your money. Your debts and your partner’s debts become “our debts.” Savings also. If you aren’t ready to share your income, your not ready for marriage.
- Saving, Sharing, Spending
Agree on a percentage of income that you will save, give away and spend. Have you heard of the 10-10-80 plan? 10% goes to God, 10% goes to savings. 80% goes to other expenses and recreation. But you both must come to an agreement of how you handle your money. Not his or hers but our money. A few problem areas:
-The most common mistake young people make is buying a house that’s beyond their income. Be wise in this area. Try to spend no more than 40% of your income on housing and utilities.
-Watch out for credit buying. “Buy now, pay later.” What’s not stated is that if you buy now without cash, you will pay much more later. Interest rates are mainly in the 18-21% bracket. Credit is very dangerous. I always recommend to never have a credit card but if you have a credit card, use it only for emergencies and necessities (car repair, major appliance) and pay it off as quickly as possible. The reason why most people use credit cards and credit buying is because they want now what they cannot pay for now. They can’t delay instant gratification. Don’t compare what you have with what other people have. They are in debt to their eyeballs. Some aren’t but most are. You don’t need things to be happy.
-Major Purchases. Come to an agreement that neither of you will make a major purchase without consulting the other. Your agreement must have a dollar value. How much can one spend without telling the other?
- Who will keep the books?
Decide on this. The one who “keeps the books” is the one who pays the monthly bills and keeps tabs on the online accounts. This person keeps track with the spending plan you agreed upon. Your both in charge of making financial decisions but one is the bookkeeper. Now it may change after awhile and you may switch roles. Always remember that you are a team and you make financial decisions together. Note: These previous steps are adapted from the book, “Things I wish I’d known before we got married.” The author is Gary Chapman.
- Discuss your current financial plan.
- Do you tithe 10% of your income?
- Do you place at least 10% of your income into some savings and investment plan?
- Declare your total assets and liabilities to each other.
- Work out a financial plan together now before you get married.
- Discuss your dollar value on purchases that doesn’t require you telling the other.
- Who will keep the books? Why?
Practical Suggestive Plan (Dave Ramsey’s Baby Steps) www.daveramsey.com.
- Put 1,000.00 in a beginner emergency fund. (This is protection against life’s unexpected events.)
- Pay off all debt using the debt snowball. (No matter what “they” say, debt will keep you from accomplishing your financial goals. The borrower is always a slave to the lender.
- Put three to six months of expenses into savings as a full emergency fund.
- Invest 15% of your household income into Roth IRAS and pretax retirement plans. (You may not think this is important now but this is one of the greatest financial tools of investement. Many have ended up being a millionaire simply because they started an IRA when they were young. (If you Saved 100.00 a month, every month, at the average return of 12 percent, from age 25 to 65, you’d retire with more than 1.1 million! The key is to start early so you can take advantage of compound interest.
- Begin college funding for your kids. (This is optional but if you want your kids to get a good education without student loan debt, this will be a great gift to them. Look up an ESA account, 529 plan.)
- Pay off your home early. (If you haven’t bought a home, try to get a 15 year fixed rate mortgage instead of a 30 year. Try to put at least 10% down. Your payment should be no more than 25% of your take home pay. Or just save to buy it outright completely.
- Build wealth and give.
Remember that you must have a plan that you agree on together for your money.
Ultimately, God wants your marriage to be a blessing to others but you must be a good steward of what He has given you. I’ll leave you with a verse, “(b) the borrower is slave to the lender.” Proverbs 22:7.