As the holidays come to a close, many couples find themselves contemplating the financial resolutions they should make in the coming year. I advise all couples to create goals together and embark on a “financial date” including an open discussion and a thorough review of their financial situation to set the stage for a solid financial future. What are possible financial topics you can discuss?
1. The Decision Between Joint and Separate Accounts
When a couple’s goals align seamlessly in terms of discretionary spending, opting for a joint bank account can provide transparency. Such an account may also prove advantageous for children, offering financial benefits, particularly in areas such as educational savings or collective retirement goals. On the flip side, maintaining separate bank accounts allows for autonomy in managing personal funds but may lack transparency. However, it’s crucial to consider potential incremental monthly maintenance costs associated with independent checking accounts, as these can accumulate over time and impact overall family savings.
2. Prioritizing the Right Insurance Coverage
Review your existing insurance policies and consider key policies such as life and disability insurance. Term Life policies provide a death benefit payout to support family or dependents, while Whole Life plans combine a death benefit with a savings component, offering an alternative for maximizing future investment savings. Life insurance is especially critical for those without full financial independence, as unexpected health issues or lack of employer support can pose challenges in supporting partner or family expenses.
3. Investing Strategically
For younger individuals, a heavier allocation into equities is recommended, given their increased capacity to take risks and ride out market fluctuations. Equity investments typically yield superior returns compared to other financial instruments, including bonds. As individuals approach retirement, a shift towards less risky investments, such as fixed income securities with predefined payouts, becomes essential. Diversification is crucial, with consideration given to factors such as job security, health, and retirement, to minimize market volatility and ensure financial stability.
4. Savings for Children
The key to securing a child’s financial future is to start saving early, leveraging the benefits of compounding over time. With rising college tuition costs, early savings for tuition and related expenses are imperative. A 529 plan is highly recommended, offering tax-deferred growth and avoiding capital gains upon withdrawal, thereby maximizing available funds.
5. It is Never Too Late to Consider Professional Help
The role of a financial advisor is paramount in guiding individuals through life changes such as marriage, children, and portfolio prioritization. Their expertise can help address goals and future monetary needs, both collectively and individually, ensuring a sound financial plan for a lifetime.
Conclusion
Whether deciding on joint or separate accounts, prioritizing insurance coverage, strategic investing, saving for children’s futures, or seeking professional advice, taking proactive steps in these areas can pave the way for financial security and peace of mind. As a meaningful New Year’s resolution, consider committing to regular financial date nights with your partner, fostering open conversations about your financial situation. These intentional discussions will not only strengthen your financial foundation but also deepen your understanding of each other’s goals and values, creating a path towards shared prosperity and a more resilient future.
