Life as an adult moves pretty fast.
You start out on your own and before you know it you are in a relationship, getting married and starting a family. Some advanced planning can help keep those milestones pleasantly memorable instead of financial disasters.
Planning Your Wedding
Finding someone you want to spend the rest of your life with is wonderful, but the need to have the perfect wedding can quickly take its toll. Your wedding should be a memorable event in your life, but not cause you to start your life together in debt.
Set Up a Budget
When planning your wedding and honeymoon, determine a budget and stick to it. Make it specific with set amounts for the dress, food, and decorations. Stay flexible, though. If you overspend in one category, reduce another to stay as close to your budget as possible
Paying cash for things is the best way to stay clear of mounting wedding debt. It requires special planning and discipline, but you will be grateful when you are celebrating future anniversaries and not still paying those wedding credit card bills!
Find Areas To Cut Cost
Planning the wedding yourself instead of hiring a wedding planner, making your own invitations, or even your own flower arrangements are all ways to cut down costs. Recruit talented friends to handles tasks like photography, videographer, music and catering. You can still have an elegant and beautiful wedding without going into debit to do it.
Don’t Overspend on Your Honeymoon
Your destination should depend on your finances and how much you budgeted. The best part is relaxing and spending time together.
<Back to top>
How to Communicate About Money
Discussing finances may not be the easiest or most fun thing to do, but it is important to be completely honest with your future spouse, even if you have made financial errors in the past.
Discuss Your Debts & Financial Errors
It’s important to discuss any debts you each may have and work together on paying them off. Confess if you have ever declared bankruptcy or stopped paying on credit cards. Once you are married, "what’s mine is yours” also applies to your debt. You both should be aware of each other’s finances, past and present.
Discuss Your Assets
You should know what each other’s assets are, including retirement savings, homes, and cars you own, general savings and investments. Start to view these assets as joint, except for your retirement savings in 401(k) plans or IRAs
which are solely owned by you.
Discuss Spending & Saving Habits
You should communicate your saving and spending habits with each other. If one of you is a spender and one is a saver, work together so you don’t become frustrated with each other. If you are both spenders, create a plan on how to begin saving
for your future — and stick to it!
Discuss Your Feelings About Money
Discuss how you feel about money — not how you spend or save — but how money affects your life. Do you want to do it differently than your parents? Do you plan to make your kids work for money? Do you see money as a tool or a burden? Do you like to save, give, or spend? Asking each other these questions will help you determine what role money will likely play in your future.
How to Budget TogetherBudgeting as a couple can take some getting used to. It’s hard to move from managing your own finances to balancing the needs of two people.
- The first item on the list should be your household needs such as rent or mortgage, utility payments, insurance, savings, groceries, car payments, and debt payments. If you find you are spending too much on these items, there are ways to cut back. Buy a less expensive car, find a less expensive place to live, use coupons or cut back on groceries.
- If your household needs are met and you have extra money, you can begin to talk about luxury items. These can include gym memberships, clothing expenses, personal grooming, or vacations.
- Once you have your budget set up, you should both keep track of your spending. Plan one night every week or every other week to go over it. If you’re saving for something special, see how close you are to reaching it. If you realize you’re spending is getting out of control, re-examine your budget and rearrange accordingly.
How to Merge your FinancesOnce you are married, be sure to merge your finances. Open a new joint checking account or add your spouse to your current Heartland FCU checking account and close all other accounts.
Don’t let Money Ruin Your Marriage
- After you are married, you take on each other’s debts and assets. It’s important to begin to look at money as "ours” instead of his or hers.
- Within your budget constraints, allow each other to spend money that you don’t have to account to each other for.
- Set goals together. Do you plan to eventually buy a house, have children, retire early, or plan a trip around the world? Start saving now so when these opportunities arise you’ll be ready!
It’s important to take steps before you get married to make sure you and your future spouse are on the same page financially and in other areas of life. Getting married is a big commitment, and it also involves a lot of trust and hard work. Don’t let money ruin anything; if you start discussing your finances early, you can create a plan that you can work on together.
Make Changes to the Proper Documents
Take care of any necessary name changes on driver’s licenses, passports, social security cards, tax documents, and financial accounts. Make sure all other legal documents are updated, including wills, insurance information, investments, and powers of attorney.
<Back to top>
Having a Baby
Planning and preparing to have children is a very important and personal decision, however the financial impact is often not considered. Here are a few items to think about when having a baby.
Soon after your baby is delivered, so are the medical bills. Many doctors will set up a payment plan or you may be able to pay ahead. If you have health insurance, everything may not be covered. Call your insurance company early in your pregnancy so you know what out of pocket expense you’ll have and can plan accordingly.
Baby supplies can be very costly, especially in the early stages. Formula and diapers alone can cost hundreds of extra dollars a month. Factor those costs when you sit down to adjust your budget for the new baby. Join savings clubs, use coupons, and don’t over spend on toys or purchase unnecessary clothes.
Long Term Costs
We know it’s hard to imagine your baby all grown up when he or she isn’t even here yet, but planning ahead for future costs is a smart idea. College is expensive and saving now will be a tremendous help when the time comes. Heartland FCU offers a higher interest Education Savings Account. These funds can be used for any school expense K-college.
Stay at Home or Return to Work?
Personal preference aside, the decision may come to the black and white — can you afford to stay at home? Make sure to include all the factors when making your decision.
- How much of your net pay are you currently using toward household expenses? This will be the place you see the most obvious effect of not working. Fixed bills like housing, utilities, and car expenses will have to be paid with your income. Can your budget manage or will the strain be too tight?
- How much of your pay is currently being used for insurance? Retirement? Miscellanous savings like emergency funds, vacation and holiday accounts, and "play” money.? These will be areas that will be adversely affected if regular contributions are not being made. Think seriously about lost time and contributions to these financial areas.
- What about company sponsored contributions? Do you carry the family insurance? Does your company contribute or pay the premium? Does your company contribute or match investments in a 401(k)? If you don’t’ return to work, these are financial benefits lost to you. Again, think seriously about the lost benefit of time and compounding to these financial areas.
RETURNING TO WORK:
- How much will childcare cost? Whether you go with a childcare center, a family member or in-home childcare, the impact is substantial and often understated in the planning stages. Research early to get real numbers for your plan.
- What about the emotional and physical toll? Don’t minimize these areas. Additional preparation time in the morning and evening, less sleep, missing your child, illness, emergencies, weather, can all take their toll on your health and well-being. Those factors all lead to additional medical problems and costs so take them seriously.
Saving for Retirement vs. Saving for College Education
Once you have a child you suddenly find yourself spending a lot more time and money on your child and less on yourself. It happens to most parents, but one area you should never skimp on is your retirement. Put away the same amount of money towards your retirement as you were before the baby, and if possible, you should be striving for at least 15%.
If you are saving 15% for your retirement and still have money left over, you should start saving for your child’s education. You can look at 529 savings accounts as an option or you can begin to invest in mutual funds or other high yield savings accounts. The earlier you begin to save, the less money you will need to put aside each month.Saving for your retirement first will protect you and your future. Remember, you can find ways to make extra money when it comes time to pay for your child’s education, but it is a lot harder to make up any difference in your retirement account.
<Back to top>