How can you plan for the future when you don’t know much about the present? Simple answer: you can’t.
See if this sounds possible: couples report having open and honest conversations about their finances. At the same time, 40% don’t know what their partner is earning, and one in ten were unable to guess it—even when given a pretty wide margin of error. Without this basic information, how likely is it that a couple can do the financial homework necessary to plan for retirement?
Wjbf.com’s article, “9 Questions to consider in planning your financial future,” reports that the Couples Retirement Study by Fidelity Investments revealed that many couples need a far better understanding of their joint financial lives. That said, many elect to divide up the tasks of money management, bills, assets and debts. Although a seemingly equitable idea, it can leave one or both without all of the important financial details.
Both partners need to collaborate when it comes to financial planning, money management and decision-making. That means sharing the responsibilities of building and protecting their financial future.
To help with this, here are nine questions to consider when thinking about your financial lives:
- What’s your philosophy on money? Consider your values and whether you’re a spender or a saver, how you use debt and what the role of money is in your life.
- What’s our budget? Understand the cost of living and if you are able to save for future goals.
- What do we own, and what do we owe? Take stock of your collective assets and liabilities—that’s anything that involves money.
- Do we have an emergency fund? See how much you have and whether it’s titled in both names so you’ll both have ready access if needed.
- What are our plans for our savings? Determine if you’re funding a college education, buying a cottage on the lake or preparing for retirement. Fix your short- and long-term priorities and save for them as a team.
- How much will we need to live comfortably in retirement? Think about how each of you envisions the future so that you can plan, save and invest to meet that goal.
- What are we saving for retirement and where is it located? Keep track of all 401(k)s, IRAs and CDs dedicated to retirement. Also, know the amount you’re contributing and whose name is on each account.
- Where do we keep our important documents? Make certain estate planning documents are up-to-date and stored in a secure spot—along with tax records, insurance policies and other valuable documents.
- Is there a plan in place for when one or both of us dies? A properly prepared estate plan will clarify what you want to happen in terms of asset distribution and include preparation of power of attorney and health care directives for your heirs. Plan in advance so that your spouse and heirs are protected.
Don ‘t have an estate plan? You’ll want to speak with an estate planning attorney, who will help you and your spouse clarify what you need for your family and create an estate plan. Best advice? Don’t delay—there are no guarantees about when you will need this.
Reference: wjbf.com (August 24, 2016) “9 Questions to consider in planning your financial future”