Family Finance: Five Steps to Get Back in the Loop

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In too many households just one spouse handles the money and that’s a recipe for trouble. If for some reason you’ve let your spouse or partner handle the money, here are a few simple steps to get yourself back in the loop. 

Step 1: Take stock. Start by figuring out what assets you have. Make a list of all your financial accounts: savings, checking, and brokerage as well as your 401(k) and IRAs. Do you own any stocks or bonds in certificate form in your safe deposit box? Don’t forget to put major assets like your house, a vacation home, or other properties on your list (and be sure you’re named as co-owner if you own them with your spouse). Include any life insurance policies you have, particularly if they have some cash value. Next, figure out the other side of your personal balance sheet: debt. Make sure you know what you owe, to whom and on what terms. For most people, this means credit-card debt, a home mortgage and perhaps a car loan.

Step 2: Make a budget. Look at how much comes in (your income) versus how much goes out (your expenses). On the income side, be sure to include any pension or investment income, as well as your salary. The expense side should include fixed expenses (mortgage, insurance premiums, car payments, etc.), as well as variable costs (food, taxes, transportation, etc.). Looking at the two side-by-side is essential. If you’re running a deficit, look for ways to cut expenses, increase your income, or both.

Step 3: Plan for the future. Start by setting aside six to nine months’ worth of living expenses; put this proverbial “rainy day” money somewhere safe and easy to access. Then articulate your investment goals. Retirement is obviously a priority. Do whatever it takes to fund your 401(k) or IRA to the max. You may have other goals: college for your kids, for example, or a home of your own. Assign a time frame to each goal and start putting money away. Another part of planning for the future includes making a will, especially if you have dependents. A will is just a tool to ensure your wishes are articulated in writing. Your own financial planning must also include insurance: medical coverage and term life insurance if you have dependents. And you might want to investigate disability insurance and long-term care insurance as well.

Step 4: Save more. Life, particularly retirement, is more expensive than you think. Even when you factor in Social Security benefits, that’s not enough for a financially secure retirement. You may not know how much you’re going to need for retirement, but if you have any sense that you’re going to need more, the time to start saving is now. Save more and invest for growth.

Step 5: Stay up to date. Make sure you review all money matters periodically; monthly for your basic budgeting, at least quarterly or semiannually with respect to your investments. It just makes sense that your financial life will continue to evolve as you do. Monitoring your progress will help you avoid problems and take advantage of opportunities. Money and all the issues surrounding it often can become a wedge that drives people apart. It doesn’t have to be that way, even for partners with wildly different approaches to personal finance.