Couple Finances

Two Incomes One Financial Household

Instead of letting money become a source of tension, couples can work together to manage household finances. Their relationship will benefit, as will their financial future.

By sharing the role, both spouses can better grasp the financial components of managing and maintaining a household. This understanding and transparency can help show the importance of avoiding ill-considered splurges.

Working together can also help couples reach their goals faster and more equitably.

The incentives

Building a budget and financial security plan and sticking to it isn’t always easy. By definition, saving means not consuming, and for many people, that doesn’t sound like as much fun. We all need goals to keep us motivated.

For younger couples, this is a fantastic opportunity to understand each other’s aspirations. It can also be a great Couple Financesequalizer. Even if one spouse makes considerably more money, decisions should be unanimous.

Cash flow – the ins and outs

Think of your household as a company, except with co-bosses. Earnings come in and bill payments go out. Whatever is left each month is profit, or in this case, savings.

Managing household expenses together in the early days of your relationship sets the foundation for lifelong financial security planning success.

Online tools make it easy to build a budget document of monthly income and expenses.

Utility bills, insurance payments, property taxes, car expenses, student loans and rent or mortgage payments will make up the biggest chunk of monthly expenses. Other household costs include groceries, keeping vehicles fuelled and insured, eating out and entertainment.

Instead of breaking down individual personal expenses, such as clothing, gym memberships and pocket money, you can set a monthly amount for each of you.

Income is the easy part. You know how much you each take home and when deposits are made. If either of you contributes to a pension plan or registered retirement savings plan (RRSP) through work, that money should be included as savings.

Joint venture

A joint bank account may be an ideal way to manage day-to-day expenses, even if one spouse looks after bill payment using the joint account.

Reoccurring bills can be paid automatically from this account. You can also set up automatic transfers to one or more shared high interest savings accounts for big ticket items like a new car or down payment for a house. Like exercising, saving money is easier when you have someone with whom to do it.

All this transparency also provides checks and balances to help prevent one partner from making a rash spending decision or putting money into an ill-advised investment.

Sharing credit

Credit cards with the highest rewards and other benefits have annual fees of $100 or more. But typically, they don’t charge extra for adding someone to the account. You’ll save on fees and your combined spending means you’re accumulating rewards faster.

You may also wish to consider having separate no-fee, low-limit credit cards. These cards can serve as a backup if one of your main credit cards is lost or stolen. Plus, it may be difficult to surprise your partner with a birthday gift if he/she has already seen the charge on a credit card statement.

Having your own credit card can also help build your credit rating score.

Sharing debt

Paying off debt offers better returns than most investments, especially high-interest debt such as outstanding credit card balances. As a family, it doesn’t matter whose name is on the debt. Paying it off should be a shared priority.

Practice makes perfect

Managing household expenses together in the early days of your relationship sets the foundation for lifelong financial security planning success. Expenses and spending are easier to track. Once kids come along, the budget will expand but the system is already in place.

Early success saving together for something special such as an exotic trip sets the stage for bigger and more important objectives – an automobile, home, kids and retirement. Understanding finances and working as a unit are essential ingredients for making money work for you to help attain financial independence.

Monthly Savings vs Paying the Bills

Have you ever noticed that your wallet manages to empty out no matter how much you put in there? Sometimes it feels like $80 lasts no longer than $40.

It may explain why that emergency $20 is hidden in one of your shoes. You just can’t trust your wallet.

Okay, you’re the one actually emptying your wallet, but the point remains: we tend to spend whatever is in our pockets. This offers an important lesson for the way we handle all of our finances.

Perhaps the most well-known mantra in financial security planning is “paying yourself first.” It endures because it usually works. Another well-known guiding principle is that paying down debt trumps all. But this one isn’t quite so indisputable.

Monthly Savings

The value of creating a clear spending plan

People living paycheque to paycheque are bound to feel shackled by their financial responsibilities. Even some people making a decent living think they’ll never get ahead. They need a formal process that will slow things down and allow them to put money away.

Creating a simple budget or spending plan is the first step. Make sure to pay your bills on time – especially those that keep the lights on and the water running. Preauthorized payments are a great solution. You also need to pay the rent, buy groceries, get to work and cover other day-to-day expenses.

If you have debt, you’ll need to devise a realistic schedule to repay it. But make sure you leave money aside for savings, even if it takes longer to repay your debts.

  • Putting money aside every month establishes a useful routine for efficiently managing your money.

The importance of creating sensible spending habits

Putting money aside every month establishes a useful routine for efficiently managing your money. First, it creates an emergency fund for a rainy day. Second, treating your savings as a priority allows you to start a financial security plan, the key to getting money to work for you.

Carrying non-mortgage debt is not a good thing. But even more alarming is holding that debt while not having any savings. The debt may cost you more in interest charges than your savings account is generating, but that cash gives you much-needed options.

Why setting money aside is a no-brainer

Setting aside a share of your monthly income needs to become routine. The best way to achieve this is by setting up automatic transfers to build monthly savings. If your pay is deposited into a bank account, arrange to have a set amount transferred right away to a separate place – perhaps a high-interest savings account. Once you have an ample emergency reserve, transfer some to a longer-term investment.

Your workplace may also offer a seamless way to save. Some employers will put a fixed percentage of your gross pay into a group registered retirement savings plan (RRSP). You can also tell them to deduct a certain amount of your pay. These programs may even provide a bonus amount if your contributions hit a certain threshold.

Growing your savings with automatic transfers

When your net pay increases, automatically boost the amount you transfer into savings. If you’re prudent, you may hit a point where your earnings allow you to increase your overall savings rate. The sooner you reach it, the faster your wealth can grow.

Flying under the radar

Building savings isn’t easy – after all, there are plenty of fun things to spend your money on. But watching your savings grow can be motivating. And as long as the process is automatic, your wallet won’t notice the money is missing.

Good Savings Habits Lead to Financial Independence

Regardless of what you’re saving for – a down payment on a home, a dream vacation, a child’s education or your eventual retirement – developing good saving habits can definitely pay off. Even relatively small but regular contributions can quickly gain momentum thanks to the power of compounding, or making interest on your interest.

Most people can rationalize buying new bedroom furniture or a better and more reliable car by using small monthly payments spread over several years. However, you can also use this strategy to build hefty savings.

For some, saving is instinctive. Chipmunks know they must save enough nuts and seeds to get them through the winter. They even build storage rooms in their burrows.

But it’s important everyone – even humans – realize the importance of saving.

Good Savings Habits

Deciding on your goals for the future

The first step is determining an investment strategy and that means carefully evaluating your financial goals. After all, saving for a down payment on a house or a new car requires a different approach than long-term retirement planning.

So, ask yourself this: what do you want to do with your money?

Crunching the numbers

Next, set up a spending plan to help you determine how much you can afford to put away each month. Plenty of online tools can help you.

Start by going over your chequing and savings accounts and credit card statements, including ATM withdrawals. Make sure to include everything – even those pricey takeout lunches. This exercise can help you trim excessive spending.

  • Setting up a regular, automatic savings plan is an essential part of anyone’s financial health.

Once you have a better understanding of your income and expenses, determine your savings “payment.” Be bold, as you can always dial it back a bit later on. Or better yet, keep the amount steady and reduce your overall spending. Then, as your income grows, continue to raise the amount you put away each week.

Choosing the right investment solution

I can help you choose the right mix of investments and help you achieve your unique savings goals. Find out more about the features and benefits of various investment solutions.

Why it’s crucial to start saving now

Setting up a regular, automatic savings plan is an essential part of anyone’s financial health. The sooner you start, the better off you’ll be and the sooner you’ll achieve your goals.

Pay Yourself First

You know it’s important to set money aside to reach your investment goals. However, with so many spending opportunities vying for your attention, it can be tough to fit savings into your financial security plan.

  • Paying yourself first means saving a set amount first and only spending what’s left over – rather than the other way around.

“ Pay yourself first ” means saving a set amount first and only spending what’s left over – rather than the other way around. It means making your financial goals a priority by treating saving like any other bill or re-occurring payment.

That’s where a pre-authorized contribution (PAC) plan can help. It allows you to transfer funds automatically from your bank account to your plan.

Pay Yourself First

Instead of saving to invest in one lump sum, PACs spread your saving over regular intervals, helping you balance the effects of up and down market cycles.

Making small, regular contributions can go a long way to helping you achieve your financial goals. For example, if you invest $100 a week for your retirement, you’ll have accumulated $197,000 after 20 years – assuming a fixed interest rate of six per cent.1

Pre-authorized contribution plans make it easier to save for your future. I can work with you to determine which PAC options and schedules work best for you.