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An Argument for Couples Keeping Their Financial Independence

An Argument for Couples Keeping Their Financial Independence

Power corrupts and absolute power corrupts absolutely…At some level, power exists in friendship, romance, marriage, and family.” — Guerrero, et al, “Close Encounters: Communications in Relationships”, p. 255

Financial independence among couples is one of the new issue many newly married couples are discussing. Despite the common thought that married couples should share conjugal rights to properties involving assets acquired before marriage, it can be a wise step if the couple remain financially independent. This does not mean encouraging financial secrecy towards each other, but encouraging freedom and autonomy to expenses. This is really important to maintain stability to the family’s expenses and for the future expenses (as the family grows). Here are the reasons why the couples should remain autonomous when it comes to finances:

1. It will allow the couple to adjust to the inter-dependency of expenses, especially if one or both were already financially independent before marriage.

Since marriage is about conjugal rights of both parties’ assets, etc., it is really important to have a smooth transition from single life to married life. In order to achieve that, in the first phase of the married life, the couple should respect the autonomy of one towards his/her expenses and what he/she wishes to spend to it. According to Kelly Long, a CPA at Shephard Schwartz & Harris LLP in Chicago, having separate accounts will allow two people who were independent financially before marriage a sense of autonomy as they slowly adjust to the couplehood.

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2. It will equally divide family expenses.

The couple is highly encouraged to have different bank accounts so as to divide the expenses needs fairly. Each one can re-check if finances are available and still stable and are still able to pay his/her part from the entire family expenses. In this way, the couple can agree with each other fairly to what they should be responsible paying for. In a couple, perhaps the other one has more income than the other or has more stable/fixed income than the other.

3. It will encourage responsibility regarding the wife/husband’s debts.

Since the couple has different bank accounts or separate finances/savings, etc., it will encourage the wife/husband to be responsible of paying her/his own debts. Thus, it also promotes discipline of each other towards the spending habits as well. As a result, it will be a more stable family life in terms of expenses and spending discipline. Moreover John Ulzheimer, President of Consumer Education at Smartcredit.com, says that getting into debt is a choice, not a coincidence/accident.

4. It promotes respect to each other in terms of spending habits.

By having different bank accounts, it can highly respect the differences of the habits of the other. For example, the wife may like Chanel bags or other expensive objects while the husband likes to have tools for carpentry, repairs, etc. In this manner, through having independence financially, they can have what they wish to have without harming the other by spending the partner’s money just for their items which he/she may not be agreeable towards.

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5. It keeps the relationship healthy.

Ideally, the couple married because they love each other.  However, if the they have unstable finances, it might affect each other’s relationship which later on develops to a more serious problem – Divorce. One manner which may help to avoid this is couples being highly encouraged to have separate accounts. This is according to Rosemary Frank, a certified Divorce Financial Analyst in Brentwood, Tennessee.

Possible problems if couples are highly dependent financially:

1. One person may lose their identity is such a relationship.

Because one is dependent on the other in terms of finances, it will also affect the way they behave and interrelate.

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2. It promotes inequality in the relationship.

It is really unhealthy for the couples to feel prejudice in some manner. It may be minor or may explode into something major.

3. It will put the wife/husband at high risk when circumstances change.

Loss of job in a single career family, is an example. If both incomes are dependent on one and the other partner doesn’t have resources, they family could be put in a bind during this time.

4. It impairs equal incentive as an individual.

This means that when the other one is financially dependent to his/her wife/husband, it may lessen the incentive of the other to earn and experience confidence and pride from also providing for the family monetarily.

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5. It explicitly shows dominance within relationships.

Because of the fact that the other one is unable to spend or to contribute toward the expenses in the family, the other one can easily show dominance over the other. This can cause one to feel demeaned and the other to feel burdened with responsibility.

A piece of advice to married couples:

Ruth Hayden, a financial educator and author in St. Paul, Minnesota, writes that there are many couples who think that they can be actually fair at all times in terms of finances, yet this is impossible. She advises couples to just be clear to their goals as a married couple and move on from there.

Featured photo credit: Dodgerton Skillhause via mrg.bz

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Last Updated on June 6, 2019

The Average Retirement Savings and How to Save Wisely

The Average Retirement Savings and How to Save Wisely

Are you on track for retirement?

If not, don’t worry, I’m not sure either. I save each month and hope for the best.

Fortunately, I’m at an age where most people don’t save so I’m ahead of the curve.

But, what if you aren’t in your 20s? What if you’re near retirement and are looking to gauge where you stand?

If so, keep reading. Here’s how to prepare for retirement and save wisely during the process.

What Does the Average American Have Saved for Retirement?

Saving for retirement is tricky.

Tell someone straight out of college to save $10k a year for retirement and it’ll be next to impossible.

Make the same request to someone decades older and they’d be more likely to be able to save this amount. But, a 20-year old college student can be “financially ahead” of someone saving more than them. Why?

Age matters in your financial journey. The younger you are, the more time you have to save and put compound interest to work. As you get older and have more saving power, you’d have less time to put compound interest to work.

Here are the average savings Americans hold by age bracket:

20’s – $16,000

During this stage, most people are paying loans and moving up the corporate ladder. Your best bet during this stage is to focus on eliminating debt and increasing your income. Don’t focus only on getting a high-paying job neither.

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Instead, focus on learning via Podcasts, reading books, and taking specialized courses. Doing this will make you more valuable and give you more career options.

30’s – $45,000

At this stage, you’ve hopefully escaped your entry-level salary and work at a career you enjoy. Your earning power has increased but you now have more obligations. For example, marriage, kids, and a mortgage.

Set a plan to pay off all your debt and focus on eliminating unnecessary expenses. Leverage financial tools like Personal Capital to ensure you’re on track for retirement.

40’s – $63,000

This is the stage where you’re at the prime of your career. Top financial institutions recommend you have at least 2 to 4 times your salary saved up. If you’re falling behind, start maxing out your 401K and Roth IRA accounts.

50’s – $115,000

During your fifties, you’re close to retirement but still, have time to save. You may be helping your kids pay college tuition and other expenses. Since you’re at the peak of your earning power, max out all your retirement accounts.

60’s – $172,000

By this point, you should have about eight times your salary saved up. If not, you’ll depend primarily on social security benefits averaging $1400 per month. Max out all your retirement options as much as possible before retiring.

Ways to Save Money on a Tight Budget

The sad reality is that most Americans aren’t saving enough for retirement.

Even high-earning power isn’t enough to secure one’s financial future. You need to have the discipline to save for retirement while time is in your favor. Don’t wait for you to have a high salary to save, start with having a small budget.

First, get a clear picture of where you stand. Write down a list of “needs” and “wants.” For example, Netflix and Amazon Prime are “wants” and a “cell-phone” is a need.

Use tools like Personal Capital to analyze your spending patterns. Personal Capital allows you to add all your financial data in one place–making it a powerful option to gauge where you stand.

Once you know all your expenses, organize them from highest to lowest expense. When you can’t cut more expenses, call your service providers to negotiate a lower price. If you’re not good at negotiating, use services like Trimm to lower your monthly expenses.

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How to Save Money Each Month

By this point, you know the average amount of money you should have saved for retirement based on your age.

But, breaking this down into monthly goals can be challenging. Here are some rule of thumbs to follow:

Aim to contribute 10%–15% of your salary each paycheck. Review your progress each week.

Why so often? The reality is that life gets in our way and you will have many financial setbacks. Your goal isn’t to be perfect but to get back on track instead.

Reviewing your finances weekly lets you know where you stand with your retirement. This doesn’t have to be a long process either. All it takes is login in Personal Capital to view your net worth and check how much you have saved for retirement.

Turn saving into a game and aim to save more each month. It will get challenging but you’ll get creative and find more ways to save.

Top Money Saving Challenge Tips

To prepare for your financial future and not be another statistic you need to be different.

How?

By adopting new habits that’ll help you become a saving machine. Here are some ways you can save more:

Automatically Contribute Towards Retirement

If you’re working for a company, you can automatically contribute towards your 401k. If you’re not currently contributing more than 10%, make this your goal. Contribute 1% more today and automatically increase this amount a year from now.

Odds are that you’re not going to be negatively affected by contributing 1% more. Many times we spend our money on things we don’t need. Contributing more towards retirement is a great way to secure your financial future.

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Use the Right Tools to Know Where You Stand

Once you’re contributing more towards your retirement accounts, gauge your progress. Make use of finance tracking apps to help you view the big picture of your retirement.

When I’d first signed up for the app Personal Capital, I didn’t know I had a negative net worth. Despite saving thousands of dollars, my debt brought my net worth to the negative. Knowing this motivated me to save more and spend less.

Now, I have a positive net worth. But, it was because I was able to view the big picture using the app. Find out what your net worth is using a finance tracking app and you may surprise yourself.

Bring in Experts to View Your Blind Spots

If you have too little or too much money saved, you should consider hiring financial experts.

Why?

You may need someone to hold you accountable to help you reach your financial goals. Or, you may need help managing your money as effective as possible.

Regardless of the reason, getting help may help improve your financial situation.

Before you hire an expert, find out which areas you need help the most. For example, if you’re constantly overspending, find a debt counselor. If you’re struggling with choosing the best investment options, hire a financial advisor.

Speed up Your Retirement Contribution

After learning how to manage your money well, the next best thing is to earn a higher income.

You’re capped at how much you can save but not much you can earn. Even if your employer isn’t giving you a promotion, you can still take charge of your financial future. How?

By starting a side-business.

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This will be something you’d work on after you’ve finished your day job. Once you start earning income from your side-business, you’ll be financially better off.

The best part is the more work you put into your side-business,[1] the more potential it has to earn more money.

So start a side-business in an area you’re familiar with. For example, if you enjoy writing, do freelance writing for small e-commerce businesses.

Once you’re earning a higher income, you can contribute more towards your retirement. Don’t wait for the right opportunity to secure your financial future, create one.

Reach Financial Freedom with Confidence

What if you were able to retire tomorrow with no problem, all because you’d have enough money saved up and little to no debt left to pay off? How would you feel?

My guess is that you’d feel happy and relieved.

Most Americans are falling behind their retirement goals for many reasons. They’re not prepared, they carry bad money-habits and are thinking short-term.

For you to retire successfully, you need to work backward and adopt better habits. Contribute more towards your 401K and focus on growing your income.

If you do, you’ll save money and pay debt faster.

Don’t beat yourself up if you’re behind your retirement goals. Take the first step today towards a brighter financial future. Isn’t retirement worth the hard work and sacrifice to be at peace?

Featured photo credit: Huy Phan via unsplash.com

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