Howdy folks! Today's blog post was written by my good friend, Stella. We've been bffs since the first grade and although we're the same age, I've always looked up to her when it comes to grown-up schhhhtuff :) She's an in demand lawyer, mother of two (she's gonna pop anytime soon!), and of course a loving wife to Julz (who is one of the sweetest husbands ever!). I've been getting lots of emails about newlywed money matters and since I'm no expert YET (Pat and I are still figuring it out just like the rest of you), I thought it best to seek the advice of my sensible and practical friend, Stella. Get your pen and paper ready!
By Stella Pastores-Esquivias
1. Income – Savings = Expenses. This formula throws away the more common albeit askew, Income – Expenses = Savings. The most prevalent mistake people commit these days is to set aside only the “crumbs” of our money—and on peak seasons like December, we end up saving none. This should never be the case. As soon as you get your money, it is wisest to set aside a certain amount for savings before you spend the whole thing at the mall ;)
2. Generally, savings must be at least 6 months’ worth of your salary. The truth is, there is really no hard-and-fast rule on the amount or percentage of income that you should be keeping as savings. In a finance seminar I attended, the speaker told us that we should keep an amount that satisfies us mentally, emotionally, and psychologically. If you’re looking for a specific benchmark, though, I find that for newlyweds, having an amount equal to (at least) 6 months’ of your individual salary is good enough. This is your “safety net” in case something unexpected comes up, and you or your spouse cannot earn as usual.
3. Open a joint account but keep your individual accounts. As a married couple, it is a must that you have at least one joint account under your names. Your wealth, after all, belongs to the both of you as one unit. Use the funds in your joint account for common expenses like household bills, insurance premiums, vacations, etc. That said, I think it is equally vital to maintain your separate accounts. Why? Because inevitably, you and your spouse will have expenses that are “unique” to each of you, and you would want the freedom to be able to pay for those yourself (ie, salon treatments for the wives!). Of course, this doesn’t mean you have to reject your partner’s offers for a treat. The point is simply that you have some legroom for your separate interests (or even luxuries!) without having to feel guilty that you took a lot from the common fund. This empowers both individuals in the marriage and helps keeps the peace at home, too!
4. Stick to a budget. More accurately, set a household budget for the family as well as a personal budget for your individual expenses. And honor it! J Setting a budget isn’t a matter of just plucking a random amount and calling it your limit every month. It’s a little more complicated than that. Wise budgeting involves recognizing the lifestyle you are used to vis-a-vis the lifestyle that would suit you as a couple; being honest about each other’s financial situation; setting financial priorities and goals together; and agreeing on expenses that can be put on hold. Feel free, however, to leave one or two “sacred” things that you can leave out of the budget and can splurge on, such as food, a special getaway, or your kids’ education.
5. Who’s in charge of paying the bills? This is a simple rule of thumb as it is painfully practical. Between you and your partner, designate the one who will be responsible in physically settling your bills. Ideally, this should be the partner who can better remember due dates, can keep bills and receipts, can keep track of expenses—generally, the more OC one ;)
6. Do NOT ever get into credit card debt. Live within your means. See Rules #1 and #4. If this is too late, prioritize paying off ALL your debts as soon as possible. This prevents the compounding of monthly interests, not to mention finally enjoying better sleep!
7. Invest. Please get rid of the misconception that investments are only for people who have “extra money”. On the contrary, good investments should benefit those who don’t have a lot… or, in the case of newlyweds, those who are just about to begin life together! Don’t be afraid to talk to a financial adviser or your bank account manager for this. There may be ways to put your hard-earned money into an investment product that can yield higher profit than, say, a regular savings account.
8. Know your tax benefits as a married couple. Do you know that you can make deductions to your income tax if you declare yourself as head of the family? Yes oh yes! Other deductions may also be available to you, so be sure to know your tax rights :)
Being financially stable as an individual is challenging enough; add another person into the equation and the task may seem a little more difficult. The good news is that this “other person” is your better half, and so the journey to financial freedom and stability should be a happy, adventurous one! :) Love, Stella
Visit Stella's blog here.