As many of you know, Bo is getting married in less than two months, so his upcoming wedding has been a hot and heavy topic around our office.  We feel that Bo is a little naive about marriage and financial expectations, so picking on him has provided a lot of entertainment for the rest of us lately.  In today’s show, we thought we would let you guys in on the fun and talk about the biggest financial mistakes couples make as well as some of the financial benefits that come along with marriage.

Some quick facts about marriage:

- The average engagement time:  13.8 months according to WeddingChannel.com and 15.4 months according to TheKnot.com

- Average wedding cost:  $26,500 in 2011 according to Brides magazine

- Average net worth for married couples in 2004:  $144,500

- For single males:  $28,100

- For single females:  $30,026

6 Financial Benefits of Marriage from MSN Money:

1. Save money on car insurance
2. Raise your credit score (if you enter a marriage with someone who has a higher score than you do)
3. Get favorable loan offers
4. Increase financial stability (due to having more than one income)
5. Combine expenses
6. Share employer benefits

The Six Financial Mistakes Couples Make according to smartmoney.com:

1. Merging the finances:  Everybody is different.  While some couples prefer joining everything, some prefer to keep everything separate, and others have found success by doing a hybrid of the two.  Before entering a marriage commitment, decide what it best for you and your future spouse.
2. Dealng with debt:  Rather than pointing fingers at the one who accumulated student loans, a mortgage, etc., work to develop a plan to tackle it together as a couple.
3. Keeping spending in check:  Be realistic and develop a budget to ensure that each person is comfortable with the spending arrangement.  One spouse may spend more on day-to-day items, while the other likes to splurge on electronics and hobbies.
4. Investing wisely:  Statistically, men are more willing to take financial risk than their wives.  Rather than fighting about it, become educated together about the appropriate amount of risk tolerance for your goals and time frame.
5. Keeping money secrets:  Cheating in a marriage does not only apply to sexual fidelity – it can also apply to financial fidelity.  This survey showed that 36% of men and 40% of women have at one point lied about the price of a purchase.  You also commonly hear about couples hiding money from each other is secret accounts.  The best way to avoid fighting about finances is to always be completely honest and transparent with your spouse.
6. Emergency planning:  This is a core concept of financial planning and one of the first things you should establish together as a couple.  Having these funds as a back up will eliminate a lot of the stress that leads to fights about money.

Additional tips for a happy marriage:

• Disclose your assets to each other

• Disclose your debts to one another

• Set joint financial goals – how much to save, when to retire

• Develop a full financial plan – insurance needs, estate needs, retirement goals

• Create a budget

• Decide who is going to manage the finances day to day

• Set up a time to review your budget each month or each quarter

• Develop a method to organize your personal documents and retain financial information for your taxes

• Update your insurance policies and beneficiary designations on all accounts

To sum it up, marriage can be one of the most challenging, but rewarding experiences you will ever have.  Do not let financial matters be the thing that comes between you and the one you love.  Always try to treat one another with respect and be honest and you can certainly make it last.  Please join us (all joking aside) in wishing Bo and his future wife happiness and a long, loving life together.  He also welcomes any additional marriage advice you may have, so you can write to him below, send him an email at bo@money-guy.com or post on our Facebook wall!

 

Hiring a professional financial planner could possibly be the key that unlocks the door to your financial success.  At the same time, choosing the right advisor to work with is an important decision that can often seem overwhelming.  In today’s show, we discuss the services that planners will and will not provide as well as key things to look for when hiring a pro.

In the March edition of MoneyAdviser, Consumer Reports outlined what typical fee-only planners will and won’t do for their clients:

What they will do:

• Help you figure your net worth:  Typically, a planner will have the client gather the necessary data and then create a statement to uncover other planning opportunities, such as insurance analysis or estate planning.  (Do-it-yourself tip:  Collect current statements for all assets and liabilities and use an online net worth calculator, such as Mint or Yodlee, to determine your net worth each year.)
• Advise you on 401(k) investments:  Your planner should be looking at all the pieces of your financial puzzle, including your 401(k) to ensure that your saving and investing goals line up across the board.  (Do-it-yourself tip:  See if your 401(k) plan sponsor offers access to investment guidance or check out the online retirement-planning program, Financial Engines, for additional support.)
• Help you invest a lump sum:  A planner should be able to offer tax-efficient investment advice to their clients, as this is a core activity of financial planning.  (Do-it-yourself tip:  Use Morningstar software to research mutual funds and stocks for your portfolio.  Also, check out Bo’s Money-Minute about investing in a lump sum vs. dollar cost averaging.)
• Determine if you’re properly insured:  Your planner should be able to evaluate your insurance needs, as well as refer you to an agent that can provide the coverage.  (Do-it-yourself tip:  Do as much research as possible and shop around for the best rates.)
• Assess if you’ve got enough to retire:  A planner can determine whether you are on track for retirement or if you need to explore other options, such as working longer or changing your lifestyle.  (Do-it-yourself tip:  Assess your potential income sources, including Social Security, and use an online tool to calculate where you stand.  Consumer Reports recommends T. Rowe Price’s Retirement Income Calculator and Analyze Now’s Free Retirement Planner.)
• Coordinate your retirement income:  Planners can determine the best method for drawing funds from your various retirement accounts, while considering tax consequences.  (Do-it-yourself tip:  Consumer Reports advises that unless your retirements consists entirely of Social Security and a pension, you might want to consult a professional on this one.)
• Help you plan for college funding:  A planner can guide you on the best ways to finance your child’s education.  (Do-it-yourself tip:  Visit www.collegeboard.com, www.savingforcollege.com, and www.finaid.com for additional resources.)

What they won’t do:

• Help you pay down debt:  As a general rule, fee-only financial planners refer such clients to a debt counselor or a bankruptcy attorney.  (Do-it-yourself tip:  Contact the National Foundation for Credit Counseling if you need help with debt.)

The gray area:

• Help you control your spending:  While many planners recommend following a budget, it’s not cost effective for you or the planner to spend hours together developing a detailed budget.  Most planners are interested in overall cash flow and will recommend cutting back if needed.  (Do-it-yourself tip:  Create a spreadsheet or utilize budgeting software like Quicken, Yodlee, or Mint.)
• Create an estate plan for you:  Planners can help you decide the structure and tax efficiency of your estate, but an estate-planning attorney will be needed to draw up wills, trusts, and end-of-life documents.  (Do-it-yourself tip:  Contact an attorney to prepare or review your documents.)

If you decide that hiring a financial planning professional would be beneficial for you, the following credentials should stand out to you:

• Certified Financial Planner (CFP):  holder has passed a 10-hour exam, has at least three years’ financial planning experience, and has completed an approved course of study.
• Chartered Financial Consultant (ChFC):  requires eight college-level courses in financial planning and 30 hours of continuing education every two years.
• Certified Public Accountant/Personal Financial Specialist (CPA/PFS):  CPA with specialized training in personal finance.
• NAPFA – Registered Advisors:  holder meets strict education and professional requirements for membership in the National Association of Personal Financial Advisors, for fee-only planners.
• Chartered Financial Analyst (CFA):  holder completes a series of three six hour exams and has four years of qualified work experience.

Hopefully this information will be helpful if you are considering hiring a professional to guide your finances.  Check us out on Facebook, YouTube, and please leave any questions or comments below!

 

Links to other things mentioned in today’s show:

Is This the End of Popping Vitamins?
On the Job, Beauty Is More Than Skin-Deep