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!

 

The average shopper may blindly pay retail price for their goods.  The average investor may make rookie investment choices that cost them dearly.  But Money-Guy listeners are anything but average when it comes to financial matters.  In today’s show, we talk about the rewards involved with being an above-average shopper and investor.

We have mentioned in past shows that we pride ourselves on saving 3-7%  more than the average person does on purchases.  A couple of our favorite shopping tools to stretch those dollars are:

• Upromise:  Upromise is an incredible tool that allows you to accumulate savings for college by simply signing up and making everyday purchases.  They recently sent out a press release stating that their already-amazing service just got even better.  You can now earn 5% cash back (or more) with every Upromise online shopping purchase to go towards higher education.
• Ebates:  Ebates is another great program that offers cash back on purchases at over 1,500 stores.  Additionally, you can sign up for a $10 gift card after your first time purchase of $25.

By using these tools along with various credit card rewards, you can shop smarter than the average person and reap the benefits of your hard work!

The second part of today’s show focuses on DALBAR, Inc.’s Quantitative Analysis of Investor Behavior.  Don’t let the long, boring name fool you.  The data here about what the average investor does wrong is actually really interesting.

• Retention rates:  We always say that to be considered a long term investor, you want to be able to lock your money up for 5-7 years.  If you think you may need the money in the next 1-4 years, you might want to stay in cash.  Research shows, however, that for the last 20 years the average holding period for equities is 3.29 years and for the bond market, 3.09.  Despite evidence that long term investing produces greater return, investors are still reacting to market movements and getting out too early.

• Market Timing Failure:  The report states that “for the calendar year of 2011, we can see more clearly how investors’ attempts to time the market are futile.  The largest uptick in the S&P 500 occurred in September, a month when fund flows were close to 0% of total assets.  Fund flows were near 10% of total assets 2 months later.  Unfortunately, by that time the S&P had lost nearly half of its September gains.”  Timing strategies and day trading is proven to be a bad strategy by this data.  No one has the magic ball that tells them what to do and when to do it.

• Irrational Decisions Lead to Inferior Results.  We have been saying for awhile that what has been perceived as safe in the past is now riskier and vice versa.  The data shows that in 2011, investors lost 5.73% in their flight to “safety” compared to a gain of 2.12% for those simply holding the S&P 500 Index.  Additional data shows that on the 20-year level, the average equity investor made 3.49% while the S&P 500 made 7.81% for a 4.32% spread.  The average fixed income investor made .94% while Barclays Bond Index made 6.5% for a spread of 5.56%.

We challenge you guys to take a look at your performance over the years and see how you measure up.  If you are a Do-It-Yourselfer who has fallen prey to some of these bad investor behaviors, you may want to consider getting a professional to help you.  Volatility isn’t going anywhere and, unfortunately, the average investor is using fear and market timing and apparently they are paying for it.  We want all of our listeners to be above-average shoppers and investors and find financial freedom and success.