Are Your Children Financially Literate?

New Approaches to a Changing Problem.

Provided by: Warren Street Wealth Advisors

 

How bad is financial illiteracy today? So bad that your children may be at risk of making some serious financial mistakes. Some are finding that talking to children about finances has become less about the nuts and bolts of money and more about putting money’s importance to our daily lives in the correct context.

Women at particular risk. The U.S. Department of Labor reports that only 45% of working women ages 21-64 have a retirement plan. The DOL also notes that more women work in part-time jobs, and are more likely to interrupt their careers to take care of family, whether that be raising children or looking after parents. Some of these patterns are just luck of the draw, but others may come from what parents teach children about money, and how they teach it.1

 

Start at a young age. New York Times money columnist Ron Lieber’s book The Opposite of Spoiled discusses ways to prepare children for dealing with financial issues. The title refers to the author’s search for an antonym to the word “spoiled” in the context of an entitled and demanding personality. Lieber suggests focusing on values like graciousness in communication, which can lead to more openness in discussing money. Money can be frightening or mysterious to many, even well into adulthood, and Lieber encourages approaching the topic with fewer facts and figures and more as an emotional issue. The reasoning for this is that money is, for children and adults, an emotional topic.2

 

The emotional toll of money issues. While most people have experienced money worries at one time or another, the science surrounding this phenomenon is compelling. Many mental health organizations have special literature dealing with the emotions that surround money troubles, including Duke University’s Personal Assistance Service. They cite an American Psychological Association survey asserting that 80% of Americans experience genuine stress related to money, and that half of Americans worry about their ability to provide for their family. While money is always an uncertain and fluid factor in our lives, how we deal with these stresses may be strengthened through early experiences and developing good emotional habits early on. Frank talk about these emotions may demystify money and, in the process, boost financial literacy.3

 

Education is still needed. Of course, money is far more than an emotional issue; being comfortable with a topic doesn’t guarantee proficiency, it merely makes it easier to learn.

 

In 2014, the Organization for Economic Cooperation and Development tested 29,000 students aged 15 from 18 member countries or economic regions. Students in top-scoring Shanghai had the highest average score at 605, while the lowest average score belonged to 15-year-olds from Colombia at 375; the average score for U.S. students was a mediocre 490.4

While a number of factors may contribute to the lower scores, there were few obvious indicators, beyond a simple lack of financial sophistication. For example, while those with better math and reading skills were more likely to demonstrate financial literacy, not all with high proficiencies were demonstrably better with money. However, those who indicated that they enjoyed solving complex problems earned higher scores. This may be key. U.S. Education Secretary Arne Duncan indicated that teens needed to be more financially proficient, and in ways that their parents and grandparents never had to be.4

 

Prescriptions in progress. There are a number of online sources for financial education, helpful to both teens and young adults. The Ad Council and the American Institute of Certified Public Accountants have a national campaign, Feed the Pig™, to try and correct this dilemma (learn more by visiting www.feedthepig.org). The National Council on Economic Education has also helped launch www.TheMint.org to acquaint young adults with vital financial principles.

 

Warren Street Wealth Advisors

190 S. Glassell St., Suite 209

Orange, CA 92866

714-876-6200 – office

714-876-6202 – fax

714-876-6284 – direct

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 

Citations.

1 – dol.gov/ebsa/publications/women.html [2/26/15]

2 – wealthmanagement.com/careers/cobbler-s-kids-have-no-shoes [2/17/15]

3 – hr.duke.edu/pas/money_emotion.html [2/26/15]

4 – pbs.org/newshour/making-sense/u-s-teens-rank-between-latvia-and-russia-on-financial-literacy-far-below-shanghai/ [7/10/14]

 

4 Money Blunders That Could Leave You Poorer

Not to do listA “not-to-do” list for the new year & years to follow.

Provided by: Warren Street Wealth Advisors

   

How are your money habits? Are you getting ahead financially, or does it feel like you are running in place?

 

It may come down to behavior. Some financial behaviors promote wealth creation, while others lead to frustration. Certainly other factors come into play when determining a household’s financial situation, but behavior and attitudes toward money rank pretty high on the list.

 

How many households are focusing on the fundamentals? Late in 2014, the Denver-based National Endowment for Financial Education (NEFE) surveyed 2,000 adults from the 10 largest U.S. metro areas and found that 64% wanted to make at least one financial resolution for 2015. The top three financial goals for the new year: building retirement savings, setting a budget, and creating a plan to pay off debt.1

 

All well and good, but the respondents didn’t feel so good about their financial situations. About one-third of them said the quality of their financial life was “worse than they expected it to be.” In fact, 48% told NEFE they were living paycheck-to-paycheck and 63% reported facing a sudden and major expense last year.1

 

Fate and lackluster wage growth aside, good money habits might help to reduce those percentages in 2015. There are certain habits that tend to improve household finances, and other habits that tend to harm them. As a cautionary note for 2015, here is a “not-to-do” list – a list of key money blunders that could make you much poorer if repeated over time.

 

Money Blunder #1: Spend every dollar that comes through your hands. Maybe we should ban the phrase “disposable income.” Too many households are disposing of money that they could save or invest. Or, they are spending money that they don’t actually have (through credit cards).

 

You have to have creature comforts, and you can’t live on pocket change. Even so, you can vow to put aside a certain number of dollars per month to spend on something really important: YOU. That 24-hour sale where everything is 50% off? It probably isn’t a “once in a lifetime” event; for all you know, it may happen again next weekend. It is nothing special compared to your future.

 

Money Blunder #2: Pay others before you pay yourself. Our economy is consumer-driven and service-oriented. Every day brings us chances to take on additional consumer debt. That works against wealth. How many bills do you pay a month, and how much money is left when you are done? Less debt equals more money to pay yourself with – money that you can save or invest on behalf of your future and your dreams and priorities.

     

Money Blunder #3: Don’t save anything. Paying yourself first also means building an emergency fund and a strong cash position. With the middle class making very little economic progress in this generation (at least based on wages versus inflation), this may seem hard to accomplish. It may very well be, but it will be even harder to face an unexpected financial burden with minimal cash on hand.

 

The U.S. personal savings rate has averaged about 5% recently. Not great, but better than the low of 2.6% measured in 2007. Saving 5% of your disposable income may seem like a challenge, but the challenge is relative: the personal savings rate in China is 50%.2

 

Money Blunder #4: Invest impulsively. Buying what’s hot, chasing the return, investing in what you don’t fully understand – these are all variations of the same bad habit, which is investing emotionally and trying to time the market. The impulse is to “make money,” with too little attention paid to diversification, risk tolerance and other critical factors along the way. Money may be made, but it may not be retained.

 

Make 2015 the year of good money habits. You may be doing all the right things right now and if so, you may be making financial strides. If you find yourself doing things that are halting your financial progress, remember the old saying: change is good. A change in financial behavior may be rewarding.

     

Warren Street Wealth Advisors

190 S. Glassell St., Suite 209

Orange, CA 92866

714-876-6200 – office

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

    

Citations.

1 – denverpost.com/smart/ci_27275294/financial-resolutions-2015-four-ways-help-yourself-keep [1/7/15]

2 – tennessean.com/story/money/2014/12/31/tips-getting-financially-fit/21119049/ [12/31/14]

Getting Your Household Cash Flow Back Under Control

Getting Your Household Cash Flow Back Under Control

Developing a better budgeting process may be the biggest step toward that goal.

Provided by Warren Street Wealth Advisors

 

Where does your money go? If you find yourself asking that question from time to time, it may relate to cash flow within your household. Having a cash flow management system may be instrumental in restoring some financial control.

 

It is harder for a middle-class household to maintain financial control these days. If you find yourself too often living on margin (i.e., charging everything) and too infrequently with adequate cash in hand, you aren’t the only household feeling that way. Some major economic trends really have made it more challenging for households with mid-five-figure incomes.

 

By many economic standards, today’s middle class has it harder than the middle class of generations past. Some telling statistics point to this…

 

*In 81% of U.S. counties, the median income is lower today than it was in 1999. Even though we are in a recovery, much of the job growth in the past few years has occurred within the service and retail sectors. (The average full-time U.S. retail worker earns less than $25,000 annually.)

*Between 1989 and 2014, the American economy grew by 83% (adjusting for inflation) with no real wage growth for middle-class households.

*In the early 1960s, General Motors was America’s largest employer. Its average full-time worker at that time earned the (inflation-adjusted) equivalent of $50 an hour, plus benefits. Wal-Mart now has America’s largest workforce; it pays its average sales associate less than $10 per hour, sometimes without benefits.1,2

 

Essentially, the middle class must manage to do more with less – less inflation-adjusted income, that is. The need for budgeting is as essential as ever.

 

Much has been written about the growing “wealth gap” in the U.S., and that gap is very real. Less covered, but just as real, is an Achilles-heel financial habit injuring middle-class stability: a growing reliance on expensive money. As Money-Zine.com noted not long ago, U.S. consumer debt amounted to 7.3% of average household income in 1980 but 13.4% of average household income in 2013.3

 

So how can you make life more affordable? Budgeting is an important step. It promotes reliance on cash instead of plastic. It defines expenses, underlining where your money goes (and where it shouldn’t be going). It clears up what is hazy about your finances. It demonstrates that you can be in command of your money, rather than letting your money command you.

 

Budget for that vacation. Save up for it by spending much less on the “optionals”: coffee, cable, eating out, memberships, movies, outfits.

 

Buy the right kind of car & do your cash flow a favor. Many middle-class families yearn to buy a new car (a depreciating asset) or lease a new car (because they want to be seen driving a better car than they can actually afford). The better option is to buy a lightly used car and drive it for several years, maybe even a decade. Unglamorous? Maybe, but it should leave you less indebted. It may be a factor that can help you to …

 

Plan to set some cash aside for an emergency fund. According to a recent Bankrate survey, about a quarter of U.S. households lack one. Imagine how much better you would feel knowing you have the equivalent of a few months of salary in reserve in case of a crisis. Again, you can budget to build it – a little at a time, if necessary. The key is to recognize that a crisis will come someday; none of us are fully shielded from the whims of fate.3

 

Don’t risk living without medical & dental coverage. You probably have both, but some middle-class households don’t. According to the Department of Health & Human Services, 108 million Americans lack dental insurance. Workers for even the largest firms may find premiums, out-of-pocket costs and coinsurance excessive. This isn’t something you can go without. If your employer gives you the option of buying your own insurance, it could be a cheaper solution. At any rate, some serious household financial changes may need to occur so that you are adequately insured.3

 

Budgeting for the future is also important. A recent Gallup poll found that about 20% of Americans have no retirement savings. You have to wonder: how many of these people might have accumulated a nest egg over the years by steadily directing just $50 or $100 a month into a retirement plan? Budgeting just a little at a time toward that very important priority could promote profound growth of retirement savings thanks to investment yields and tax deferral.3

     

Turning to the financial professional you know and trust for input may help you to develop a better budgeting process – and beyond the present, the saving and investing you do today and tomorrow may help you to one day become the (multi-)millionaire next door.

      

Warren Street Wealth Advisors

190 S. Glassell St., Suite 209

Orange, CA 92866

714-876-6200 – office

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

     

Citations.

1 – washingtonpost.com/sf/business/2014/12/12/why-americas-middle-class-is-lost/ [12/12/14]

2 – tinyurl.com/knr3e78 [11/27/12]

3 – wallstcheatsheet.com/personal-finance/7-things-the-middle-class-cant-afford-anymore.html/?a=viewall [12/15/14]

 

What’s Your Financial Health Score?

What’s Your Financial Health ScoreCan a 5-question test predict how wealthy you will become?

Provided by: Warren Street Wealth Advisors

    

In the future, will you become wealthier or poorer? Who knows, right? It seems like you would need a crystal ball to really answer that question given life’s up and downs. What if the answer is right in front of you? What if you can determine it from your present financial behaviors?

 

Two economists present a brief questionnaire – and an audacious claim. Last month, the Center for Household Financial Stability at the Federal Reserve Bank of St. Louis published an article titled “Five Simple Questions That Reveal Your Financial Health and Wealth.” The authors, William Emmons and Bryan Noeth, argue that your answers to these questions can effectively predict your financial future.1,2

 

Q: Did you save any money last year?

Q: Did you miss any loan or mortgage payments in the past year?

Q: Did you have a balance on your credit card after the last payment was due?

Q: Do liquid assets make up at least 10% of the value of your total assets?

Q: Is your total debt service (i.e., the cash you devote each month to paying principal and interest) less than 40% of your income?1

 

The Federal Reserve has actually asked these questions of consumers for decades as part of its Survey of Consumer Finances. Studying the eight SCFs conducted from 1992-2013, Emmons and Noeth looked at the answers respondents provided to these questions and the level of personal wealth they reported. Their assertion: “In summary, good financial health – as measured by our simple five-question scorecard – is highly correlated with the accumulation of wealth.”2

 

As part of their research, Emmons and Noeth scored the answers. A financially positive answer to a question was assigned 1 point; a financially negative answer, 0 points.2

 

The average total score (across more than 38,000 households) was 3.01. The highest average score to a question was 0.91 (the one about debt load being less than 40% of income) and the lowest average score to a question was 0.27 (the one about the percentage of liquid assets among total assets).2

 

There was a surprising conclusion. The authors found that education was no reliable indicator of personal wealth. When it came to being rich or poor, well-educated individuals had no leg up on lesser-educated individuals.2

 

What’s your score? If you are able to successively answer the above questions with “yes,” “no,” “no,” “yes” and “yes”, your household is probably in pretty good financial shape – or better. In simple terms, those answers would get you a 5.0.

 

Here’s the bottom line. If you save money consistently and maintain a good cash position, if you make loan and mortgage payments on time and pay off 100% of your credit card debt each billing cycle, if you avoid debts that put a strain on your budget … congratulations. You are doing the right things on behalf of your financial life and promoting your chances to build wealth.

 

If you’d like to see the precise methodology the researchers used and their definition of a “positive” and “negative” answer for each question, you can go online and download Issue 10 of the St. Louis Fed publication In the Balance (which contains the article and the scorecard) at stlouisfed.org/publications/itb/.

 

Warren Street Wealth Advisors

190 S. Glassell St., Suite 209

Orange, CA 92866

714-876-6200 – office

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

     

Citations.

1 – stlouisfed.org/newsroom/displayNews.cfm?article=2390 [12/15/14]

2 – stlouisfed.org/publications/pub_assets/pdf/2014/In_the_Balance_issue_10.pdf/ [12/14]

Your Year-End Financial Checklist

Check ListSeven aspects of your financial life to review as the year draws to a close.

Provided by: Warren Street Wealth Advisors

                       

The end of a year makes us think about last-minute things we need to address and good habits we want to start keeping. To that end, here are seven aspects of your financial life to think about as this year leads into the next…

 

Your investments. Review your approach to investing and make sure it suits your objectives. Look over your portfolio positions and revisit your asset allocation.

 

Your retirement planning strategy. Does it seem as practical as it did a few years ago? Are you able to max out contributions to IRAs and workplace retirement plans like 401(k)s? Is it time to make catch-up contributions? Finally, consider Roth IRA conversion scenarios, and whether the potential tax-free retirement distributions tomorrow seem worth the taxes you may incur today. Be sure to take your Required Minimum Distribution (RMD) from your traditional IRA(s) by December 31. If you don’t, the IRS will assess a penalty of 50% of the RMD amount on top of the taxes you will already pay on that income. (While you can postpone your very first IRA RMD until April 1, 2015, that forces you into taking two RMDs next year, both taxable events.)1

   

Your tax situation. How many potential credits and/or deductions can you and your accountant find before the year ends? Have your CPA craft a year-end projection including Alternative Minimum Tax (AMT). The rise in the top marginal tax bracket for 2014 made fewer high-earning executives and business owners subject to the AMT, as their ordinary income tax liabilities grew. That calls for a fresh look at accelerated depreciation, R&D credits, the Work Opportunity Tax Credit, incentive stock options and certain types of tax-advantaged investments.2

 

Review any sales of appreciated property and both realized and unrealized losses and gains. Take a look back at last year’s loss carry-forwards. If you’ve sold securities, gather up cost-basis information. Look for any transactions that could potentially enhance your circumstances.

 

Your charitable gifting goals. Plan charitable contributions or contributions to education accounts, and make any desired cash gifts to family members. The annual federal gift tax exclusion is $14,000 per individual for 2014 and 2015, meaning a taxpayer can gift as much as $14,000 to as many individuals as you like in each year without tax consequences. A married couple can gift up to $28,000 tax-free to as many individuals as they prefer. The gifts do count against the lifetime estate tax exemption amount, which climbs to $5.43 million per individual and $10.86 per married couple for 2015.3

 

You could also gift appreciated stocks to a charity. If you have owned them for more than a year, you can deduct 100% of their fair market value and legally avoid capital gains tax you would normally incur from selling them.4

 

Besides outright gifts, you can plan other financial moves on behalf of your family – you can create and fund trusts, for example. The end of the year is a good time to review any trusts you have in place.

 

Your life insurance coverage. Are your policies and beneficiaries up-to-date? Review premium costs, beneficiaries, and any and all life events that may have altered your coverage needs.

 

Speaking of life events…did you happen to get married or divorced in 2014? Did you move or change jobs? Buy a home or business? Did you lose a family member, or see a severe illness or ailment affect a loved one? Did you reach the point at which Mom or Dad needed assisted living? Was there a new addition to your family this year? Did you receive an inheritance or a gift? All of these circumstances can have a financial impact on your life, and even the way you invest and plan for retirement and wind down your career or business. They are worth discussing with the financial or tax professional you know and trust.

 

Lastly, did you reach any of these financially important ages in 2014? If so, act accordingly.

 

Did you turn 70½ this year? If so, you must now take Required Minimum Distributions (RMDs) from your IRA(s).

Did you turn 62 this year? If so, you’re now eligible to apply for Social Security benefits.

Did you turn 59½ this year? If so, you may take IRA distributions without a 10% penalty.

Did you turn 55 this year? If so, and you retired during this year, you may now take distributions from your 401(k) account without penalty.

Did you turn 50 this year? If so, “catch-up” contributions may now be made to IRAs (and certain qualified retirement plans).1,5,6

 

The end of the year is a key time to review your financial well-being. If you feel you need to address any of the items above, please feel free to give me a call.

 

Warren Street Wealth Advisors

190 S. Glassell Streeet, Suite 209

Orange, CA 92866

Direct: 714-876-6200

Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC.
Advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered
Investment Advisor. Warren Street and Cambridge are not affiliated.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

   

Citations.

1 – irs.gov/Retirement-Plans/RMD-Comparison-Chart-%28IRAs-vs.-Defined-Contribution-Plans%29 [4/30/14]

2 – tinyurl.com/o7wqk7z [3/27/14]

3 – forbes.com/sites/ashleaebeling/2014/10/30/irs-announces-2015-estate-and-gift-tax-limits/ [10/30/14]

4 – philanthropy.com/article/Donors-Often-Overlook-Benefits/148561/ [8/29/14]

5 – nolo.com/legal-encyclopedia/getting-retirement-money-early-without-30168.html [12/2/14]

6 – turbotax.intuit.com/tax-tools/tax-tips/Tax-Planning-and-Checklists/Tax-Tips-After-January-1–2015/INF12070.html [12/2/14]

Talking About Money Before & After You Marry

Talking About Money Before & After You MarryNo money secrets should stand between the two of you as you wed.

Provided by: Warren Street Wealth Advisors

 

 

 

No married couple should suffer from financial infidelity. If you hide debt, income or assets from your spouse, it can lead to a fight and possibly even an impasse in your relationship.

 

Communication & transparency are essential when it comes to money. That truth should be recognized by every couple tying the knot, or even just cohabitating. Yes, financial matters can prove hard to discuss – but if you can’t talk about them together, that’s already a serious problem.

 

That problem may affect more couples than we realize. In 2013, 7% of engaged individuals who answered a National Credit Counseling Foundation poll said that if they discussed money issues with their fiancé, it would prompt a fight; 11% felt such a talk would uncover financial secrets, and 5% said it would “cause us to call off the wedding.”1

 

On the bright side, 32% felt a conversation about financial matters would be “a productive and easy conversation to have.” The most frequent response (45%) was that a money discussion would be “awkward,” but also necessary for the health of the marriage.1

  

You have to tell your future spouse about your debts. Do it before you get married, not after. That debt will become your spouse’s financial concern as well as yours. The two of you should plan together to pay down your individual debts in the coming months or years. Again, this represents a shared commitment. Don’t put your name on your deeply indebted spouse’s credit card. Attaching your name to that account will have minimal impact on your FICO score, but you don’t want to pay a (literal) price for your spouse’s runaway financial impulses.2

 

If you have six credit cards between the two of you, see if you can slim it down to three or four – the ones with the lowest fees and best rewards programs. Or see if you can just use those three or four and let the other accounts lie dormant. That might be a better move than just canceling the excess credit cards – that could hurt you, especially in the case of older accounts. About 15% of your FICO score is based on the duration of your credit history, so if that was good history, you don’t quite want to say goodbye to it.2

 

Think about a new joint credit card account for the two of you. If you feel your spouse needs debt counseling before you can make that move, don’t be shy about requesting it. Even if your spouse has been living on plastic, think twice about leaving him or her without a credit card. You want (and need) to show some credit history.

 

You will have to compromise. The most valuable verb in marriage is also really valuable when it comes to your shared financial life. Maybe you’re a good saver, a future “millionaire next door” – and yet your spouse is a comparative spendthrift. If you can’t compromise on a “money policy,” then maybe you can find a middle ground by saving for a special experience. Or, maybe each of you can set aside a bit of money per month to spend or save purely at your discretion.

 

You may want to pay the bills proportionately. If one of you earns 70% of the household income, then maybe that spouse should pay for 70% of the household bills and expenses. To many newlyweds, that seems entirely fair.

 

Build retirement savings & an emergency fund together. Financially, there are few better ways to signify your long-term commitment to one another.

 

Wait on a big purchase. Consider waiting 24 hours (if you can) before going through with it. Or, alternately, set a dollar limit on such purchases – give each other limited financial autonomy I making major purchases that ends at X hundred or X thousand dollars. If the money exceeds that limit, then you both have to discuss it before it can occur.

 

Make a budget. In fact, strive to make a zero-based version, a budget in which income minus expenses comes precisely to zero each month. This is a way of accounting for each and every dollar spent (actual or projected) and a way to pinpoint potential monthly savings or redirection of income toward expenses.

 

Watch those taxes. Should you file your taxes jointly? Not necessarily. That is wise for many couples, but if your incomes vary greatly it may be better to file separately. Consult a tax preparer for an answer. Also, look at your W-4 at work. It may be time to adjust your withholding status. If your spouse isn’t employed, you get to add another withholding allowance. Assuming he or she is employed, you can turn to irs.gov to learn how many allowances you are due in total. Then, you can divide that total by two. You and your employer need to follow the instructions on the W-4 so you don’t withhold more or less than you should.

 

Talking about money isn’t always pleasant, but candor, communication and full disclosure can lead to clarity in your financial lives.

 

Warren Street Wealth Advisors

190 S. Glassell Street, Suite 209

Orange, CA 92866

 

Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC.
Advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered
Investment Advisor. Warren Street and Cambridge are not affiliated.

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

  

Citations.

1 – nfcc.org/press/multimedia/news-releases/two-thirds-of-engaged-couples-express-negative-attitudes-toward-discussing-money/ [5/31/13]

2 – washingtonpost.com/news/get-there/wp/2014/09/23/for-richer-or-poorer-a-financial-plan-for-newlyweds/ [9/23/14]