About half of my clients are couples, and they often ask me what they could improve with their finances. My suggestion: View “your money” as “our money” and start planning as a couple.
I realize that you may have spent the last 10 years of your adult life as a single lady (cue Beyoncé), and you didn’t have to take into account anyone else’s money habits — or their money problems. But once you’re married and have two incomes supporting one household, it’s time to shift your thinking.
You can accomplish your goals faster, save more money, and work toward opportunities together. They key is to live on one income instead of two.
The Benefits of Living on One Income
When you first get married and are a DINK (Dual Income No Kids), it’s the perfect time to ramp up your retirement contributions, pay down debt with gusto, and build that emergency fund like you’re Scrooge McDuck (the richest duck in the world from the DuckTales cartoon).
If possible, try to set up your budget so that one spouse’s income funds bills and monthly living expenses. Then you can allocate the second income toward your financial priorities: Paying down debt, building up savings, and investing money for retirement.
This shift in mindset will force you to figure out how much cash you have available for travel and lifestyle expenses.
Throwing Kids Into the Mix
If you’re able to spend a few years as a couple living off of one income, you may find that you’re able to pay down a significant amount of debt and build up savings before you start a family. This allows you to have options and flexibility once you have kids. You might decide to have one parent take an extended maternity leave, stay home long-term, or only go back to work part time. Since the cost of childcare keeps getting higher and higher, it might not even make financial sense to have both parents work full-time. But none of those options are possible if you need both incomes to make ends meet.
It Starts With Planning
If having a family might change how much time you’d like to spend at work, then it’s important to start talking about this with your spouse now. Ask each other:
- How will things change once we have a baby?
- What is our ideal scenario?
- How can we move one step closer to our ideal scenario?
For example: If you have student loans that are weighing on you, sit down and figure out how much more you can allocate towards paying off that debt every month.
Don’t Forget About Retirement
If you decide that having a stay-at-home parent is the priority, then focus on saving for retirement now so that your retirement assets can grow while one parent isn’t working.
And don’t forget about spousal IRAs: As long as one spouse has earned income, they can contribute up to $6,000 per year to the other spouse’s IRA or Roth IRA. This is really important and easy to overlook! (Write it down if you have to!)
More Flexibility and Less Stress
The couples I know who are able to live off of one income experience much less stress because they have so much flexibility with their budget. They have given themselves options to adjust to their changing family situations. If both parents decide to work, they have freed up cash flow to pay for childcare. If one parent decides to stay at home, they don’t depend on that parent’s income, so it’s not jarring to the family budget. Taking the time to plan has given them peace of mind.
So sit down with your spouse this week and ask each other: What’s the first step we can take to move closer to living on one income?