I get a lot of questions from folks about how couples should manage their money. Is it best to have both people involved in everything or to divide and conquer on investing and budgeting? Should you combine finances or keep them separate? My answer? Yes. Every couple will have an answer unique to them and what will work best.
The problem I see is how little consideration can sometimes go into these questions.
This week, my husband and I are celebrating our 10-year wedding anniversary, and in that spirit, I will share 10 practices that have worked for us. Perhaps these practices can provide a starting point for a conversation to lead couples down the road to co-managing finances with intention.
The caveat here is that if you find yourself 50 years married and wondering how I can possibly give advice after only 10 -- point taken. I offer this column from a place of utmost humility and with the full disclosure that my husband and I have not gotten it all right with our money.
We are constantly learning. In fact, we have adopted new practices on advice from readers who have been married a long time.
So here are the Gutierrez 10:
• We have combined finances. We were coming into our marriage with our own financial lives intact and could have made an argument for dividing our saving, investing and even budgeting. You take the mortgage. I'll take the utilities. While it can work, separate finances seemed like too much, well, work. I get the sense that some people think dividing finances is easier, which could be true if the division was just on bills. The murkier issue is the common experiences like dining out, vacations, etc. Who takes what and how much? Further complicating the issue are different salaries and who contributes in what ratios when comparing the magnitude of various household costs.
• We believe in saving for our future and for our kids' futures. This is fundamental because we sure could enjoy more money right now in our present--a home remodel, the Tesla, a new wardrobe, a vacation home, and the list goes on and on and on. What keeps us focused? We value our time. We want to be work-optional in our 50s. Our ultimate freedom goal is time.
• We pay ourselves first -- and last. Let me explain. As a two-entrepreneur household, we have seen income become a moving target in the past. So, we save first into our retirement plans each month as a payroll deposit into our respective company 401(k) plans. But as with all entrepreneurs the big question is, what if you make more? My concern has always been that lifestyle creep rises in tandem with business profitability. My husband developed a perfect antidote to this issue. We have a practice of only depositing our "budget" into our household checking account from each of our businesses. This means that if we have any upside in our respective businesses, that upside accumulates and can be invested in brokerage or retirement accounts throughout the year. Our savings rate escalated with this practice without us ever feeling deprived. It would be a terrific practice for folks working on commission or who have variable bonuses.
• We are on the same page with investing. Thankfully, we have a passionate commitment to not time the market. For that, we average into whatever market condition there is with whatever savings we have available to invest. The majority of our investments are in passive mutual funds. We generally steer clear of investments we don't understand, investments wrapped in insurance products or individual equity purchases. We have opted for our non-diversified, concentrated risk to be in our individual businesses.
• We are aggressively saving in our kids' 529 accounts. When we see the option to save uniformly over 18 years or aggressively for 10 in a 529 account the math seems to favor the aggressive early savings. 529s work like a Roth in that earnings grow tax-free. These 529s need to be de-risked around the time your kid is in middle school to insulate from a protracted market downturn so saving early and aggressively seems to have the potential to capture market returns the most advantageously.
• We live on a weekly spending budget. I talk often about this practice because it is miraculous. The same spending amount hits a separate checking account, and we each use debit cards to pay for our weekly needs like gas, food, dry cleaning and miscellaneous expenses. That weekly budget tells us how much we have available to spend and takes all the guessing out of it. Also, it's radically simple, which is preferable to a budgeting system where we have to spend a lot of time writing down or categorizing expenses.
• We save ahead for future expenses. Vacations, car repairs, home repairs, gifts, clothing, health and college expenses have a savings home that gets funded every month. Every six months or so, we re-evaluate how much to put each month in those savings accounts. For instance, when we made that last day care payment in August, we increased our college savings for each kid accordingly. Whenever a significant monthly expense goes away, my favorite practice is to give that budget infusion a home.
• The future of health care is a concern. It could disrupt our plans in our working years through cost and illness, both of which are out of our control and arguably out of control in this country. We are doing our best to address what we can control. We eat our veggies and are both fairly active. On cost, we are building up a defense for crushing health care costs in retirement. But we feel the crush already (if you detect panic, you are correct). Like other folks in small business America, we pay more than $1,300 a month in premiums for our family for a high deductible health care plan. Despite that breathtaking expense, we save further into a health savings account knowing that however bad it is now, it will be exponentially worse in two decades. We pay for our deductible expenses out of pocket leaving our health savings account intact. Our health savings account, as a result, is a de facto retirement health care account, as it will be available to pay premiums and costs in our retirement. We invest that money in the health savings account in mutual funds in the hopes that we can grow that nest egg at least to beat inflation.
• We talk about money. Before I hear a collective "duh," I just want to reveal that this is not our favorite discussion. Occasionally, it can be tense when we disagree. Money is emotional. We intentionally speak about our money a couple of times a year, walking through our balance sheet and budget for the next several months.
• Our favorite discussion is time. We love our time together, with our kids, with our families. We love a slower pace. Time is our most precious commodity. Every few months we will find ourselves lingering at the dinner table after the kids have run off, ticking through the list of every lifestyle item we would give up to keep our time. Turns out that is a long list.
This is not marital financial advice, and I don't want it misconstrued. These are the practices that I am glad we adopted in our first decade of marriage. Maybe this list will look different if I am still around writing a column in 10 more years.
The only advice I would offer is to make conscious decisions as a team. Otherwise, your decisions could be made for you via the Jones's (as in, keeping up with), via inadvertent lifestyle adaptation or inertia.
Sarah Catherine Gutierrez is founder, partner and chief executive officer of Aptus Financial in Little Rock. She is also author of the book "But First, Save 10: The One Simple Money Move That Will Change Your Life," published by Et Alia Press. Contact her at sc@aptusfinancial.com.