Here comes the bride, the groom, and… a whole new set of financial responsibilities. But before you let the unpleasant thought of tackling your finances overtake the joy of your recent wedding day, here are five ways newlyweds can start saving money and building a sound financial future right now.
1. Create a financial plan
You may have successfully planned a wedding, but your planning as a couple has only just begun. Now it’s time to look to your future by creating a sound financial plan. Although it may sound scary, a financial roadmap is basically a way to look at your financial goals as a couple, create a budget, and figure out how much money you can afford to save and invest after you’ve paid all your bills.
If this still seems overwhelming and you need a little extra advice, you might consider seeking guidance from a financial advisor. This can help you get started and stay on track with your short-term and future goals, says Johanna Fox Turner, a partner at Milestones Financial Planning in Mayfield, Kentucky.
2. Save for a rainy day
Regardless of what type of financial goals you have, you should start building an emergency fund right away — especially if you just spent the lion’s share of your savings on your wedding and honeymoon.
How much should you save? If you and your spouse are working, you should save three to six months of your combined salary. If you are the sole earner, you should try to save six to 12 months of your salary, says Kimberly Howard, a financial planner at KJH Financial Services in Newton, Massachusetts, and Denver, Colorado.
Saving this amount of money may take some time. But don’t let this stand in your way. By creating this rainy day fund, you’ll be prepared if you or your spouse should lose your job or need cash for an unexpected expense, like a major home repair or a move across the country.
3. Invest in your retirement
Now is a great time to invest in your company-sponsored 401(k) retirement plan. And, thanks to compounding interest, the sooner you open a retirement account and start saving, the more money you’ll have for your future.
Contributions to your 401(k) plan come right out of your paycheck before taxes. You can save up to $18,000 a year in 2016. Better yet, your employer may offer a matching contribution. This is free money, so you should definitely take advantage of it.
If you are self-employed or your employer doesn’t offer a 401(k), you can open a Roth IRA or traditional IRA. You can contribute $5,500 annually after taxes to a Roth IRA, and the income grows tax-free. You are eligible for a Roth IRA as long as you and your spouse are filing jointly and earn no more than $184,000 together. If you can’t open a Roth IRA, a traditional IRA is a good alternative. Contributions to traditional IRAs are tax-deductible, although you will have to pay taxes down the line when you withdraw the funds.
4. Pay off your student loans
As soon as your student loans and other debts are paid off, you’ll have more money for other needs and investments, says Andrew Comstock, president of Castlebar Asset Management in Leawood, Kansas.
Yet, contrary to what some believe, you should not pay off your student loans until you’ve created and built an emergency fund first. Here’s why: If you have an emergency fund, you won’t find yourself in a situation where you have to borrow yet more money to pay for that unexpected expense.
5. Buy term life insurance
Buying life insurance usually isn’t top of mind for young couples who may have other financial goals. Yet, buying term life insurance is an inexpensive way to protect your financial future, especially if you want to buy a house, have a mortgage to pay or plan to have children. It’s also cheaper than you might think and offers a layer of financial protection in case you or your partner were to pass away.
Image: Rachel Andrew