For many couples in the 20's and 30's, there’s not much thought that goes into financial planning. Instead, it becomes part of daily life and when purchasing decisions are made, seldom are the long term financial implications considered. However, if young couples develop good habits early on and they stick to them, they will create a sound and healthy financial future. Let’s look at 3 things young couples can do to improve their finances.
#1 Get Out of Debt
Wipe your debt out as quickly as you can. Eliminate any debt that’s non-tax deductible such as lines of credits and student loans. This should be a priority before you even think of buying a house. You might consider consolidating the debts into one loan at a lower interest rate.
Sit down and figure out what your household budget looks like. Now this might sound like it shouldn’t be hard, yet many people have trouble and wind up living from paycheck to paycheck. Creating a budget that works is a key part of your financial planning. Include all your recurring expenses, which is the easy part, but also include things like movies, your monthly Starbucks bill, etc. If you want your budget to work, you need to be honest.
#3 The Earlier You Start the Better
In your 20s, often the last thing you are thinking about is your financial future. However, if you do it can make a huge difference! If a 25 year old invests $2000 in an RRSP and does that every year, you will have $330,095 at the age of 65 using a 6% compounded annual growth. If you started just 10 years later at age 35, you would have half the amount. If you don’t start investing until age 45, you will only have $79,980. You can see the beauty of compound interest.
It begins by sitting down and having an open dialogue as a couple. You need to talk about your goals and expectations and come up with a financial plan for your future as a couple.