A few months before our son’s recent wedding, I sat down with him and his fiancée and talked about (what else?) money. I’ll be doing the same soon with the younger of our two daughters and her fiancé, who recently became engaged.
All four of these young adults are responsible citizens, living on their own earnings from respected if not highly paid occupations. (So is our older daughter, a real super saver.)
I gave the young couples some fatherly advice about their personal finances, derived from the institutional wisdom of this magazine. Here are my key points.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
1. Don’t jack up your lifestyle. It is a fallacy that “two can live as cheaply as one,” but combining your households can save money on rent, home-cooked meals and transportation (if you can share a car). It’s like found money.
This surplus income might make you feel as if you’ve hit the jackpot. Now you’ve got more money to spend on some of the things you’ve always wanted — electronics, clothes, travel and dining out more often, for example.
My advice: Don’t. Leave your spending as is (or, ideally, trim it a little) and budget your combined incomes to pay down student debt and credit cards, contribute regularly to your favorite charities, and boost your savings. Even better:
2. Live on one salary, save the other. Don’t assume that each of you will always have the earnings you do now. Think about the interruptions of income — voluntary or unexpected — that could lurk a few miles down the road. One of you might get laid off. One might want to change careers or start a business. One of you might want to go back to school, full- or part-time. If you start a family, one of you might want to stay home with your children for a few years.
You’ll have more options in such situations if you have enough savings to replace one of your lost or reduced salaries for an extended period — without a sharp drop in your future lifestyle. To plan for that day, start banking all or most of one of your two salaries.
3. Max out on retirement savings. I know that a financial need that’s 40 years off may seem pretty abstract to you now. But let me put it this way: No one else will provide for you if you don’t save now.
Sure, you’ll have a small monthly check from the government someday. I dispute the cynical belief, common among your peers, that “Social Security won’t be there for me” — that it’s destined to collapse. It will still be there, but your monthly benefit, 40 years from now, will represent a lousy investment return on the hefty taxes that will come out of your paychecks for decades — 12.4% of your earnings, the combined tax bite for you and your employer.
That’s why you should contribute as much as you can to your tax-deferred retirement plan at work — your 401(k) or 403(b) — to get the maximum match your employer offers. Ditto for your individual retirement accounts or Roth IRAs — and each spouse should have an account.
Your retirement-savings goal should be to save no less than 10% of your combined gross income each year. That’s in addition to the savings I described above, which you should consider your family’s accessible “working capital,” there for special needs that arise.
4. Get some insurance. As newlyweds, you need protection against catastrophic medical bills and a long-term disability with loss of income. Life insurance is good, too, but that can wait until children arrive, when you’ll need plenty of it.
5. Enjoy life, while living within your means and sleeping well at night. Good luck to you!
This piece was originally written by Kiplinger in 2013.
Related Content
-
AI Stocks Lead Nasdaq's 398-Point Nosedive: Stock Market TodayThe major stock market indexes do not yet reflect the bullish tendencies of sector rotation and broadening participation.
-
Top Tech Gifts to Grab at Walmart Before ChristmasBig savings on Apple, Bose, HP, Vizio and more while there's still time to shop.
-
AI Appliances Aren’t Exciting Buyers…YetThe Kiplinger Letter Artificial intelligence is being embedded into all sorts of appliances. Now sellers need to get customers to care about AI-powered laundry.
-
Being the Executor of an Estate is a Thankless Job: Here's How to Do It Well AnywayYou can be a "good" executor of an estate, even though carrying out someone's final wishes can be challenging.
-
Quick Question: Are You Planning for a 20-Year Retirement or a 30-Year Retirement?You probably should be planning for a much longer retirement than you are. To avoid running out of retirement savings, you really need to make a plan.
-
Don't Get Caught by the Medicare Tax Torpedo: A Retirement Expert's Tips to Steer ClearBetter beware, because if you go even $1 over an important income threshold, your Medicare premiums could rise exponentially due to IRMAA surcharges.
-
I'm an Insurance Pro: Going Without Life Insurance Is Like Driving Without a Seat Belt Because You Don't Plan to CrashLife insurance is that boring-but-crucial thing you really need to get now so that your family doesn't have to launch a GoFundMe when you're gone.
-
What You Need to Do With Your 401(k) Before 2025 Is OverBefore 2025 ends, check your 401(k) contributions, investments, and catch-up eligibility to lock in this year’s tax savings and employer match.
-
I'm a Tax Attorney: These Are the Year-End Tax Moves You Can't Afford to MissDon't miss out on this prime time to maximize contributions to your retirement accounts, do Roth conversions and capture investment gains.
-
I'm an Investment Adviser: This Is the Tax Diversification Strategy You Need for Your Retirement IncomeSpreading savings across three "tax buckets" — pretax, Roth and taxable — can help give retirees the flexibility to control when and how much taxes they pay.
-
The Top 22 Gifts for Grandkids from Walmart in 2025From PlayStation to Labubu, you'll find the hottest gifts of 2025 for your grandkids at Walmart this year. Some of them are up to 78% off.
