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You might think that the moment you tie the knot with the same-sex partner, your concerns end (since we did have to go too far and endure too much for this to be legal), but this is only just the beginning.
First of all, congratulations on getting married, we do all wish you a lifetime of happiness. But, you might not have really thought about all the things that you are supposed to think about before tying the knot. Apart from the place where you will be living and the number of kids you want to have, you will have to think about finances and budgeting in general. Being married is not an easy, nor a cheap exercise, and living with someone has plenty of other expenses that you might not have taken into account. But, in order for this to go as painlessly as possible, take a look at some of the best budgeting tips for the two of you:
1. Talk about your priorities
The first thing that you need to do is make a list of the priorities that you might have as a married couple. Knowing these things in advance will not only help you save some more cash in the future, but it can also significantly enhance the communication between the two of you and prevent any future problems that you might face in regards to your relationship. Plenty of people fall out because of irreconcilable differences regarding finances, so the sooner you set these rules in stone, the better. What is your priority? Do you think that the most important thing to do is invest in the house? Do you want to travel, or perhaps invest in a new business? Make sure you talk this out with your partner, as this will be extremely helpful once you have to plan out your finances.
2. Planning out the finances
Now comes the tricky part, and that is planning out your finances. Allocating the amount of money that you will spend on different aspects of your life together is definitely not an easy task. In order to do this, calculate your monthly earnings on one side and write all of your necessary expenses on the other. Next up, try to allocate the amount of money that you will spend on traveling a year, and see if you have to save for that on a monthly basis or not. These are all the things that you are supposed to do if you want to travel effortlessly and to always have a ready fund for things like these. Also, bear in mind that no matter where you are in the world, you will be able to apply for a personal loan if you know where to look, so it would be good to know your finances in advance and plan things accordingly. Do not forget to add a fund for your house or apartment (as probably there will be things to be done there) and some bigger shopping.
3. Long-term planning
Planning is indeed a great thing, so the next step would be to plan bigger. Now, this is the time when you have to think about your long-term finances, and the things that you would like to have accomplished or bought by then. This is also a great way to avoid any arguments in the future. So, where do you see yourself in 20 or 30 years? Do you want to buy a car? Do you want to invest in a big house somewhere out of the city? Knowing these things in advance will only make this process easier when the time comes.
4. Have three different funds
In order to keep everything in perfect control and to avoid any conflicts in the future, it would be a good idea to have three different funds - one that is going to be for the both of you, and two for each of you. This will give both of you an illusion that you have “your own cash”, even though you might not have the opportunity to spend it very often, it is a good feeling. This is also something that you can use if you want to make a purchase that your partner disapproves of. Surely, depending on the amount of money that you both earn a month or year, determine these two funds accordingly. Also, it would be a great idea to have exactly the same amount of money in those funds, regardless of how much each of you earns.
5. Have an emergency fund
Finally, there is another fund that you have to worry about, and that is the emergency fund. This is important for all the married people (and all people in general), but it might be slightly more important for LGBT people as you never know what tomorrow will bring and if you will have to spend a bit more on certain taxes or not. Yes, gay marriages are legal, but it is always to play it safe and keep an emergency fund in case something happens, and you cannot have control of the finances of your partner. Apart from that, this is a good idea as it is always better to be safe than sorry.
It might seem that you have to have different funds, and by having so, you will not see one dime from your salary. Yes, life is expensive nowadays, but with proper budget planning, you will be able to do a lot.
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Consider Your Financial Goals
Just like you have fitness goals to help you achieve physical results, you should also have financial goals to have something to work towards. There are short-term and long-term financial goals; then, there are the goals that are in between. Consider all of your investment goals, from buying a car, starting a family, and saving for retirement.
Put Your Money Somewhere
Once you know your financial goals, consider where you can put your money to start investing it based on the length of time you need for the goal.
Immediate Goals
Immediate financial goals include being able to pay bills on time, purchasing groceries and other necessities. It's typically best to keep this money in your checking account so you can easily pay bills. Keep a cushion of funds in your account just in case an emergency comes up, or your bills change from one month to the next.
Short Term Goals
Your definition of a short-term goal may be different from someone else's, depending on your age. For example, a short-term goal for someone in their early 20s might be to move out of their parent's house, while a short-term goal for someone in their late twenties might be to be able to afford their wedding.
For short-term financial goals, you should choose investment options that allow you to quickly access your funds.
You might consider a high-yield savings account that allows you to earn interest on all of the money you keep in the account for short-term goals. Other types of investments ideal for short term goals are:
- Certificates of deposits (CDs)
- Monkey market accounts
Photo by Caique Silva on Unsplash
Long Term Goals
Long-term goals allow you to invest to earn money you'll need in the future, such as twenty years from the time you begin investing. When it comes to your future, there are many great long-term investments, including:
- Stocks and Bonds
- Cryptocurrency
- Mutual funds
- Retirement Plans
Types of Retirement Accounts
When you're in your 20's, you might not feel ready to start making high-risk investments. If you're new to investing, it's typically best to go for the lower-risk investment options, including retirement accounts.
Many retirement accounts come with tax advantages, so you won't need to pay taxes on the money you earn. Starting a retirement in your 20s can help you make more money in the long run than someone that starts later in life. As you may know, retirement is expensive, so it's important you begin saving for it as soon as you get your first job.
There are a few different types of retirement accounts, including:
401k Plans
Many employers offer a 401k with a company match, which means the employer will match your contributions into your retirement account up to a certain limit.
Traditional IRA
Traditional IRAs are tax-deferred retirement plans, which means you won't pay taxes on your contributions right away; instead, you'll pay taxes when you withdraw the money in your account for retirement.
Roth IRA
Roth IRAs are funded with the money you've already paid taxes on. If you're in a low tax bracket, a Roth IRA might be the right option for you so you can earn more in the future and save enough for retirement.
Other Investment Opportunities 
Of course, you should also be thinking about more than just retirement. Other types of assets you can invest in your 20s are:
Stocks
Stocks allow you to own a small piece of a company. When you invest, you earn money through appreciation and dividends. Before investing, do your research; stocks can be volatile, and prices fluctuate according to supply and demand.
Bonds
Bonds are a type of contract that includes you loaning money to a company or the government. You earn money through the interest the company pays you for lending them money. Bonds are not risk-free, but they are less risky than stocks because there is a stated rate of return.
Cryptocurrency
Cryptocurrency is one of the most volatile types of investments, so it's not for investors with low-risk tolerance. However, if you can tolerate the risks involved with crypto, you should never act on impulse.
Tips for Investing in Your 20s
Investing in your 20s can be intimidating. It's up to you to learn as much as you can about an investment opportunity before you use any money. Here are a few tips to help you navigate the complex world of investing:
Consider Your Risk Tolerance
Jumpy investors should avoid high-risk investments like stocks and cryptocurrency. If you panic and act on impulse instead of waiting for the market to pick back up after a drop, you could lose thousands of dollars.
Take Advantage of Employer Retirement Plans
If your employer offers an employer-sponsored retirement plan, take it. Affording retirement is difficult for those who don't have a retirement account earning money throughout the years. If your employer provides a company match, consider investing up to the maximum limit to ensure you can make the most of the free money your account is earning.
Consider Alternatives
There are more investment opportunities than just stocks, bonds, and mutual funds. Depending on how much you want to invest, real estate is another great option for people in their 20s. Luckily, investing in real estate doesn't mean you have to own a property. Instead, you can invest in properties and flip them for a return on your investment.
Final Thoughts
Consider investing if you want to start earning money without putting in extra hours at work. The earlier you invest, the longer you have to earn money over time.
About the Author
Matt Casadona has a Bachelor of Science in Business Administration, with a concentration in Marketing and a minor in Psychology. Matt is passionate about marketing and business strategy and enjoys San Diego life, traveling, and music.
If you've recently started your first job or started a new job that offers a retirement plan, you'll start to wonder whether you need one and how it all works. A retirement plan allows you to set aside money out of your paycheck every month to save for your retirement. You can also invest in other types of assets, including stocks. Over time, your invested money will grow so you can have a nice nest egg when you retire. Here's your guide to help with your retirement plan.
Definition of a 401(k)
A 401(k) is a retirement savings account offered by employers to their employees. It's tax-advantaged, which means you won't pay taxes on any of the money within it. Once you enroll in a plan, automatic contributions will be made from your paycheck into your account. These contributions may also be matched by your employer, which means you'll get additional money put into the account. Your investment earnings are not taxed until you withdraw the money.
Who is Eligible for a 401(k)?
Employers do not legally have to provide retirement plans to their employees, but it is a highly sought after employee benefit that can help them attract top talent. You'll know if you're eligible for a 401(k) or if your employer offers one typically during the first round of interviews you go to get your job. It will also be mentioned again during onboarding and in your employee handbook. If you're not sure whether your company offers a 401(k), you should ask the human resources manager as soon as possible.
Contributing to a 401(k)
Contributions to a retirement plan are subject to limits set by the IRS, but the employee and their employer can contribute until that limit is reached. A pension may sound similar to a 401(k) because a retired person uses their pension to fund retirement. However, these are not the same type of retirement plans. A pension plan is a type of benefit plan in which the business pays the employee a set amount when they retire.
Many businesses, large and small, offer a 401(k) to employees because it's efficient and eliminates the employees' stress of saving for retirement on their own. Employees can choose a variety of investments in their 401(k) plans and must choose between the employer's options. The employer's choices typically include mutual funds for stocks and bonds and a mix of stocks and bonds.
Contribution Limits
How much you can contribute to your retirement plan every year changes year over year to account for inflation. For 2020, the maximum contribution for employees under the age of 50 was $19,500.
If the employer also contributes or employees want to make payments into the account, the numbers may vary. However, your plan might not allow it because there are many types of 401(k) plans.
Employer Matching
Employees contribute to their retirement accounts monthly, and employers sometimes match those contributions. If employers choose to match contributions, they typically match the same amount up to a particular portion of the employee's salary. If your company offers a 401(k) match and you have the financial ability to invest the full amount into it, it's recommended to do so to take full advantage of the company match.
Making Withdrawals
If you deposit any money into your 401(k), you cannot withdraw it for free. Depending on your salary, everyday expenses, and budget, you may not want to invest as much as the maximum into your retirement account. If an emergency happens, you'll have to pay a fee to take that money out, which means you'll have even less money for retirement. Instead, set aside money out of your retirement plan for emergencies or large purchases and consider your retirement money inaccessible until retirement.
Everything you earn, including employer contributions and interest, is tax-deferred, which means you won't pay anything on it until you withdraw the money. However, earnings in a Roth 401(k) are tax-free no matter when you take the funds out because the funds were already taxed when you contributed it.
You can start taking money out of your retirement account when you retire or beforehand for a fee. If you're taking it out for retirement, you'll likely have to arrange plans with the company that manages your 401(k) to ensure you get your withdrawals as a check or direct deposit. This company will also handle your taxes for you, so it'll be just like getting a regular paycheck without the work that comes with it.
If Your Employer Doesn't Offer a 401(k)
If your employer doesn't offer a 401(k), you can still save for retirement on your own and set up a similar program with an investment firm or open an IRA at your local bank. These retirement accounts work similarly to a 401(k) in the sense that you put money into an account, and it grows intending to save money for retirement.
However, if you take out a savings account from a bank, the money doesn't come directly out of your paycheck; instead, you'll have to take it out of your checking account and put it into your savings account at scheduled intervals. Some banks allow you to take money out of your checking account and put it into another savings account automatically on the same date every month, but some require you to be a little more diligent and do it on your own.
If you invest in a retirement account outside of work, you can deduct your contributions when you file your taxes every year. You might want to invest in tax software to help you keep track of your payments so you can deduct the correct amount from your taxable income. An IRA is easy for those who already take deductions, such as small business owners and freelancers.
Saving for Retirement
Financial experts agree you should take advantage of any retirement plan your employer offers and start saving money as soon as possible. Retirement is expensive, and a regular check coming in can ensure you're financially comfortable when you're no longer working.
About the Author
Matt Casadona has a Bachelor of Science in Business Administration, with a concentration in Marketing and a minor in Psychology. Matt is passionate about marketing and business strategy and enjoys San Diego life, traveling, and music.
Photo by freestocks on Unsplash
Control Yourself
When you get your first paycheck, it can be tempting to spend it all in one place instead of saving it. While you can always celebrate your first paycheck by buying yourself something special or going out to a nice meal, you should save whatever is left over, especially if you are planning on getting your place sometime soon.
Delayed gratification leads to more gratification later on. When you're able to control your spending, you can reach your financial goals and move to a new home, pay off college loans, and even start saving for retirement.
Instead of using their paychecks to buy things, many people use their credit cards, which means buying something now and paying later. While credit cards aren't necessarily bad because they can help you build credit, they can be incorrectly used. If you don't have enough money to pay off your credit card within a few days of using it, there's no reason to use your credit card. After all, if you can't afford to pay your bills, you could end up in debt quicker than you think.
Of course, if you can pay your credit card bill at the end of the month, you can put as many of your purchases on your card as you want. However, if you're trying to save money, it's always best to exercise self-control and consider what you're buying. While a new pair of jeans might look great on you, wouldn't you rather put that $100 towards your savings to get something even better in the future?
Know Your Credit Score
Your credit score is just one factor taken into consideration when you're trying to get a loan, buy a house, or even rent an apartment. For example, landlords perform a rental background check to determine if you regularly pay bills on time. Someone with a low credit score likely doesn't have good financial health, which helps a landlord determine which prospective tenants are ideal and which are not.
Similarly, anywhere you can get a loan, including a bank, auto dealership, and mortgage company will look at your credit score to determine your ability to repay the loan. Typically, those with higher credit scores get loans with lower interest rates.
Have Goals
If you don't have any financial goals, you'll start spending without thinking about where your money goes. Most people have financial goals of some kind, even if they don't realize it. When you're young, your goals probably include getting your apartment, staying healthy, becoming a pet parent, or even getting married. All of these things cost money, and if you're spending your paycheck as fast as you get it, you won't be able to achieve these goals.
Having goals is the first step to ensuring healthy finances, but what comes next is how you achieve those goals. Make a plan for each financial goal. While you don't have to meet those financial goals in a certain number of years, you can still aim to save enough by a deadline.
For example, if you want to get your apartment by the time you're 23, consider how much money you'll need to save up based on the average apartment rent in the area where you want to live.
From there, you can expand on your goals to give yourself a savings goal for each month. If you need to save $5,000 to get your apartment and save $500 per month, you know that it will only take you ten months to achieve your goal.
Understand Your Spending
If you get a regular paycheck, you already know how much money you're bringing in. But, unfortunately, most people don't know how much money they're spending. If you want to create a budget for yourself to begin saving money immediately, you need to know how much you spend each month. While you might spend more money one month than another, you can calculate an average monthly spend to learn more about your spending habits.
Depending on your bank, you might have access to budgeting and spending tools that will tell you how much you've spent in a month. For example, you can add up the past six months and divide that number by six to get an average monthly spend.
If you don't have these tools at your disposal, you can take a deep dive into your financial statements. Add up how much you spend using your credit and debit cards each month to find your average monthly spend. If you want to learn more about your spending habits, you can also look at all of your purchases in a given month.
Once you understand your average spend, subtract that number from your monthly income. The number you have leftover (if any) is how much you can put into savings. If you don't have much leftover, it's time to learn more about your spending habits.
Take a look at your bank statements and learn about where your money goes. You may find that you're spending too much money on food delivery, and by eating at home, you'll save a few hundred dollars each month. The goal here is to understand exactly how much money you're spending each month and where you can start making changes.
If you consistently spend more money than you make and you can't cut out very many items from your list, then it might be time to get a side hustle or second job to help you boost your income.
Properly Budgeting While You're Young
Good financial health requires proper budgeting. Now that you understand your goals and how much you spend every month, you can start making a budget that allows you to save money each time you get your paycheck. There are many different budgeting strategies out there, but it's important to find one that works best for you.
Instead of continuing to recklessly spend, consider budgeting your money by breaking it down into necessities versus luxuries. Finally, always try to save at least 10% of your paycheck by putting that 10% into your savings account before you do any spending.
About the Author
Marné Amoguis holds a B.A. in International Business from UC San Diego. She is a contributing writer at 365businesstips.com where she loves sharing her passion for digital marketing. Outside of writing, she loves traveling, playing music, and hiking.