A few weeks ago I wrote about the little red folder and my first steps for budgeting. This time, I think it’s time we heard straight from the source (aka, my mom!). I’ve brought some burning financial questions to Certified Financial Planner Dianne Webb of Stonebridge Financial Planning Group, and here are her answers!
Q: We know that money and relationships is a tough topic, and that money problems in a relationship can be really harmful. If you could give one piece of money advice to all the newlyweds out there, what would it be?A. I have to give two. First, always live on one of the spouse’s salary and save every penny of the second spouses. If they do this from the very first day of their marriage, the chances are that they will never have money problems and money problems contribute to 80% of all divorces. The savings can be put into Roth IRA's for each of them and the rest into a joint savings or investment account. When you are ready to buy a house, the down payment will be there. If one person is laid off, it won't affect your standard of living. When they have children, they have the freedom for one person to stay home if they want. If they do this for life, they will be, financially, light years beyond the average couple.
The second is to immediately get life insurance on each other. One catastrophic event can wipe out the savings from above if there isn’t additional protection. Anyone can be a single unemployed parent in the blink of an eye.Q. What is the most common financial mistake that you feel people make?
A: Living beyond their means. This is especially true of young adults. It is so exciting when you get that first real job and first real paycheck. The temptation is to assume you should instantly have the same standard of living as your parents. Remember it took your parents 30 years to accumulate what they have now. If single young adults can start out only living on 80% of that new salary and save the rest, they will be significantly more secure than their peers. They need to start a Roth IRA, have at least 6 months of living expenses in savings and avoid debt like the plague.
Q. A lot of our readers have to make the tough choice between paying off debt and saving. What is your advice to people in this situation?
A: Pay minimums on your debt and as fast as you can put aside $1,000 in a savings account. Once you have that, then attack the debt. Put every penny beyond your core living expenses on the debt and get it gone!!! Sell everything you have that isn’t essential. Get a part time night and weekend job. You didn’t get in this situation overnight and you won’t get out overnight, but if you are willing to sacrifice, there is a light at the end of the tunnel. That is financial freedom.Q: Some readers may see this and wonder "Should I get a Financial Planner?" In what kind of situations should one consider a financial planner? What are the benefits of having one?
A: Consider seeing a financial planner when you are ready to be serious about your financial future. In the beginning it may just be a consultation to make sure you are on the right path with occasional checkups every year or two. Find a planner who is a Certified Financial Planner and thus trained in all areas of financial planning, tax, investments, insurance, retirement and estate issues - not just investments. You can go to www.fpanet.org and click on “What is Financial Planning”. It will give you a list of questions to use when interviewing a possible planner. You can also search for planners on this site. I would recommend that you choose one that does not require minimum investable assets. You want someone who is a good teacher and willing to help you get started.The main benefit of hiring a planner is that you don’t know what you don’t know. Financial and tax issues and regulations change almost every day that Congress is in session. You want someone on your team that will keep you up to date on all the tools you can use to help you reach your goals. It also helps you stay on course when you know that someone will be asking you about your progress! Studies show that those who use Financial Planners significantly exceed those that don't in reaching their financial goals.
Have other questions for Dianne? We want to hear them!
Dianne is a partner with Stonebridge Financial Planning Group, LLC. and is a CERTIFIED FINANCIAL PLANNER™ practitioner. She holds a General Securities license through FINRA and is licensed to sell insurance in various states.
Dianne is also a Certified Divorce Financial Analyst and specialized in working with women in transition- divorce, widowhood, layoffs and inheritance.