For young families, dealing with the monthly budget can seem like a constant grind. Those who have either recently graduated or moved onto higher education can feel burdened by student loan payments. For couples eager to start a family, the financial demands of welcoming a child can add extra stress to an already challenging situation.
We’ve written previously about ways to manage student loan debt. Our advice includes making sure you are taking advantage of the generally more favorable terms offered by federal government programs, careful budgeting, understanding all your loan terms and becoming familiar with alternate payoff plans. For recent graduates who have nailed down that first job, it’s vital to build your student loan payments into your budget for each month. Broad student loan forgiveness programs that were discussed during the Biden administration are unlikely to become available soon, but there are still a number of federal student loan forgiveness programs that remain in force. Depending on your circumstances, it may be possible to qualify for one of these. While this can be helpful, it’s not always the best path forward – be sure to compare loan forgiveness opportunities to an early payoff plan that allows you to throw more money at principal to minimize the amount of lifetime payments.
Education debt that provides the opportunity for greater earnings or career advancement constitutes a real investment in your future and that of your family.
The Ground Rules
It’s important for new families to be centered on some basic financial principals that can provide structure and strategy for meeting the important obligations that come with this phase of life. Gaining such agreement and getting on the same page financially is vital to a healthy, mutually respectful relationship. In fact, it’s about the only way that you, as a young couple, can set an effective course for managing various needs in the short term while still growing your wealth over a shared lifetime. No doubt, it takes money to live and conflicts around money account for the #1 relationship challenge of about 25% of couples. Not only that, but according to surveys, around 70% of couples age 25 and older who make at least $50,000 per year argue about money.
Setting Goals
When couples have a mutually agreed goal that they are committed to working toward, they typically experience fewer financial arguments. Challenges and surprises are inevitable, but when you’re aligned on your goals, it’s much easier to navigate setbacks and stay on track financially – together. Whether it’s paying for a child’s education, saving to buy a home, or planning a comfortable retirement, when couples agree on their most important goals and commit to helping each other achieve them, financial harmony is almost always the result.
Saving and Investing
The number-one rule for growing wealth over your lifetime is to commit to spending less than you earn. This may seem obvious, but for those who don’t follow a budget, and especially for those who reach too readily for credit cards to obtain short-term gratification, monthly debt service can easily rob you of the ability to set aside savings on a regular basis. Make it a goal to save about 10% of your income each month. Admittedly, in the early days, you may have to start smaller than that, but even a smaller amount, set aside systematically, can help you toward your goal. Over time, as your savings balance grows, you should also set a goal of investing a portion of your savings in assets that can grow faster than inflation over the long term. In other words, putting money in a savings account, while an important start, is unlikely to enable you to grow the kind of significant wealth you’ll need to meet some of your long-term goals.
And speaking of saving and investing, you should also make it a priority to take advantage of any employer-sponsored retirement savings plans—like 401(k)s and 403(b)s—that might be available to you. Regular, systematic deposits in a tax-advantaged retirement plan are a primary wealth-building tool. And even if you don’t have access to an employer-sponsored plan, you can make contributions to an individual retirement account (IRA) and begin building a foundation for a more secure retirement.
Even if you have children, prioritizing your own retirement may be even more important than saving for their education. Making sure your kids don’t have to take care of you in your later years is one of the best financial gifts you can give them. So, even though it may sound counter-intuitive, you generally shouldn’t sacrifice your retirement for the sake of your children’s education.
At Curio Wealth, we want to know: What are your family’s main financial priorities? If you’re faced with student debt, do you have a plan for managing it over time? If you’ve got questions about these or other important financial matters, we’d like to talk to you. And to find out more about getting on the same page financially, visit our website to read our article, “Tackling ‘The Talk’: Your Finances and Your Relationship.”
