Money and Relationships: A Concrete Financial Plan

Continuing our Relationship and Finance series, we come to “The Plan.” We have built the basics, and now, with knowledge in our pockets, let’s look at ways to build a financial plan.

Design Your Blueprints

As you build your joint financial future with your spouse, you will be relying on all of the building blocks you have already laid through your work in the series, beginning with talking about your ideal future.

By turning to one of the first ideas in our series, you and your spouse can lay out your ideals to begin. Talk again about where you want to see yourselves in five, ten, twenty years and beyond. Then, write these goals down. From there, add specific smaller goals to complete the blueprint for your financial future.

For example, let’s imagine a couple, Tim and Tina. They are 35 years old, but they have not saved for retirement. At the top of their list, they write a few huge goals:

  • Pay off all debts in five years, including the house.
  • Contribute at least $200,000 to their retirement funds in ten years.
  • Retire by 58 years old with $2 million in retirement funds.

When Tim and Tina look at their goals, they are a little daunted by the figures, but they decide to lay out the short-term goals on paper to see if their dreams are plausible.

Set Specific Goals

As they move forward, Tim and Tina must test their large goals by breaking them down into smaller, more manageable ideas. They calculate that all of their debts total $200,000, so they will need to plug away $40,000 per year toward their liabilities. They jot this figure down and make a notation to check where they can cut back.

For the ten year retirement goal, they figure out that they will need to set aside $20,000 per year. But to retire comfortably at 58 years old, Tim and Tina use a financial calculator to figure out how much they will need to contribute. They find out that, with their good jobs and employers’ 401(k) matches, their goals are possible – if they set aside 15% per year.

Set a Budget That Includes Future Goals

When they found out their dreams were possible, Tim and Tina got down to the nitty-gritty: They completely overhauled their budget. Both decided to cut back on personal spending, but Tim insisted they set aside money for date night once a week, their one treat.

Tim and Tina’s goals were so intense that they decide to work backwards. They calculated their salaries at 15% less than they currently received to account for their new 401(k) contributions. Then, they added the necessary items into the budget one by one, beginning with their debts (at accelerated payment values), groceries, and bills.

With only the bare necessities in bills and debts, Tim and Tina were almost maxed out. They decide to drop cable, home internet, cell phones, lunches out, dinners out, clothes shopping, electronics purchases, manicures, pedicures and massages. To both, their new lifestyle seemed almost impossible, but their retirement dreams outweighed their more immediate desires.

As Tim and Tina moved forward in their goals, they found they could live on a lot less. In fact, they seemed happier as they worked toward their joint financial plan.

As you design your own strategy, deciding together your major and minor goals will help you and your spouse develop a financial system you both will happily agree upon. Also, understand that as jobs change, kids come along, and goals are tweaked, the plan will have to be updated as well. Make it a living document and discuss it often.

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Anonymous's picture

MoneyCone wrote:

Wed, 04/06/2011 - 11:30 Comment #: 1

Can't argue with the post! Setting goals *and* tracking them is essential to have an accurate picture of one's financial state.

Anonymous's picture

Ravi Gupta wrote:

Wed, 04/06/2011 - 12:51 Comment #: 2

One of my co-workers always tells me that plans are meant to be changes and I believe Murphy's law states "what can go wrong will go wrong". I think you've written a great plan. I know my parents never did any of the items that you listed but we live and learn.

-Ravi Gupta

Anonymous's picture

Newlyweds on a Budget wrote:

Wed, 04/06/2011 - 16:07 Comment #: 3

I love this idea. I seem to always be on board for saving though, while my husband is usually not. I mean, he'll say "yeah that sounds good." but when it comes to the everyday...it's mostly on my shoulders.
we're trying new things though, so hopefully we'll see some improvement.

Christa Palm's picture

Christa Palm wrote:

Wed, 04/06/2011 - 23:17 Comment #: 4

Good point, Moneycone -- Tim and Tina need to stick to those goals or change them if they are unattainable!

Ravi, I completely agree. Plans will definitely change all the time, so it's important to check back often. I hope your 'rents are able to make a plan now -- it's never too late :-)

Newlyweds, it's always rough when the hubby says one thing and does another, but it sounds like you've re-worked your plan. Great job! I hope the new plan works for you guys!

Anonymous's picture

Finances and Relationships - Taking on Tough Topics | MomVes wrote:

Sat, 01/21/2012 - 18:00 Comment #: 5

[...] a long-term financial plan is one of the key steps to acting together as a team. See how to build your plan [...]

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