Next up, we have a question from VT Snacks. They ask, “What preparations might be useful as I get married this year? We have highly imbalanced incomes and the ability for separate 403b, 457b, and 401K accounts to save in. Where should they start?”
First of all, I think the Financial Order of Operations is something people often overlook, but I’ll let you jump in. It’s interesting that people always ask if net worth statements and other financial aspects are per individual or per household. Once you get married, even though you may have individual accounts like a Roth IRA or a 401K, those are in your names. However, when it comes to the Financial Order of Operations and figuring out how to maximize savings, that’s on a per household basis. Look at your combined income, do the math, and allocate it like a jigsaw puzzle among your different options such as Roth IRAs and retirement accounts.
When my wife and I got married, we approached it with the mindset that what’s mine is yours and what’s yours is mine. We viewed our finances as a single entity. As a financial guy, I had a variety of options to choose from, such as Roth IRAs, health insurance through my job, or health insurance through her job. It’s important to consider all the retirement accounts available to you as a couple and determine which ones are the most optimal to use. Even if there are imbalanced incomes, it doesn’t mean you have to contribute the same percentage to each 401K. Sometimes it’s beneficial to prioritize the retirement plan that offers the best options for the household. You can tailor your contributions accordingly. Start by looking at all the available options and select the best ones based on the financial order of operations. When you reach step number six, which is maxing out retirement options, you can decide which accounts to prioritize. It doesn’t have to be evenly distributed. Consider the quality of the plans and choose accordingly. Don’t get trapped in the idea that each spouse has to contribute the same percentage to their respective retirement accounts. It’s okay to approach these decisions from a household perspective rather than an individual one.
Ultimately, have open communication with your spouse. Sit down together and discuss your financial plans for the next three to five years. Ensure both of you are heard and have input. Communication is key in any relationship, and it’s important to address any insecurities or concerns that may arise. Make sure everyone involved feels part of the plan and has buy-in. It’s more enjoyable and rewarding to go on this financial journey together. Consider taking courses or using resources like learn.moneyguy.com to further facilitate communication and understanding of financial matters as a couple. Remember, doing things as a couple, such as following the financial order of operations and reviewing your net worth statement, can be valuable and promote healthy communication.