Marrying into Financial Security: How to Start Investing as a Married Couple

Congratulations, newlyweds! As you embark on this exciting journey together, it’s important to start planning for your future. And what better way to review your financial stability than by making smart investments for your future security. To see some examples of good investments check out my favourite wealth management author Adam Fayed’s latest article ‘the ultimate guide to investment funds’ here:
https://adamfayed.com/the-ultimate-guide-to-investment-funds-part-1-which-investment-funds-suit-you-best/

For most people, the first and probably only thoughts they have about a wedding’s financial impact is the price tag.

With good reason. There are some mind-boggling sums involved between the engagement ring, the wedding, and the honeymoon. It is understandable that, in the run-up to the big day, individuals would be concerned with wedding budgeting in an effort to cut costs.

However, you should not stop thinking about money after the wedding. As a newlywed couple, there are many financial decisions that must be made, such as whether or not to merge accounts, how to budget, and how to invest.

In this article, we’ll explore the best investment options for newly-married couples, discuss investing for beginners, different asset classes and alternative investments, to help you navigate the world of finance with confidence.

Whether you’re dreaming of a beautiful home, planning for retirement, or saving for that dream vacation, investing wisely can help you achieve your goals faster. But with so many investment options available, where do you start? We’ve got you covered.

Why should you invest as a married couple?

If you are a newlywed couple living happily ever after, you might be surprised to learn that money problems are the number two cause of divorce.

The good news is that all that is preventable. One habit that distinguished “great” relationships from “OK” or “in-crisis” marriages is simply in the frequency with which the partners spoke and planned for their financial future.

Investing is important because you need to invest your money and take advantage of compound interest if you want to be financially secure in retirement.
Investing is important because you need to invest your money and take advantage of compound interest if you want to be financially secure in retirement.

If you are newlyweds, it might be wise to discuss money matters regularly and freely. However, it is far easier to talk about money than it is to actually work together on financial problems, such as how to invest as a pair.

As newlyweds, it’s crucial to prioritize financial planning to ensure a secure future. By setting financial goals and making smart investment choices, you can build a strong foundation for your life together. Financial planning allows you to create a roadmap that aligns your goals and aspirations as a couple.

One of the first steps in financial planning is to have open and honest communication about your individual financial situations, debts, and income. By understanding each other’s financial obligations, you can work together to create a budget and allocate funds towards different investment opportunities.

What is investing anyway, and why do you need to do it? For example, if you and your new spouse have received $1,000 in wedding gifts, you may be wondering how to best put that cash to use.

Putting the money in a high yield savings account, ideally one that pays interest at a rate higher than inflation, is a common strategy. Investing the money is another popular choice. An equity index fund offering a real annual return of 7% would be used for this illustration.

Here is what would happen to each choice after 40 years:

Investing your money nets a return that is nearly 14 times greater!

The bottom line is that investing is important because you need to invest your money and take advantage of compound interest if you want to be financially secure in retirement.

Think about all the other things you could buy with the money you would have spent on a lavish wedding. Planning your wedding without going into debt and investing your funds could be the best decision you ever make financially.

How do you start investing?

Before diving into how to start investing, it’s essential to establish your financial goals as a couple. Are you saving for a down payment on a house? Planning for a comfortable retirement?

Or perhaps you want to start a family and need to save for education expenses. Identifying your goals will help you determine the investment strategies that best align with your aspirations.

It’s important to set both short-term and long-term financial goals. Short-term goals could include building an emergency fund, paying off any high-interest debts, or saving for a vacation.

Long-term goals, on the other hand, may involve retirement planning, saving for your children’s education, or investing in real estate.

Retirement planning should be the primary focus of any investment strategy. Two questions must be answered when you do this:

The answer to the first question is simple: you can modify it as needed. A basic estimate of how long you want to be working is crucial, but goals should evolve as your priorities do.

The 4% rule will tell you the answer to the second question. You may estimate how much money you will need for retirement by taking your anticipated annual spending and dividing it by four percent.

If you plan on spending $50,000 per year in retirement ($50,000 0.04% = $1,250,000), you will need $1.25 million to do so.

It is a rough guideline, but it can serve as a starting point for improvement. The annual amount you need to save and invest to achieve your retirement objectives can be calculated once you have established those goals.

Retirement investing and retirement planning are a crucial aspect of financial planning for newly-married couples. It’s never too early to start saving for retirement, and the earlier you begin, the more time your investments have to grow.

Consider opening individual retirement accounts (IRAs) or contributing to employer-sponsored retirement plans, such as 401(k)s.

When planning for retirement, it’s important to determine your desired retirement age, estimate your expenses, and calculate how much you need to save to maintain your desired lifestyle. Consulting with a financial advisor can help you create a comprehensive retirement plan tailored to your specific needs.

It is important to agree on additional broad financial objectives beyond retirement as well, such as:

Investing for shorter-term goals requires a different strategy than saving for retirement. It is preferable to use a method of saving, such as setting up sinking funds.

You should not save for only one big thing and forget about the rest of your financial plans altogether.

Setting your Investment Strategy

Once you and your spouse have agreed upon your retirement and other financial goals, you can choose an investment approach.

This is a great chance to meet other people in a similar position and learn about investing together. There are a variety of approaches suitable for people with a wide range of comfort and confidence in taking risks.

Retirement planning should be the primary focus of any investment strategy.
Retirement planning should be the primary focus of any investment strategy.

For better or worse, opposites do attract. A pair who always sees eye to eye is unusual indeed. And even marriage cannot fix a couple’s differing views.

Just because you get married does not mean that you automatically become one person. It is fine if you and your partner have different opinions on how to handle finances and the stock market.

This is not a problem though. A married couple’s investment success may even benefit from their polar opposite personalities.

If one partner is more risk-averse than the other, for instance, the portfolio can benefit from his conservatism. Meanwhile, a more risk-taking investor can enable a more conservative one gain from enhanced development.

But a clash of conservative and aggressive approaches can also cause investing anxiety. A strained relationship can be the result of one partner feeling compelled to make investments he is not happy with.

There should be some sort of financial coordination, but that does not mean you have to adopt your partner’s investment strategy (especially if it makes you nervous).

Newlyweds with different opinions on keeping an investment portfolio could find themselves with a mix of assets that have no clear direction. Couples can get around this by talking about and writing down their portfolio objectives and aligning with one another.

It is important for couples to agree on their investment goals, time horizons, and tolerance for risk before making any joint financial commitments.

What are the different types of investments?

Investing money can go into a number of different things, including, but not limited to:

Buying into a few index funds or exchange-traded funds (ETFs) is the simplest strategy. You can diversify your portfolio without having to acquire ten, twenty, or thirty separate stocks and bonds by investing in mutual funds that hold a wide variety of securities.

Stable assets like short-term CDs or money market funds are best if you are saving for a goal that is due within three years. If your investment goal is several decades away, you may find that you may be more aggressive if you both feel comfortable doing so.

Regardless of your end aim, you should always be prepared for the unexpected by keeping a small emergency fund. Selling early to raise cash could ruin your investment strategy if you are not careful.

Likewise, newlyweds should think about how their financial decisions relate to their values. Building wealth without compromising morals or values is feasible through socially responsible investments for the newlywed couple.

After that, you (or your broker) can decide where to put your money. In the case of a broker, you can utilize them for an IRA (step 4) or a brokerage account (step 5), but not for a 401(k) (step 6).

There are generally three main choices:

A full-service broker will provide the widest range of investment opportunities, while an investment app will be the most convenient and a Robo-advisor will handle much of the legwork for you.

This presents yet another chance to consult one another in your search for the optimal solution.

Understanding the different types of investments

It is important for a newlywed couple to have a firm grasp of the various investment options at their disposal.

Risks can be reduced and long-term gains increased through prudent portfolio diversification. Let us look into some of the financial opportunities that are most suitable to newlyweds.

Low-Risk Investments for Newlyweds

Low-risk investments provide stability and security, making them an excellent choice for newly-married couples who want to preserve their capital while earning moderate returns.

One such option is a certificate of deposit (CD), which offers a fixed interest rate over a specific period. CDs are insured by the Federal Deposit Insurance Corporation (FDIC), making them a safe investment choice.

Another low-risk investment option is government bonds. These bonds are issued by the government and offer a fixed rate of return over a specific period. Treasury bonds are considered one of the safest investments as they are backed by the full faith and credit of the government.

High-Risk Investments with Potential for Higher Returns

For couples looking to take on more risk in pursuit of higher returns, high-risk investments may be worth considering.

One such option is investing in individual stocks. This requires careful research and analysis of companies’ financials, market trends, and industry outlook. It’s important to note that investing in individual stocks can be volatile, so diversification is key to managing risk effectively.

Another high-risk investment option is investing in growth-oriented mutual funds. These funds invest in a portfolio of stocks with high growth potential. While they carry more risk than low-risk investments, they also have the potential for higher returns over the long term.

Investing in Real Estate

Investing in real estate can be an excellent long-term investment strategy for newly-married couples. Owning a home not only provides stability and security but can also be a valuable asset that appreciates over time.

Additionally, you can consider real estate investment trusts (REITs), which allow you to invest in real estate without the need for direct ownership.

Before diving into real estate investments, it’s essential to consider factors such as location, market conditions, and potential rental income. Conduct thorough research and consult with professionals to make informed decisions.

Investing in Mutual Funds and Index Funds

Mutual funds and index funds offer diversification by investing in a portfolio of stocks, bonds, or other assets. These funds are managed by professionals who make investment decisions on your behalf.

By investing in mutual funds or index funds, you can spread your risk across a wide range of assets and industries.

Index funds, in particular, aim to replicate the performance of a specific market index, such as the S&P 500. These funds offer low expense ratios and are a popular choice for passive investors looking for broad market exposure.

What other investment strategies should you consider?

Active investing vs. Passive Investing

Active investing involves actively managing a portfolio, with the goal of outperforming the market.

This strategy typically involves buying and selling stocks or other securities based on the investor’s analysis and market predictions. Active investors believe that they can beat the market by making strategic investment decisions.

On the other hand, passive investing aims to replicate the performance of a specific market index or benchmark.

Instead of actively buying and selling securities, passive investors prefer to invest in index funds or exchange-traded funds (ETFs) that track the performance of a particular market index.

Passive investors believe that it is challenging to consistently outperform the market, and they aim to match its returns instead.

There are many upsides to engaging in active investing. Investors have a shot at outperforming the market and making more money as a result.

Those that actively monitor the markets and act on their findings through analysis and research can profit from market shifts. This method enables shareholders to take an active role in portfolio management and to respond flexibly to shifting market conditions.

There are, however, risks associated with active investment. It calls for a substantial investment of time, knowledge, and effort.

Market movements, economic statistics, and company-specific news are all important for active investors to monitor. Costs associated with active investing are often higher than those associated with passive investing.

Consulting with a financial advisor can help you create a comprehensive retirement plan tailored to your specific needs.
Consulting with a financial advisor can help you create a comprehensive retirement plan tailored to your specific needs.

It is also worth noting that not all “active” investors manage to outperform the market on a regular basis.

various people choose to invest passively because of the various advantages it provides. It enables investors to have exposure to the market at large while also sharing in the market’s expansion.

Index funds and exchange-traded funds (ETFs) provide diversification for passive investors because they hold a portfolio of securities from a variety of companies and industries.

There are fewer fees associated with passive investment. Passive investors save money on trading fees since they do not actively buy and sell securities to match the performance of a market index.

Furthermore, the management fees associated with passive investments are typically lower than those associated with actively managed funds.

There are, nevertheless, risks associated with passive investing. A passive investor’s returns are directly proportional to those of the market index they follow. Losses will be incurred by passive investors in the event of a market slump.

Since the goal of passive investing is to provide returns similar to those of the market, it does not offer the chance to exceed the market. In addition, active investors might take advantage of opportunities that passive investors might overlook if they did not actively manage their portfolios.

What is ESG investing?

Here at Bride and Tonic, we put a lot of thought into sustainability. ESG investing is the same, as it focuses on environmental, social, and governance factors when making investment decisions.

Investors who follow this approach consider the environmental impact of a company’s operations, its social responsibilities, and the effectiveness of its governance practices. ESG investing aims to align investments with one’s values and promote sustainability and ethical practices.

By considering ESG factors, investors can support companies that have positive environmental and social impacts and are committed to good governance practices. This approach allows investors to prioritize sustainability and make a positive difference while seeking financial returns.

ESG investing has gained popularity in recent years as more investors recognize the importance of investing in companies that are socially responsible and environmentally conscious.

Companies that excel in ESG practices are more likely to attract investors who value sustainability and ethical business practices.

The Importance of Impact Investing

Impact investing goes a step further than ESG investing by actively seeking investments that generate positive social or environmental impact alongside financial returns.

This approach allows investors to support initiatives and businesses that address pressing global issues, such as climate change, poverty, and inequality.

With impact investing, you can put your money where your values are and make a good difference. It is a way to back cutting-edge initiatives with the potential to improve people’s lives and the planet.

You may help alleviate some of the world’s most pressing problems by financing businesses and nonprofits that are dedicated to effecting constructive change.

Although there is a chance of financial and social benefits from impact investing, investors should be aware that there may also be greater dangers involved.

Many impact investments are made in the early stages of businesses or initiatives, when the risks are larger. Therefore, it is essential to conduct extensive research and weigh the risks and advantages of impact investing before making any investments.

What is Value Investing?

Value investing, meanwhile, is an investment strategy that aims to find undervalued assets or companies based on fundamental analysis. Value investors believe that the market sometimes undervalues certain assets, presenting opportunities for long-term growth and potential profits.

Value investing involves identifying companies that are trading at prices below their intrinsic value. Investors look for companies with strong fundamentals, such as solid financials, a competitive advantage, and a proven track record.

By investing in undervalued assets, value investors hope to benefit from the market eventually recognizing the true value of the investment, resulting in increased share prices.

Value investing requires patience and discipline, as it often involves holding onto investments for an extended period. Value investors believe that over time, the market will recognize the value of the investments, leading to potential returns.

What are Alternative Investments?

To diversify one’s portfolio beyond the usual suspects of stocks, bonds, and cold hard cash, one can consider alternative investments.

These include a broad spectrum of investments and methods, each of which presents its own set of advantages to the investor. Alternative investments are not as heavily regulated as more conventional ones, but they may nevertheless necessitate a higher level of competence on the part of the investor.

Real estate, commodities, private equity, hedge funds, art, collectibles, and other illiquid assets are all examples of alternative investments.

remember to conduct thorough research, seek professional advice if needed, and regularly review and adjust your investment strategy as your financial goals and values evolve.
Remember to conduct thorough research, seek professional advice if needed, and regularly review and adjust your investment strategy as your financial goals and values evolve.

Because they are not as widely bought and sold or kept, these assets are given the “alternative” label. They can help you reduce your exposure to risk, increase your potential return, and diversify your portfolio.

Alternative investments have the potential to be lucrative, but they are not without their own unique dangers. Before determining how to invest your money, it is vital that you have a firm grasp on the intricacies of each potential possibility.

Alternative investments are being considered for a variety of reasons. The ability to spread out risks is a major factor. The returns on alternative investments are not highly correlated with those of more conventional assets like stocks and bonds, therefore they are less susceptible to market fluctuations.

The potential for higher returns and lower risk can both be achieved by including alternative assets in a diversified portfolio.Another reason to consider alternative investments is the potential for higher returns.

Some alternative investments, such as private equity and venture capital, have historically outperformed traditional investments over the long term. These investments often involve direct ownership in companies or projects that can generate significant returns if successful.

Additionally, alternative investments can provide access to unique opportunities that are not available through traditional investments.

For example, investing in real estate allows you to own physical properties and generate rental income. Investing in hedge funds gives you exposure to sophisticated investment strategies and the potential for outsized returns.

Like any investment, alternative investments come with their own set of risks and rewards. It’s crucial to understand these factors before making any investment decisions. Here are some common risks and rewards associated with alternative investments:

Risks

Rewards

Investing in Education and Professional Development

Last but certainly not least, investing in education and professional development can be a wise investment for newly-married couples.

By enhancing your skills and knowledge, you can increase your earning potential and open up new career opportunities. Consider investing in certifications, courses, or advanced degrees that align with your career goals.

Additionally, investing in your partner’s education can also lead to long-term financial stability. Supporting each other’s educational pursuits can result in higher incomes, job security, and increased opportunities for both of you.

Final thoughts

As newly-married couples, investing wisely is vital for building a strong financial foundation. By setting clear financial goals, understanding various investment options, and diversifying your portfolio, you can secure your future together.

Understanding the different investment strategies, such as active and passive investing, ESG investing, impact investing, and value investing, is crucial for making informed investment decisions.

Each approach offers unique benefits and potential drawbacks, and it is important to consider your financial goals, risk tolerance, and values when choosing an investment strategy.

Whether you are looking for higher returns, aligning your investments with your values, or seeking undervalued opportunities, there is an investment approach that suits your needs.

Active investing provides the opportunity to outperform the market, while passive investing offers broad market exposure at lower costs.

ESG investing allows you to align your investments with your values, and impact investing allows you to generate positive social or environmental impact alongside financial returns.

Value investing focuses on finding undervalued assets or companies based on fundamental analysis.

As you explore the world of investing, remember to conduct thorough research, seek professional advice if needed, and regularly review and adjust your investment strategy as your financial goals and values evolve.

Remember to consult with financial professionals, conduct thorough research, and stay informed about market trends.

By making informed decisions and taking advantage of the right investment opportunities, you can set a strong foundation for your financial future, together.

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