It’s normal that spouses harbor different opinions on a variety of subjects. The two maroon shirts I occasionally wear—and love—are regarded by my wife as particularly ugly. As she’s kind enough to humor me on this matter, it’s only fitting that I don’t openly criticize the TV melodrama she chooses to view at 9 o’clock every Thursday night. Although we seldom bicker over things, at times our respective differences, particularly on the matter of money, are clearly stated. And this is as it should be, for income and expenditures are at the heart of any partnership, family as well as business. With that said, it’s my belief that there are five basic issues in which both spouses must be in firm accord. These represent the most prevalent omissions and commissions that lead to untold grief for many couples.
1. If I Should Die Before I Wake
As a very first consideration, every family provider must arrange financially for his or her survivors in the event of untimely death, meaning the spouse and all minor offspring. A common way to accomplish this is with a life insurance policy. This is where controversy arises, for there exists an industry devoted to selling products that minimize death benefits while maximizing profits for its marketers. Regardless of sales pitches to the contrary, you want an inexpensive and unadorned 20- or 30-year level benefit term policy, of sufficient face value (normally no less than ten times the insured’s annual income), from an insurer with an A.M. Best rating of A+ or A++. Once the company is chosen and the face amount of the policy is determined, neither husband nor wife should question the wisdom of the periodic premium outlay.
2. The Minimum Payment is a Road to Disaster
No single implement has lead to greater misery for more families than the credit card. Over the past couple of generations it has been promoted in a way that serves to financially destroy the unsophisticated user. It’s my belief that a credit card should serve a single purpose: a convenience when neither cash nor check is readily available. Purchases should only be made in a manner that the account balance is paid in full each month before any interest can be charged. Both spouses must conduct their lives by this rule. If either cannot do so, all credit cards should be destroyed with members of the family adjusting their lives accordingly.
3. All Hail the Horseless Carriage
With the exception of hearth and home, the motor vehicle constitutes the typical American’s single most important fixation. No other product is more forcefully marketed, and far too many people succumb to its allure, forfeiting a substantial portion of disposable income. I’ll put it bluntly: No one should drive a vehicle that is financed or leased. You should acquire your transportation using 100% cash you've saved, even if it means you drive a 1984 Toyota Corolla. Each spouse should enthusiastically embrace this concept. At a later date, when your fortune is deservedly secure, you may feel free to sport brand new matching Rolls Royces—but again, devoid of any financing.
4. Education Doesn’t Make You Smart—Merely Educated
Too many dollars that go toward tuition and ancillary expenses are wasted. The educational establishment has convinced the nation that post secondary schooling must appear prestigious and be costly. The result is that untold numbers of college graduates and their parents are in debt big time, some never to emerge from it. What a waste! I advocate college-on-the-cheap, with the freshman and sophomore years spent at a community college, commuting from home, and the junior and senior years at a reasonably priced local state university. For a bright and diligent student, the education received is as good as four years at Harvard. Both spouses should be in accord on this principle. The finest gift a parent can give an offspring is the assurance that child will never need to support an indigent parent.
5. It’s Never Too Soon to Plan for the Future
A most repeated statement of persons in their late 50’s and beyond is: “I never though I’d get here this soon.” It’s for this reason that a wise couple will plan for their retirement at the earliest age. There must be no question that retirement accounts, whether they be IRAs, 401(k)s, or other private programs, be established, and funded, from the earliest working days. In addition, funding should continue year after year, as though future wellbeing depends upon the assets accumulated—for indeed, it does. It is true, of course, that regular allocation of meaningful sums toward retirement reduces what is available for current luxuries. This is where mutual resolve, together with a healthy dose of discipline, is vital. Above all, neither spouse should undermine the efforts necessary to insure that retirement years will truly be a period of prosperity, free from the financial worries in which the majority of citizens are immersed. I’ve long contended that the benefits of wealth only intensify with the passing years.
Let me sum things up: It’s been said, and rightly so, that personal satisfaction and financial contentment is not dependent as much upon the amount of income earned, as much as on the way in which that income is used. It should surprise no one that the marketing of services and products is now the most pervasive industry in the world, employing highly effective methods to create demands for goods of all sorts. The social and psychological pressures brought to bear on prospective customers are more than many persons can resist. If you hope to prosper, it’s vital that you avoid the impulse to purchase unwisely. As pleasing as childish illusions may be, they invariably lead to disappointment. Keep this constantly in mind as you conduct your financial affairs.
AL JACOBS has been a professional investor for nearly four decades. His business experience ranges from real estate, mortgage, and securities investment to appraisal, civil engineering, and the operation of a private trust company. In addition to managing his investments on a day-to-day basis, he is a featured financial columnist for both online and print publications. He is the author of Nobody’s Fool: A Skeptic’s Guide to Prosperity. You may subscribe to his financial newsletter, "On the Money Trail," at no cost or obligation, by visiting www.onthemoneytrail.com.