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A Financial Expert’s Advice on Making a Marriage Last and Building Wealth

“Most couples don’t need a couple’s counselor; they need a financial advisor,” says author and financial consultant David Bach. “Couples who work together on their financial life stay together.” Bach likes to use himself as an example: The first fight he and his wife had was about bills.

“Ironically, my wife was also a financial advisor, so you would have thought we’d have it all figured out,” he says.

The way Bach talks about money is encouraging. His advice isn’t preachy or entitled; it’s honest, and it stems from a twenty-five-year-long career in the financial industry—and, of course, personal experience. His grandmother Rose Bach, a self-made millionaire, was his biggest mentor.

“At thirty, she decided she didn’t want to live paycheck to paycheck,” he says. “She just didn’t want to be broke anymore. So she started learning how to invest, and over time, she became smarter and smarter with money.”

That inspired Bach to write his first book, Smart Women Finish Rich, which compelled droves of readers—women and men—to ask him how to get their partners to read it. He started digging deeper to create a book that would cater to married people, and he used anecdotes from his own clients in it.

“I knew all these couples who had been married for thirty, forty years, and they’d done really well financially,” he says. “I needed to go back to them and find out what they did. What were the themes?”

The answers became Smart Couples Finish Rich, Bach’s second book, and one of his most popular (it was first published in 2002, and he released a revised version this year). It reads like a conversation with a friend—a financially savvy, emphatic, enlightening friend. It leaves you feeling more in control.

On a recent call with goop, Bach shared some of the biggest takeaways of his research, which, he says, can be put into motion no matter your financial circumstances or lifestyle. “The sooner you do it, the better,” he says. “But it’s also never too late to start.”

A Q&A with David Bach

Q

What are the keys to building a financially healthy marriage? And what are your best practices for building wealth together?

A

The most important place for any couple to start—and the way to stop fighting about money—is to get clear about your values, both individually and as a couple. What are your goals? What is important to you? This is what I’ve taught couples for decades: It’s what I call purpose-focused financial planning.

I have an exercise for couples: Each person writes down his or her values in life, five each. Next, you sit down together and go over them. And then you decide what values you’re going to stand for as a couple. Once you’ve done that, you take a look at the way you’re spending money to see whether it’s lining up with your values.

For example, one of the top values I often see is security. Most people want to know they’re going to be secure, that they won’t lose their home. So if someone’s value is security but they’re spending more than they make in a month, then their life is in conflict, and something needs to change. I teach couples to build their financial life around their values and create a specific action plan to get there. It’s about simplifying.

Then be clear on where all your money is and where it’s going. The biggest thing, especially as we get older, is we end up having accounts everywhere. We have old 401(k) plans, an IRA account, brokerage accounts. Most couples in the beginning don’t know where their money is—or what their net worth is. You have to have a way to measure where you are today so you can make progress. Is my money in the right place? Is my money working for me? These are the things you need to organize.

The next step involves creating three “baskets” for accounts: the retirement basket, the security basket, and the dream basket.

The security basket: This is what you need as a couple to be secure. How much money do you need to set aside to cover your expenses for a certain period of time? It depends on the couple, but ideally it needs to be six months or more of living expenses set aside in a money market or security account to be secure. This also accounts for health care and, if you need it, disability.

The retirement basket: One of the most important things couples can do is to agree to pay yourselves first. This means you’re the first person who gets paid when your paycheck gets to you. I teach people to pay themselves first, one hour a day of their income. So if someone were to work a normal workweek of forty hours a week, the first hour a day of whatever you make an hour should be swept automatically out of your paycheck and into a 401(k) plan (or the retirement account you have—if you work for a nonprofit or are a teacher, you may have a 403(b) plan). And if you don’t have one, you have to open up an IRA account. If you take one hour a day of your income, you’re saving over 12.5 percent of your gross income, which is four times what the average American saves. The average American saves less than fifteen minutes’ worth of their income. I teach this in this manner because it makes people think differently. Why would you go to work all day long and not keep an hour’s worth of your income?

“Most people want to know they’re going to be secure, that they won’t lose their home. So if someone’s value is security but they’re spending more than they make in a month, then their life is in conflict, and something needs to change.”

The dream basket: The dream account is considering what you want to do between now and retirement that’s going to take money. For instance, you may want to travel to Chiang Mai, pay off your house, or buy a second home. This covers short-term dreams (six months to about two years), mid-term dreams (five years out), and long-term dreams (ten years out). Then set up an investment account specifically for those dream goals and label the accounts. This is what I do for my clients as a financial planner. We help people not just look at their investments as investments but look at their money as a way to make their dreams real.

Q

What if there’s a substantial income disparity between spouses?

A

If you’re earning significantly more money than your partner, or if you come into a marriage with significantly more assets, the question is: Do you do a prenuptial agreement? I say, flat out, one of the biggest mistakes couples make is not signing a prenuptial agreement. They’re much less controversial now. I’ve been asked, “What do you mean? I fell in love with this person; I want to be with them forever. How can you ask me to do this?” But the truth is 50 percent of Americans still end up divorced, and 60 percent of second marriages end up in divorce. Divorce is the single most expensive thing you will ever go through in your entire life. Nothing has the potential to destroy your financial life faster, harder, or more aggressively than divorce. On average, in my experience, a couple will lose somewhere between 10 to 20 percent of their net worth just in the costs of fighting over their divorce.

When you get married, you’re basically getting into a contract. If you’re marrying somebody, and you’re making a lot and your spouse isn’t or doesn’t work, then you’re immediately going into a financial liability unless you have a prenuptial agreement. I tell people if the assets are significantly uneven or you’ve been married before and you have children, you should consider a prenuptial agreement.

Q

What are some other common financial mistakes you see married couples make?

A

I don’t think budgeting works for couples; I think budgeting leads to fighting. Discipline often doesn’t work. I’m a big proponent of saving automatically. If you follow my plan, you don’t have to worry about budgeting because you simply live off of what’s left.

Also, what I see most people do is pay all their bills first, and then they try to save. But they get to the end of the month and there’s nothing left. My approach is the opposite.

Q

Any other one-size-fits-all rules for couples?

A

Owning a home is the single most important financial decision couples can make. And it is a true escalator to wealth. If you’re a couple and you continue to rent and rent, the person you’re making rich is your landlord. What I see happen in major cities like New York City, which is where I live, is so often people move there with the idea they’ll be there for only a few years—and then they turn around and ten years have gone by. Meanwhile, rents continue to escalate. It’s really important for couples to make it a goal to buy a house. And if you have a loan, make it a goal to pay it off early. When you pay off your home early, it gives you so much financial freedom.

Q

Is it better to share everything, from accounts to expenses, or keep some things separate?

A

I typically see people have their own accounts and have a joint account. So you have the she account, the he account, and a joint account. Or two he accounts and a joint account, or two she accounts and a joint account. I think it’s important to have your own account and have your own money. This gives you autonomy for things, including buying gifts for each other, etc. Then it’s important to have a joint account that you’re paying bills out of or a joint investment account. But there will always be things that are separate, such as stock options and IRA accounts.

Q

What if two partners are opposites, say one’s a spender and the other’s a saver?

A

Most couples marry their financial opposite. I believe people are born a certain way: We’re either born to save, or we’re born to invest. Inevitably those two people are attracted to each other. We’re magnets for our financial opposite. People laugh, but it’s true. It’s rare that two people who are both into financial investing come together.

So if you marry your financial opposite, what do you do to overcome that? This is where I go back to the values. If you can get your values aligned, I believe you can overcome these issues. And the fastest way to do this is to agree we pay ourselves first. Take that off the top first before you spend it. Let’s put money automatically into a dream account, and an emergency account, and a retirement account.

Q

Advice for couples before they get married? Best practices?

A

Getting clear about whether you and your partner’s values are aligned before marriage is important. This doesn’t mean you shouldn’t marry someone who had credit card debt, but you need to know whether they want to get out of credit card debt. Talk about these things. How were you raised about money? Did your family talk about money? How do you want to manage money when we’re married? It’s important to talk about these questions with somebody before you get married and to know where you stand financially. When it comes to money, you have to go into marriage with your eyes wide open. It’s more likely you’ll get divorced fighting over money than you will about kids or religion. The reason I wrote Smart Couples Finish Rich was to save the average American family.

“I believe people are born a certain way: We’re either born to save, or we’re born to invest. Inevitably those two people are attracted to each other. We’re magnets for our financial opposite.”

And the moment you get married, you should create a will, whether you have kids or not. The moment you have kids, you should have life insurance.

Q

Any favorite financial resources or tools, like podcasts, books, or blogs?

A

A relatively new app I recommend is Clarity Money. It helps you track where your money is going. There are various features inside the app I love. You can start to save for your emergency account inside the app, and you can open an investment account inside the app. Another feature shows where you’re signed up to spend money every month automatically. I call those two things your latte factor and your double latte factor. These are metaphors for all the small things we spend our money on, where our money is automatically taken from us to pay for something, like a gym membership or a Spotify or Netflix account. Many times when we sign up for something, after three or four months, we’re no longer using it. A fast way to find the money to save is to cut out all these monthly expenses that you’re not using. From Clarity, you can just click and unsubscribe.

I challenge couples to do what I call the latte factor challenge. Track your spending for one week using an app like Clarity Money, and see where all your money is going. Are you spending $5 a day on coffee or are you buying bottled water? At the end of seven days, sit down together and review what you both spent money on: What’s in here that’s really small that we can change so we can start saving more? Saving $10 a day often is enough to change your life. If you each save $10 a day, it adds up to $7,300 a year for a couple. And if you can save $7,300 a year as a couple, you can be millionaires by the time you retire. For many couples, this can be life-changing.

For podcasts, I like Jean Chastky’s Her Money, Farnoosh Torabi’s So Money, and Bobbi Rebell’s Financial Grownup.

David Bach is a cofounder of AEWealth Management and a nine-time New York Times–bestselling financial author. His most recent book, Smart Couples Finish Rich, is a national bestseller. To learn more about Bach and to read his “timeless truths” about investing and money, visit DavidBach.com.

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