Before You Invest: A Checklist for Couples

Figuring out finances and planning for the future can be difficult for couples, but having honest conversations about money and coming up with a plan – before you invest – can help put you on the road for a comfortable life together. If you haven’t started investing yet, or if you simply aren’t sure where to start, consider using this checklist to begin your wealth-building journey together.

Address Debt First

Debt, particularly high-interest debt, can stand in the way of creating a stable financial foundation for your relationship. Talk to each other about the types of debt you have, whether it’s a lot of credit card debt or a stack of student loans. Once you have a dollar amount determined for each of you, it’s easier to come up with a plan for paying off old debts or consolidating with lower-interest personal loans. Remember that high-interest debt can quickly erase any gains you make with modest investment interest, so it’s a good idea to tackle what you owe as part of your plan to save and invest.

planning before you invest

Talk About Risk

Investments carry different risk levels, so any options you consider as a couple must have a risk level you’re both comfortable with. Talk about risk in practical terms, starting with how much you can actually afford to invest. For example, a $1,000 investment in a CD or mutual fund won’t work for your partner at any risk level if one of you can’t spare that amount of money currently. Determine first how much you can afford to risk, and then move the conversation to the different types of investments and their assigned risk levels. 
Some investments carry more risk than others, so you’ll also want to make sure you have a solid understanding of each type of investment before you make a decision as a couple. Individual stocks can be very risky, while REITs offering long-term investments can provide a more stable option for those uncomfortable with the ups and downs of the stock market. The illiquid nature of long-term REITs is that they protect the investor against early withdrawal. You’re essentially paying yourself. Ideally, a diverse portfolio will combine investments with different risk levels to create a set of balanced holdings.

retirement planning

Take Stock of Retirement Accounts

Whether you have a 401K with your employer or an old IRA you opened but haven’t contributed to in a while, it’s important to review the retirement accounts you both have before making any new investments. Retirement accounts are taxed differently than stocks, bonds, mutual funds, or even real estate investments. By reviewing the money you already saved for your retirement, you can both get a better idea of how much you need to have put away before you begin enjoying your golden years together. If you don’t have any retirement accounts, now is the time to consider them. Here are a few things to think about when preparing to start a retirement account:

  • Talk to your employer. You may be able to invest in a 401K, and there might also be a company match. If you’re already contributing, make sure your contribution lets you max out on the employer contribution. 
  • Compare IRAs. Roth and traditional IRAs are taxed differently, and there may be caps on how much you can invest each year, depending on the option you choose. 
  • Look at alternative IRA options. There are now IRAs that go beyond traditional stocks and bonds. IRAs investing in REITs, crypto, collectibles, and precious metals are all unique alternative asset options you may want to consider. 

If you’re unsure about tax implications for your retirement accounts, be sure to discuss your concerns with a financial advisor before making any moves with your money.

Set Financial Goals and Benchmarks Before You Invest

Retirement isn’t the only goal for couples, so your financial plans should reflect each of the relationship milestones and benchmarks you’ll see together. Your investment strategy should take into account purchasing a new home, caring for children if they’re in your future, planning for travel, and any other important steps you want to take as a couple. Set financial goals for each step in your relationship, and then look at investments that align with your timeline. For example, a REIT that pays out distributions after 5 years can fit into different timelines easily. CD ladders can be set up to coincide with events that are 1, 5, and even 10 years down the line. While no investments are guaranteed, creating a portfolio with a combination of holdings can help you plan for nearly every phase of your life together. 

Not all couples want to invest their money together, and that’s okay. You don’t have to combine your money into investment accounts to create a financial plan before you invest. Even if you both decide to invest independently, be sure to communicate with each other regularly about your finances so you always know where you stand with relation to your investment goals. Whether you invest in alternative assets like REITs or more traditional mutual funds and CDs, creating a plan together can make it easier to live out the dreams you envision for your future together.

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