Portfolio Management March 8, 2015

    Anyone in a relationship knows there are some things that are hard to talk about, no matter how long you've been together. Yet the most difficult conversations are often important ones. One recent survey1 found that more than 40% of couples waited until after they tied the knot before discussing how they would handle big financial decisions around savings, debt and investments.

    Money is an intimate topic, so tread carefully. Financial planning should be an ongoing discussion for every couple in a long-term relationship. Here's how to kick off the conversation.

    Discuss your spending habits. When you sit down to talk about your finances, try defining the lifestyle you want to share in the future. Does it include a house with a yard, a city apartment, foreign travel, season tickets to the opera or local sporting events? Once you've discussed what you'd like to do together, decide how much you'll need to save to get there.

    Talk about debt. Perhaps you're carrying a loan from your undergraduate degree, or you're considering graduate school or a home purchase. These choices can add to your overall level of debt as a couple, and might have a major impact on how much money you'll need to save to reach your shared goals. Whether you're entering the relationship with a big credit card balance or looking to take on new debt for a student loan or mortgage, discuss how you plan to pay it off. You should be honest about the sacrifices you're comfortable with making in order to do so.

    Identify your accounts. A big part of marriage is pooling your financial resources. Break down a list of all of the household bills and decide how you'll share them. If you choose to set up a joint bank account, you can select automatic bill payments to make sure the power isn't cut off when you're both too swamped with work to keep up. If you retain separate accounts, specify how you're splitting the bills and how much money you're each setting aside for the future.

    Stay on top of savings. As life changes, your portfolio should change with you. An automated investment advisory service like Schwab Intelligent Portfolios™ can help simplify your planning for the tasks ahead—from saving to buy your first home next year to planning college educations for your children 15 years from now. This can help you prepare for short-term and long-term goals. As you create portfolios for each objective, the Investor Profile Questionnaire will help you identify your time horizon and an investing approach you're comfortable with, to help you stay on track for each goal.

    Understand how you each feel about market risk. Even if you agree on the big picture, you may find you have different investing styles. Filling out the Investor Profile Questionnaire together may help you identify how much appetite for risk each of you has and guide you to appropriate portfolios. For example, if you're a risk taker with a long while to go before retirement, your own IRA might be directed into an aggressive asset allocation. On the other hand, if your spouse is prone to pulling money out of the markets after a downturn, then that IRA may be guided toward a more conservative portfolio with a smaller allocation to stocks and a larger one to bonds. Being honest about how you feel about market risk when completing the questionnaire can be an important factor in finding the portfolio best suited to help you reach your goals. Research shows that staying the course in choppy markets can be crucial to long-term portfolio returns.

    Plan for your shared future, together

    Once you've agreed on a financial game plan, outline your goals in chronological order. Perhaps you would like to travel extensively together before turning your attention toward settling down and starting a family. Identifying the times when you'll need money for near-term and long-term goals will help you organize your finances so you can be comfortable with the risk-and-reward profile for each time frame. Schwab Intelligent Portfolios may be able to further help you with automated tax-loss harvesting, a feature available for accounts worth at least $50,000. If you decide to go this route, it's a good idea to link your Schwab Intelligent Portfolios accounts to maximize your combined savings on capital gains taxes.

    Whatever your long-term goals, it may be wise to sit down together for a money check-in every month, or even more frequently. Money should not be treated as a special topic that you only touch on when there's a problem. It should be something you're talking about on a regular basis.


    1. http://www.countryfinancialsecurityblog.com/cfsi-full-may-2013/

    Tax-loss harvesting is available for clients with invested assets of $50,000 or more in their Schwab Intelligent Portfolios™ account. Clients must enroll to receive this service.

    Diversification and rebalancing strategies do not ensure a profit and do not protect against losses in declining markets.

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