Q: My fiancé and I have a dilemma and have agreed to do whatever you recommend to resolve it. We have a mortgage but no other obligations and easily manage our monthly expenses. We pay cash for vacations and even have a “rainy day” fund for big things like car or roof repairs. We get along great, except for one thing: every month I get a haircut at an upscale salon, which costs $125 plus tax and tip; he gets a regular haircut and beard trim at the hairdresser for only $40. He thinks I should find a cheaper hairdresser because he is very stressed that we haven’t started saving for retirement yet. But I think we’re doing really well compared to our friends who have student loans and credit card debt and don’t own homes. What do you suggest to keep the peace in the house?
A: Bravo! The two of you have done a really good job of balancing your lifestyle with your consumer debt. This mutual decision is the first step to financial success.
Unfortunately, couples break up more because of money problems than because of lack of love. So let’s solve this lingering financial problem to ease the strain on your relationship. And you will find that this solution works at any price point.
The one important thing you didn’t mention – and the No. 1 determinant in my recommendation – is your age.
If you haven’t started building retirement savings yet, the older you are, the bigger the task ahead. The sooner you start saving, the less money you’ll need to set aside because the funds have more time to compound and grow.
Here’s my retirement savings plan for every age. This consistent savings strategy can inspire confidence in your financial future and is likely to reassure your fiancé that you’re on the right financial path, easing his concerns about your monthly salon visit or other expenses and removing this thorn in your relationship:
In your 20s, you should save 10 percent of total pre-tax income for retirement. For example, if you and your fiancé are both 25 years old and earn $100,000 a year together, you should save $10,000 — or about $830 a month.
However, older couples who have not yet started saving for retirement will need to save a larger percentage of their income to make up for lost time.
So a couple in their 30s, already a decade behind early savers, would need to save 15 percent of their combined gross income to create that retirement.
Likewise, couples in their 40s or 50s should start saving 20 and 30 percent of their income, respectively. The percentage increases more as retirement approaches. (As you might guess, a couple in their 60s with no savings could be in trouble, with fewer financial choices when they retire.)
Using my savings plan and based on your age, you and your fiancée can determine what percentage you should save. While none of us can go back in time, today – no matter your age – you can definitely start with my savings plan to give you the greatest chance of financial success when you retire.
After implementation, if you find that you still have excess money available, you can spend that money on – what I will call – luxury items and enjoy them without guilt or stress, because you can rest assured that you have also been responsible for your pension savings.
Your betrothed may even feel like he can splurge on a luxury without risking hindering your financial future.
Soon you and your fiancé will be on the same page about your retirement savings plan and never argue about money again – and that’s a luxurious place to be!
Thie Convery, RFP, CFP, CIM, FMA, FCSI, is a wealth advisor in Dundas and balances a few luxury goods with her monthly retirement savings. Her column appears biweekly in The Hamilton Spectator. Thie invites your questions at TheSpecMoney@gmail.com or by visiting ConveryWealth.com.
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