The Money Plan for Couples: How to Build Wealth as a Team (Step-by-Step)

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0:35We picked up a couple of pieces recently. Some updated furniture and a few accent items. And everything showed up fast, was easy to put together, and just worked right away in our space. And what I like is that they have Wayfair Verified, where their team actually vets products so you know you're getting something solid no matter your budget. Wayday is the sale to shop, the best deals at home. We're talking up to 80 % off with fast and free shipping on everything. Head to Wayfair.com April 25th through the 27th to shop Wayday. That's W-A-Y-F-A-I-R.com. Wayfair, every style, every home. On this episode of the Personal Finance Podcast, how to manage money as a couple.

1:23what's up everybody and welcome to the personal finance podcast i'm your host andrew founder of mastermoney.co and today on the personal finance podcast we're going to dive into how to manage money as a couple if you guys have any questions make sure you join the master money newsletter by going to mastermoney.co slash newsletter. And don't forget to follow us on Apple Podcasts, Spotify, YouTube, or whatever podcast player you love listening to this podcast on. And if you want to help out the show, consider leaving a five-star rating and review on Apple Podcasts, Spotify, or your favorite podcast player.

1:59Cannot thank you guys enough for leaving those five-star ratings and reviews. They truly do mean the world to us. Now, today, we're going to be diving into how to manage money as a couple. And I am really excited to dive deeper into this because once you get your relationship right, when it comes to money, that will absolutely change your financial life over the course of the longterm. Why? Because the person that you marry actually has a dramatic impact on how much wealth you can build over time. If you both are not on the same page and one person is trying to build wealth while the other person is in this time or place where they want to spend more money on different values, you will never make progress with your finances.

2:38And so what I'm going to show you today is this episode is going to be slightly different because I'm going to give you the exact framework step-by-step of exactly what you need to do to make sure you get money aligned when you manage money as a couple. Now, this is a very cool system, and we taught this system inside Master Money Academy and got some incredible results from some of our members inside of there. So I'm going to give you some portions of this and the actionable portions of what we taught inside Master Money Academy. That's the cool thing about Master Money Academy is we dive deeper.

3:07We pick a topic every single month and we dive deeper into that topic and we do a master class to give you those frameworks so that you can go out and take action on it this. And so a lot of our students inside Master Money Academy love this. And so we're going to do this in three steps. First, we're going to build the dream and start actually having conversations around money. This is one of the most important areas that you need to make sure you do not skip is you need to build out your dream life and where you want to go. Everything when it comes to having conversations around money comes down to your why.

3:39Why are you actually pursuing this and why are you getting after this? Okay. Number two is we're going to build the system. How are you actually going to manage money together? How are you going to make sure that you both are on the same page? How are we going to have this system set up? We're going to talk about all those different things and answer all those different questions for you. Three, then we're going to talk about how you can let money supports your life so that you can go out and get exactly what you want in this life. So you can do what you want in this life and prioritize the things that you both love together.

4:07And so I'm going to talk through some of the challenges that a lot of you may go through when you are managing money as a couple or in a relationship. And we're going to dive deeper on how you can both get on the same page. Because guess what? You may not be on the same page right now. Maybe you have arguments about money. Maybe you're fighting a lot about money. Maybe you're both just really worried about your finances. I'm going to help you solve that today. This episode would cost you thousands and thousands of dollars if you went to some sort of financial therapist. And I'm going to show you exactly the plan today of step-by-step what you can do.

4:36So I would highly recommend out there to take some notes because this is going to be a framework that could change your relationship forever. We're going to take a quick break and then without further ado, let's get into it. All right, number one, and this is phase one, we're going to build out the dream. Now, this is the fun part when it comes to building wealth. This is the fun part when it comes to managing money with your finances. Now, what I highly recommend for most of you out there is do not make the mistakes I made. When we first got married, my wife and I decided to get our finances together.

5:07And guess what? One of the biggest things that I did, and I made the biggest mistake overall, is every single time that I saw something happening with our money, I first would pull out the spreadsheets. This is the wrong order to have a conversation about money, especially with your significant other. Don't start pulling out the spreadsheets. Don't start pulling out the budget. Don't start pulling out all the transactions on Amazon. We know you've got 15 Amazon boxes at your door. We know you go to Target all the time. We know you shop at Walmart. We know you spend a little bit too much at Allo.

5:38But at the same time, we want to make sure that instead, we are building and starting with the end in mind. So I want you to build this dream life together because guess what? Money is a tool. and money is the tool that is gonna get you anything you want in life. And if you do it together and you build this together, you both will become unstoppable as you get the ball rolling. So again, do not start with spreadsheets. Do not start with the numbers first and begin with the end in mind. Next, I want you to make sure that you're having a real conversation when you do this. I want you to have an open and honest conversation.

6:11I do not want you pointing fingers. I do not want you saying, you buy this, you buy this and you buy this and the other person comes back and does the same exact thing. Instead, I want you to make this fun. I want you to dream together. And you can even turn this into a fun weekend trip if you wanted to. If you want to turn this into a whole event because it is that important to you, go get away for two days. Go get a hotel and start to have these conversations because you are aligning and designing a life that you will be living for the rest of your life. So this is very, very important. Another thing I want to note is that you have one life, but a shared vision together.

6:43So individual goals are going to matter and you both are going to have very different goals, but I also want you to have some shared goals that you both agree on. Shared goals matter more. And so we're gonna have these individual goals. That's completely fine. But you also wanna make sure that you are agreeing in some of these other areas. And your overall goal when you're having these conversations is alignment. Your overall goal is not perfection. You're not gonna be perfect the first time around when you have these conversations, but you wanna try to get aligned and as aligned as possible. For a lot of folks, when you are arguing about money or if you're having issues around money, getting just aligned in some way, shape, perform on some of these areas is going to change your life forever.

7:20It's going to remove the stress from the relationship and some of that anxiety that you are probably feeling right now. Now, inside Master Money Academy, we gave our members something called a dream life worksheet, which helps them map out their dream life. And the cool thing about the dream life worksheet is it's going to map out and kind of be the basis for every single financial decision. And so you want to think through what is my dream life and exactly where do we want to get to? And so you go through step by step and ask each other questions. Well, what do we want to do in life? Where do we want to retire?

7:45Where do we want to be? How do we want to think about money? How do we want to manage our dollars? What do we want our kids to do? Do we want them to go to private school or public school? How do we want our life to look when it comes to managing money? I want you to think about the vacations you want to take every single year. I want you to think about both of your hobbies and how much you want to spend on those hobbies. Maybe you love going to Pilates class. For example, my wife loves going to Pilates classes. And so you have to figure out how to budget to make sure that can work. Pilates classes aren't cheap.

8:13And so instead, what we do is make sure we prioritize those because it brings her so much value. For me specifically, one of the things that I want to do over the course of the next couple of years is get better at golf. I've been playing golf for a long time. I have not gotten better whatsoever. In fact, I've most likely gotten worse. And so I want to go and find a golf coach that can help me through this process so that I can step by step, learn more, and build up a skill that I can use for the rest of my life. These are two separate goals, but two shared things that we both really enjoy. And so moving forward, we wanna make sure we prioritize some of those dollars for each individual person so that we can get the ball rolling.

8:49But we also wanna travel more with our family. We wanna spend more time with our family. And so we wanna prioritize dollars for travel going forward. We've thought about, hey, where do we wanna live in the future? What type of house do we wanna have? We've mapped out retirement. We've mapped out the thought process of that. But we've also mapped out the day-to-day, week-to-week, and month-to-month money management and how that's gonna work. And so we built our dream life by just going through this process and having a conversation and asking questions. Now, step two, once you do this, then you need to define your lifestyle cost.

9:19Your dream life is going to need a price tag and you're going to need to come up with how much you want to spend and how much you want to save in retirement or later on down the line. Maybe you both have agreed on one thing. You both want financial freedom. You don't want to work so much. You want to spend more time with your kids. You want to spend more time with your family. you wanna spend more time with your aging parents, and so you decided you want financial freedom. Well, that's a very real reason to do this. Or maybe you're just trying to think through what I need to do next. Well, we need to make this real.

9:47And so that is what defining our lifestyle cost is going to do. And so what you need to do is list your current annual spending right now. What is your burn rate? How much money are you burning every single year? And you need to figure out, okay, let's think through these expenses. And in the future, maybe we won't have things like childcare. here. Maybe we won't have as much commuting costs. Maybe we won't have things like work-related costs or we won't have a large house. Maybe we want to downgrade our house, get a smaller house, because there's not going to be so many people in the household.

10:16And your dream life could be, hey, I want to move out to a farm or I want to move out to the country. Maybe you want a little tiny beach house or a condo. Those are all great goals and great conversations to have. Then what we want to do is we want to add the new expenses into that. So maybe you want to travel more. Maybe you want to have more experiences and you want to have a budget so that you can have new experiences on a monthly basis. You also want to think through healthcare. Maybe you want to give more to causes you believe in. You feel like you're not doing enough for those causes that give you that burning desire in your heart, that give you that passion, that give you that reality of how life is going.

10:49Maybe you want to spend more on hobbies, just like I was talking about with the golf and the Pilates, or maybe you want to spend more going fishing. Maybe you want to buy a boat. So many different options out there, but you need to make sure that we think through exactly what this is going to cost, okay? And then I want you to go through all those numbers and try to guesstimate where you think your dream life is going to be. And I want you to have one annual number. So you know how much you spend now, but get as close as possible to that one annual number. This is going to be the number that represents life done well.

11:22What does life done well look like? L-D-W. What does life done well look like? I say W because that's how my grandmother used to say it. L-D-W. you. What does life done well look like? You need to figure out what that number is. Step three. Now let's talk about your freedom number because we need to turn this lifestyle into financial independence. Most people listening to this podcast, if you're not already financially free, and I know we have some listeners who have become financially free just from listening to this over the course of the last six years, but I want you to have this conversation and say, what is my freedom number?

11:55Now we talk about the freedom number a lot. We think about the freedom of number a lot. And in fact, if you are a wealth builder or anybody inside Master Money Academy, we talk about making sure that you are updating this number on a yearly basis. And so the freedom number is going to be that number that is your North Star. That is where you are going. That is your why. And so this is going to motivate you over time. Now, how do you find your freedom number? Let's do some quick and dirty math. Now, the 4 % rule is the rule that is just the baseline number, the conservative number that you can think about when it comes to how much you can draw down every single year in retirement.

12:28And so to reverse that number, we just use the 25X rule, meaning you figure out how much money you're gonna spend every single year, multiply that number by 25, and that is how much you need to have in investments in order to be able to be financially independent. Now, social security would come into play down the line and a bunch of other factors. If you have other income sources or pensions or anything else, those can also factor in and lower this number, lower your overall need. But the 25X rule is gonna be the quick and dirty back of the napkin math that you can use to go through this. So you have your freedom number.

12:59Now we need to choose our timeline. And so this is gonna be the timeframe where we figure out, okay, when do we want work to be optional? How far away is that going to be? And compare that to the age that we are today. Maybe you wanna retire at 55. Maybe you wanna retire at 50. Maybe you wanna retire in your 40s. Maybe you wanna be one of those outliers. And there are some of those outliers that listen to this podcast who have retired in their 30s. but figure out what that number is gonna be. Maybe you wanna work longer because you both love your jobs or one of you loves your job. And so you wanna work well into your 60s, maybe even your 70s.

13:33Or you never wanna retire and you just wanna keep your mind sharp. You wanna keep doing what you're doing, but just focus on taking some time away and reducing the amount of days that you're working. There are so many different options here, but I want you to think through your timeline and where you're gonna go because this is a very important thing. Now, if you don't know how much time this is going to take you, I highly recommend you using a compound interest calculator. You can go to calculator.net, for example, and utilize the compound interest calculator there, but just go in there and say, okay, I'm investing X amount of dollars every single month right now, and so I need to figure out how long this is gonna take me before I hit this freedom number.

14:08So how long is this process gonna take before I nail down that freedom number? Now, step five, the next thing we need to do is take inventory, meaning we need to know where we're starting from, and we need to understand understand how much we have on hand and calculate our net worth. So we need to know the scorecard. We need to know where we are. We need to know what we're doing. And so making sure you have your net worth calculated is very important. I'm going to link this down below in the show notes, but there is a tool called empower that is completely free and it helps you track your net worth.

14:37I highly encourage you to utilize that if you're not using some other tool right now, because empower is free and it will automatically track your net worth for you. And so it's a great tool for anybody out there that is looking for something like that to track their net worth, But your net worth is just your assets minus your liabilities. This is your financial scorecard and we wanna see our net worth increasing over time. And so your assets are gonna be things like cash, investments, retirement accounts, and your liabilities are gonna be things like your debt. So your mortgages, your student loans, credit cards, those types of things are what are gonna be the difference between your assets and your liabilities.

15:08And the outcome, when you start to calculate this, should be your net worth snapshot. That should be exactly where you land and you should see where your net worth is. If you're starting off from negative or you have a low net worth, that is okay because you can develop a plan to get yourselves out of this situation. If you're in a lot more debt than the assets that you currently have, you may have a negative net worth, but that again is okay. You can get out of that situation and you can figure out exactly where you are. Now, step six is I want you to define the gap, meaning I want you to stay conceptual here, no systems yet.

15:41We're gonna talk about systems in a second, but I want you to have a conversation about the gap. And I want you to compare your net worth number to your freedom number. I want you to think through, okay, well, right now we have a net worth of, let's just say it's $50 ,000 and your net worth is$50 ,000, but your freedom number, the number that you want to get to and then the amount of dollars that you want to have invested need to be$3 million, meaning you could draw down$120 ,000 per year if you have$3 million invested. And so how long is that going to take based on how much you have available to start investing every single year?

16:11We want to figure out what that is. And then we can say to ourselves, okay, well, if we want to get there faster. We need to make sure that we are taking action on some of these different items. So maybe we need to increase our income so we can invest more dollars. Maybe we need to decrease our spending so we can invest more dollars. Maybe we need to do a little bit of both so that we can get the ball rolling. Maybe one of the spouses wants to stay home with the kids for a little while, but maybe if they work two more years, you realize, oh wow, if you work two more years, we save your income, then we'll be able to retire 10 years faster.

16:44So there's a lot of different scenarios that you could look at a lot of different scenarios that you could consider when you're doing this. And this is why we have master money Academy to kind of show you some of these scenarios and you can ask me questions on that weekly basis. So it's a very powerful exercise that you and your spouse can be doing when you're having these conversations. But I want you dreaming in this phase still, I want you dreaming about your future so that you both start to smile ear from ear and really feel comfortable about this plan that you are both putting together. Because when you're both aligned and you're both in the same page, this is when you both are motivated.

17:15This is when you both can see, oh, this is why I'm doing this. This is why I want to run and push forward in order to accomplish this goal. A great analogy that I read in the book, The Compound Effect on this was, let's say, for example, there is two buildings. And in between those two buildings, there is a wooden beam that you have to walk across to get from building one to building two. Now, for most people out there, if I asked you to walk across that wooden beam across these two buildings, there's no sides, there's no roof, there's no handrail. Most of you would say no. Why? Because it's very risky.

17:46It's not worth the time and energy to do that. But what if your child was in building B and it was a burning building? Well, you would have a really big motivation to run across that beam and you would do it in an instant in order to save your child. That is your why. Your why is that burning building. Your why is to make sure that you are going to save your life, save your financial life by taking control of this and taking advantage of the overall process that we are talking through here. And so when you do this, all of a sudden you both are aligned on your why and you can both get attacking.

18:23And so I love the dream portion. I love dreaming about this because you can really think through and have conversations in very open conversations about what you want your life to look like. Guess what, guys? You can do anything you want in this life. You can design your life the way you want it to look. And that's what I want to show you because money is the tool that allows you to do it. It's not about the money. It's all about the life that you want and designing that life. Want more freedom and flexibility? Money is gonna help you get there. Wanna spend more time with your kids? Money is gonna help you get there.

18:53Wanna spend more time in your relationships so you can actually see each other every day? Money is gonna help you get there. And the only way to do this is to use money as a tool. You should be a user of money. You should not be a hoarder of money. You should be a user of money so that you can utilize it for the things that you want. So after you do this phase, this is phase one, you should know exactly what the life is that you want. And when you have these conversations, then you can move on to the next step. You should know what it costs. What is it gonna cost for us to get there? You should know the number that you're aiming for, meaning what is your retirement number?

19:28You should both should have that in your brain and you should understand why you wanna get there. And then you should understand the general path forward. Generally, what are we gonna be doing next? And we're gonna talk about exactly how to execute that because in phase two, we're gonna build the money system right after this. All right, so we started to plan out our dream life and now we're gonna build the money system and this is how our plan is actually going to run. This is how our plan is actually gonna happen and how we're gonna execute that plan and so this is very, very important. The thing and the way to do this is with systems.

20:01Now, why do systems matter? Because if you have a vision without a system, it's just gonna create stress and most of us out there, we may have this vision of what we want our life to look like, But if we have no system in place, it's never going to happen. It's never going to get executed. And it's never going to be actually achieved. Where you've seen me talk about this in the past. Habits are for suckers and systems are for winners. And systems are the way that you can get to exactly where you want to go. So step one, we're going to have a conversation about these systems. And we're going to talk about how to manage your money together as a team, as a couple.

20:32And we're going to dive deeper into this. So before tools, you got to decide the rules. And so when we look at this, we're going to figure out, one, what is our structure? Now, when it comes to managing money, you have a couple of different options here. Number one, you could fully combine your finances when you're married. And that is option one. Option two is you could have separate accounts plus shared household account that helps you manage those dollars so you can get your money automated. And then number three is you would have fully separate accounts with agreement responsibilities. Now, let me tell you right now, I'm gonna go through all three of these options and we're gonna have a conversation about this.

21:11We're gonna have an open and honest conversation about this because my preferred method and the method that I have done from day one is fully combined. Now, let me put a caveat on this. When I first got married with my wife, neither one of us had any money. We were both pretty broke. And so this was something where we didn't have the difference of like one of us had a million dollar net worth, the other person had a bunch of credit card debt. That is a situation where you want to start to have conversations around this. And there are ways to set up your structure and set up your accounts so you do not have to worry if you don't want to fully combine your money.