As a youngster during the Great Depression, I remember a popular complaint of the time: “When poverty comes through the door, love flies out the window.” For many couples, the financial strain was more than the relationship could bear. With the nation’s economy again in similar straits, financial partnership is crucial, with each partner working together. Here are five suggestions to avoid the trauma.
1. Beware of interest. The single greatest economic threat to most Americans is payment of interest. The credit card, successfully foisted upon us by our financial institutions now has this nation by its collective neck, with interest rates exceeding 20% not uncommon. You must break this hold if you are ever to achieve financial independence. The solution is simple; pay your monthly credit card bill in full before any interest is charged. If you cannot bring yourself to do this, then cut up the card with scissors and adjust your life accordingly.
2. Harness the horseless carriage. The motor vehicle constitutes the average American’s single most important fixation. Thanks to the industry’s forceful marketing, many persons stay locked into auto debt for a lifetime. Resolving this problem is easily accomplished. Whatever your vehicle, it should be paid for in full. If this means that you and your mate must drive a 1984 Toyota Corolla, so be it. Later, when your fortune and future are secure, you may enjoy brand new matching Rolls Royces’ if you choose—but only as an all-cash acquisition.
3. Buy wisely. The products we acquire define what is important to us. Unfortunately, many of the choices we make are based more on illusion than reality. Whether your choice of lipstick is the $25 Chanel selection from Macy’s, the $7.50 Max Factor brand from Rite Aid Drug, or the $1.39 Wet ‘n Wild tube from Target, recognize that the essential ingredients are the same. The difference is packaging, promotion and mystique, which is what salesmanship is all about. If the market manipulators create your preferences, you may expect to pay a premium for everything you buy. There is one good rule to follow if you want to stretch your dollars: The more aggressively a product is advertised and promoted, the greater your resolve to avoid it.
4. Avoid the gaming table. There is nothing that the racetrack, the poker parlor or the lottery will ever do to promote family prosperity. Except for its entertainment value, no good comes from wagering your hard-earned dollars in a system where the house has the advantage. Many otherwise ideal relationships have ended over the inability of one of the partners to reign in the urge to gamble. It is a practice you must resist.
5. Make your money grow. The adage that time is money is accurate; it depicts the earning power of money astutely invested. Let me suggest a method. Open a self-directed brokerage IRA account—preferably a Roth if you’re eligible—in which you accumulate certificates of deposit, treasury notes and high-grade corporate bonds. Begin at an early age and pursue this program systematically through your working years. An annual contribution of only $4,000 invested at 7.5%, compounded semiannually over the 40-year period from ages 25 to 65, results in more than a $1 million. It’s the compound interest that brings this about, a phenomenon as close to magic as you’ll ever encounter. Your golden years together will be far more golden when you can smile all the way to the bank.
Al Jacobs has been a professional investor for nearly four decades, with articles that appear regularly in a variety of online and print publications. His financial column, “On the Money Trail,” can be viewed at www.onthemoneytrail.com.
Steve Cooper is the co-founder and editor-in-chief of Hitched. You can follow him on Twitter at @hitchedmedia.
