We saved over $1M for retirement in our 30s by working together on our finances.
According to a GOBankingRates retirement planning survey, 36% of Americans have less than $10,000 saved and only a little more than 5% have more than $500,000.
After five years of careful planning, many money arguments between us and paying down $300,000 of debt, my husband and I saved enough for retirement by the time I was age 37 and he turned 40.
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This means that we have enough money invested in our retirement funds, even if we don’t add any more money, according to the the FIRE (financial independence, retire early) movement.
Here are three specific financial moves we made as a dual income, no kids (DINK) household to reach more than $1 million in retirement investments several years before we originally planned.
Allocate One Income Toward The Present And The Other Toward the Future
When you have two incomes to rely on versus one, it’s easy to let money leak out in the form of lifestyle creep — increasing spending on nonessential expenses or feeling like what used to be sufficient for living expenses is no longer enough.
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My husband and I certainly were guilty of lifestyle creep as we grew our incomes over the years — buying two cars when one used to be enough, spending more on food and buying a home that was much bigger than we could reasonably maintain.
In 2016, when we decided to start aggressively paying down $300,000 of debt including student loans and mortgages, we agreed to allocate new purposes for our individual incomes.
We mentally shifted his income as the limit for what we could spend on our daily expenses. And we allocated my income toward growing our net worth — paying down debt, setting aside emergency savings and investing into individual retirement accounts.
Essentially, we learned how to live within the means of one income, and it removed the emotional barrier of feeling like we had to administratively combine all of our finances at first.
And though we made sure to consult each other on bigger financial decisions, realigning our incomes also gave us clear lanes of who was responsible for line items within our budget. He was in charge of bills like utilities, insurances and home repairs, and I focused on payments towards student loans and IRAs.
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Diversify Investments Across All Accounts Rather Than Each Individually
Diversification is an investing strategy used to manage risk, not necessarily to maximize returns. Rather than concentrate money in a certain type of asset, you can diversify investments across a range of different assets.
When I first started learning about investing as an individual, I learned it was important to diversify in terms of asset class, companies and industries. My husband also started investing before we were married and had a similar mindset.
But knowing we planned to retire together, after we looked across all our individual accounts for 401(k)s, traditional IRAs, Roth IRAs and brokerage accounts, we found that we had actually overdiversified by:
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- duplicating similar investments in different accounts;
- paying higher fees for investments where lower expenses were available; and
- investing in mutual funds that we didn’t fully understand.
Once we put all our investment accounts side by side, we were able to consolidate old 401(k)s from previous employers, diversify outside of just stocks within the financial and technology industries and lower our overall fees by picking the best options between what was available in his 401(k) and mine.
We also realized that because we both were heavily concentrated in stocks, we opened up an account to invest in a mutual interest that wasn’t in either of our portfolios — real estate.
Work Together From A Mutual Set Of Facts, Not Individual Emotions
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Before I became a financial coach, I strongly believed married couples should absolutely combine all their financial accounts. But after coaching a diverse range of people, I learned there are valid reasons to keep separate accounts even if you are married.
When my husband and I decided to keep all our financial accounts — cash, debts, investments and properties in one view using a tool like Mint, the focus became less about what was happening in any particular account. How would we move our joint net worth forward as a team?
Having an accurate dashboard for making our financial decisions together, our conversations became less emotional with statements like, “You always do this” to “Our trends show that our spending looks like this.”
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Regardless of keeping separate checking accounts or credit cards, you can still provide visibility into one another’s accounts without necessarily exerting unsolicited opinions or judgments over how your partner might choose to spend.
Employing these three strategies took us years to learn and eventually convert into habits. If you and your partner are not on the same page right away, give yourselves a calendar year before you give up.
With both of you likely operating from years of different financial backgrounds, beliefs and styles, it’s only natural that it will take several months of practice to shift your financial plan toward retiring early together.
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