Newlyweds should make it for richer and not for poorer
As originally appeared in The Jerusalem Post on August 16, 2024.
When planning your wedding you make so many decisions: ‘Do I want this fork or that fork?’ But in the end people aren’t going to remember what napkin holder you choose. -Lara Stone
A few days ago, I was sitting around the living room with the children and the topic of men wearing wedding rings came up. I was quickly criticized for not wearing one and the kids chalked it up to me being a tad bit ‘old fashioned’. Then in a very unusual show of unity and fervor they all proclaimed how important it is and that their spouses or they themselves will wear one. They also kept pressuring me to wear one. I was so happy that they all agreed on something with such passion that I didn’t mind the personal criticism!
On the heels of the conversation, I decided to Google the topic. My first attempt netted me page after page of jewelry stores pitching male wedding rings and bands. Needless to say, that since then, as is the way with Google, I have been inundated with advertisements about wedding rings!
Since we are now after the 3 weeks and Tisha B’av wedding season is back in full swing. In fact, I have 2 nephews getting married in the next 3 weeks and I figured I would give a few useful tips for the newly married.
Plan for Disaster
Don’t mean to rain on anyone’s parade but how often do we hear appeals to help support a family where the husband passed away at a young age, and the family is totally broke. While this tragedy pulls at our heartstrings, in many cases it can be avoided. There is nothing farther from a new couple’s mind than planning for the worst-case scenario. With their minds set on building a new home, no one wants to think about the potential death of one of the spouses. Talking about insurance isn’t very exciting, but not talking about it is very dangerous and could lead to bankruptcy. It’s dangerous because if you don’t have the right kind of coverage when disaster strikes, you can be led into financial ruin.
Life insurance
The only real reason that you need life insurance is if someone is dependent on the income that you bring home. Children, a spouse, or even an elderly parent, if they depend on you then you owe it to them to take out a policy. The question I hear frequently regards how large a policy to take. While there are no hard and fast rules, I like to use the rule of twenty. This says that you take your annual expenses and multiply them by 20 years. For example, if your annual expenses are $30,000, multiply that by 20 and you get to $600,000. So, you would get a life insurance policy that would pay a $600,000 benefit. The reason I like this rule is that you can set up an investment portfolio that will potentially enable you to generate the income needed without too much capital risk.
How Much to Spend on Rent or Mortgage
Another question commonly asked regards how much to spend on either rent or a mortgage. I often see young couples swimming in debt because they are living in an apartment way above their means. A general rule is to allocate up to 30% of your take-home income to rent or mortgage payments, with the ability to go up to 35 percent. As rent or mortgage payments account for the highest percentage of expenses for a new couple, if you go ahead and rent an apartment that you allocate a high percentage of your income to, there won’t be anything left for other basic needs, i.e. food, utilities, transportation.
Stay Away from the Car
It all starts after the wedding. The new couple has a few weeks off and they decide to travel around Israel, and the easiest way is by renting a car. They have a blast with the car and become addicted to it. Then real-life sets in and the couples go back to either walking or taking the bus. A few months later they have a wedding out of town, and they must take 2 buses to get to the wedding, it’s raining outside, and they get soaked. They fondly remember the convenience of having that rental car, and they decide they are going to buy a new car. The only problem is they don’t have the 100,000NIS, so they take a loan. Ultimately, they are not making enough money to pay off the loan, and they sink further and further into debt.
Take Stock of Your Future
Sit down with your new spouse and make a list of your short- and long-term goals. Understand your expenses and if you can cover them. Then it’s best to sit down with an advisor to help map out a course of action to enable you to reach those goals. Buy living within your means and planning for the future, your chances of building a financially stable home will greatly improve.
Mazel tov!
The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates.
Aaron Katsman is the author of Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing (McGraw-Hill), and is a licensed financial professional both in the United States and Israel, and helps people who open investment accounts in the United States. Securities are offered through Portfolio Resources Group, Inc. (www.prginc.net). Member FINRA, SIPC, MSRB, SIFMA, FSI. For more information, call (02) 624-0995 visit www.aaronkatsman.com or email aaron@lighthousecapital.co.il.
