Basic financial planning is important for all couples and is often more complicated for age gap couples planning marriage and also for those who are not married. As you may know, finances are one of the top reasons leading to relation disagreements and a break-up.
Age Gap Financial Considerations
Specifically, in age gap relationships, there may be greater room for financial problems in that:
• large income disparities as the younger person may still be in school or may be at the beginning of their career,
• the older person may be living off retirement, may have expenses related to a previous marriage such as spousal support (alimony) or may be supporting children or elderly parents.
Since this is a big topic, we’ve broken it into two blog posts for age gap couples.
This blog post is for a dating couple who perhaps is in a long-term relationship, but is not married. The next blog post is for those planning to marry or already married. Both sections should be helpful and we hope you find it useful.
Basics topics can include: budgeting, earnings, debt management, judgements (leans or commitments including alimony and child support) savings, expenses, and insurance. All of these should be addressed especially when living together.
Budgeting for income & expenses
- Determine the division of expenses to decide who is going to pay for what including how is the rent or mortgage going to be paid.
- Plan to spend within your means and avoid debt, especially high interest cost credit card debt (spending less than what you earn is best).
- Set up a simple budget spreadsheet (many are available for free on the internet).
- Track your expenses versus you budgeted amount and adjust your spending or your amount budgeted and be realistic.
50/30/20 rule for budgeting
Another budgeting technique is the 50/30/20 rule. It involves dividing your monthly income into three ”buckets”:
• 50% (or less) goes to necessities such as housing, student loans and utilities. These are expenses you have to pay every month.
• 30% (or less) goes to nice-to-haves, such as entertainment, hobbies and travel.
• 20% (or more, if possible) goes toward savings and paying down debt.
- Retirement should be a MAJOR goal in your financial plan. Make an effort to save 15% to 20% of your income for retirement.
- An emergency fund that can cover 3-9 months of your living expenses is also vital. What if you lose your job or need a car repair or an unexpected housing expense?
The three most basic insurance types are:
• Health insurance, hopefully available thru you employer. If not, check to see what coverage is available through a Government sponsored plan at low cost.
• Life insurance if your committed partner (spouse?) or any dependent children are in your life.
• Long-term health insurance, if available at a cost you can afford.
Episode 7 of Age Gap Love Story is devoted to this topic of basic financial planning. Listen to it here, or watch it on our YouTube channel.