SMART COUPLES FINISH RICH: 9 STEPS TO CREATING A RICH FUTURE FOR YOU AND YOUR PARTNER, BY DAVID BACH
BOOK REVIEW

 

A summary of the advice offered by David in his book:

1. Its fairly normal for a couple to have different outlooks on finances.


Everyone comes from a different financial background, and with that, have probably come to value and spend money different than your partner. Bach states that its not the differences here that leads to problems with marriage, its the failure to address them. Its imperative to talk about each others financial expectations and be on the same page moving forward. It shouldn’t be taboo for a couple to discuss their financial situation, no matter how rocky it may be at the moment.

Take a moment to find out how much you know about your current financial situation as an individual and as a couple: What are your liabilities? What are your assets? What are your financial goals as an individual and as a couple?

2. Determine the true purpose of money in your life.


Bach states that money allows us three things: to be, to do, and to have.
Money allows people to live in a particular way that defines who they are; to take actions that help them create the kind of lives they think they want; and to accumulate things they think will bring them joy. If we spend too much time working on the last of these, we may find ourselves surrounded by things that no longer bring us much happiness.

Organize your finances.
Bach lays out an easy File Folder System to get all of your finances in order and in one place.

Automation is great, but it can be beneficial to consolidate all of your paperwork into one cabinet for easy access, for both yourself and your loved ones.

Bach advocates for a 12-section system:

– Tax Returns: Dating back even years.

– Retirement Accounts: Quarterly statements from your IRAs, 401ks and the sign-up package from your company retirement account.

– Social Security: Your benefits statements.

-Investment Accounts: All accounts that aren’t retirement accounts and include quarterly or annual statements.

– Savings and Checking Accounts: Where youd keep your monthly banking statements.

-Household Accounts: With subfolders for your house title, home improvements (keeping receipts for any home-improvements), and home mortgage, for all your mortgage statements. If you rent, place your lease in this section.

-Credit-Card Debt and Other Liabilities: Include monthly statements for credit cards and college loans, car loans, etc.
Insurance: Include policies and payments on health, life, car, homeowners, etc.

-Family Will or Trust
Childrens Accounts: including all pertinent info on college savings accounts and other investments for them

-Real Estate & Other Investments
Inventory Planner: Prepared by Bach is a worksheet, which includes a running total of your net worth.

Build your retirement basket.
Bach advocates for a 10% contribution of your pre-tax income each year towards your retirement accounts, at a minimum. He advocates 15%, citing a Fidelity study which observed that an average person became a millionaire when they saved an average of 14% of their income.

However, if you’re already struggling with your finances, 10% is a great place to start.

Build your security basket.
First and foremost, this includes getting your rainy-day funds in order. Things come up in life, such as losing a job or unexpected medical expenses. Bach advocates having a minimum of three months of expenses.

It can be up to 24 months of expenses. This doesn’t mean leaving it in a bank account that is only accruing .01% interest.

Build your dream basket.
Don’t forget that life is to be enjoyed! Money can give you the opportunity to carry out your dreams, whether that be acquiring new skills and education, traveling, or starting your own business. Bach recommends setting aside a minimum of 3% of your income towards achieving a dream of yours or your family.

If its a short-term dream you’re hoping to achieve, such as a family vacation or class you’d like to take, consider a more conservative investment like a money-market account. If you have a long-term dream of starting your own business or getting a second home across the country, consider more growth-oriented investments.

As a couple, determine who’s responsible for what.


Its important to maintain transparency as a couple, and both should know the household cash flow, and have a say as to where the money is going.

Bach recommends for both separate and joint accounts for a couple. Its important for each person to have some sense of privacy with how they spend their money and to also have a joint account for your security and dream baskets.

Bach advocates for reaching out for professional help from a trusted financial counselor or advisor. Its not a sign of weakness to seek help from a professional, but rather a strong step toward being comfortable with your financial situation.