Six Mistakes Couples Make With Their Finances
Whether you’ve been married twenty years or you’re fresh out of the chapel, discussing finances with your spouse can be a touchy subject. Studies have shown that money is the number one reason couples argue – and also one of the top reasons couples get divorced. This is why it is so important to be honest when you talk about your finances and spending habits – and you do need to talk about it. There are more than six mistakes couples make with their finances.
You’ve entered a partnership that is meant to last for the rest of your lives and maintaining it requires trust. That means no secret spending, no feeling like this is MY money and I’ll do whatever I want. This is OUR money. These are OUR decisions to make.
To ensure your discussion and decision-making runs smoothly, we’ve collected six mistakes couples make with their finances for you to learn from.
Merging Your Finances
The biggest question newlyweds face is whether they should merge everything into one joint account or maintain individual accounts with one joint account for household expenses. Everyone is different; if you have drastically opposing spending habits, maybe having the single joint account for household expenses and your own individual accounts is the best route for you. For some, the decision to merge finances into one unit is an easy one. They often feel like it is going to be on of the biggest mistakes they make or that that they are giving up their independence.
The one thing we would not recommend is having two separate accounts without any joint accounts at all. This is a mistake that couples make all of the time. This can lead to a lot of unwanted stress when trying to decide who is going to pay which bills for that month. Talk with your spouse, find out what each of you are comfortable with and go from there. Not talking to your spouse and finding out what makes them comfortable one of the most common mistakes people make in a relationship. Talking with your spouse is a great way to avoid these six mistakes couples make with their finances.
Dealing with Debt – Yours, Mine, or Ours?
One of the six mistakes couples make with their finances is dealing with their debt. You may have been fortunate enough to be debt-free and on a good financial path, but now you’ve married into debt. Are you responsible for your new spouse’s debt? It is a legitimate concern, with 33% of newlyweds having no idea how much their significant other was in debt before walking down the aisle.
There are some people on the side of a definite yes, they would help pay off their spouse’s debt if they had it. They feel their money is together; just part of being married. Others say that they would pay off their spouse’s debt if they had lost their job or weren’t financially able to pay it off themselves.
It is completely up to you and whether you feel that your spouse may need to learn a hard lesson in repaying their personal debt to ensure that it doesn’t get out of control. Whatever option you choose, just keep in mind that the sooner this debt is paid down the sooner you can hop on the debt-free happily ever after train.
Keeping Spending in Check
As I said before, NO secret spending this is one of the most common mistakes made! Keeping secrets (especially financial ones) can put you on a fast track to divorceville. This includes how much you spend gambling, or how much you really spent at that dinner. Sit down together and start working on a budget. Compile how much each of you bring in per month and try making a list of your expenses like your rent or mortgage, car payments, etc. Then add in things that are important to you, like your Amazon Prime membership or her monthly manicures.
Also, set a max that you can spend without discussing the purchase with your partner. For example, if you spend $75.00 on something, it might not be a big deal but if you’re going to spend $500.00 on something, maybe you should talk about it first.
Honesty is the best policy; don’t hide purchases and be completely honest about things that are important to you. “To do well, couples need transparency to know what is happening with all the money,” said Dan Moisand, certified financial planner at Moisand Fitzgerald Tamayo in Melbourne, Florida.
Designating a Money Manager
It’s not that uncommon for one person to be more in charge of paying the bills, checking the insurance coverage, or deciding how much you want to invest and where. They may be more inclined to suit this position, but leaving out your significant other can cause a multitude of problems.
If you and your partner aren’t both invested in how much you’re spending and where the money is going, someone can slip up on a dime. They didn’t realize that they only had a certain amount left in their budget for that month, and now you have even less available for groceries. Maybe whoever’s in charge didn’t want to be there and they’re steadily growing resentful at the other’s lack of initiative.
Take turns managing your finances and having regular conversations about it so everything is clear. It also means that one spouse isn’t bogged down with all the financial responsibility while the other keeps their feet up and laughs off the stress and frustration.
While no one really wants to think about bad things happening, the reality is that they do, and you don’t want to find yourself completely unprepared in a situation like that. Even if you have a great job, earn a comfortable living and don’t have to worry about debt, you should still prepare for the worst.
Building your emergency fund can be pretty easy. Work a payment to this account in your budget or set up an automatic payment from your primary account to ensure that every time you get paid, so does your emergency savings account. You’re asking for financial chaos if you don’t have some form of savings set aside for a rainy day, so working towards this goal should be a long-term priority.
If you can both agree on how much to invest and where you want it to be invested, then by all means, do your thing together. It’s all too common for couples to disagree on this subject, which is why most investment advisors recommend that you and your spouse have separate accounts for investing to avoid any glaring disagreements. This way you can both figure out your investing allowance and take risks or make safe decisions to your heart’s content.
If your spouse isn’t as knowledgeable with investing and stocks but you think it would be a great idea for your finances, sit down and go over the pros and cons together. You shouldn’t be making any big investing decisions without some input from your spouse. Treat them as a fully participating partner so they don’t feel excluded.