One of the biggest decisions newlyweds have to make is how to go about combining their bank accounts. This decision requires a lot of discussion around personal money habits and short- and long-term financial goals. Depending on the couple, this conversation may be short and sweet or it may be excruciatingly long and painful.
I hate to be the bearer of bad news, but this money discussion will not be your last. No, not even close. It is important that you regroup on a regular basis to discuss your budget, the progress of your goals and any circumstances that may divert your current financial path.
To give you a head start on your wonderful journey of navigating the world of finances as a newly married couple, here are some of the top financial mistakes that newlyweds make and how to avoid them.
Mistake #1: Have one person take control of the finances.
Why it's bad: Couples often divvy up household chores, so in theory, it makes sense to give one person the “chore” of paying the bills. However, this can leave the other person completely out of the loop when it comes to financial decisions that affect both people. Plus, if something were to happen to the person who is in charge of the finances, the other person must be ready and able to take over the financial responsibilities.
What you should do: It’s fine to give one person the responsibility of making sure the bills get paid – but both of you should be aware of bill due dates and account information. It’s also important to make sure that both of you are on the same page when it comes to your budget.
Mistake #2: Only have the “money talk” once.
Why it's bad: While it is essential to have that initial talk to establish your goals and budget, the difficult part is actually staying on track. It’s likely that the initial budget you create will not work as well in practice as it does on paper. It’s okay if your first budget ends up being impossible to follow. What’s not okay is doing nothing about it.
What you should do: Set up regular meetings with your spouse to discuss your finances. Since this isn’t exactly the most exciting topic to discuss, you can liven things up by doing it over a nice Sunday brunch, or any other activity you enjoy. I’d suggest setting up these dates at least once a month, at the beginning of the month, to discuss how well you were able to stick to last month’s budget, and to discuss any tweaks that should be made to this month’s budget. You should also discuss any large purchases that you plan on making that month. You may want to consider meeting again in the middle of the month to discuss your monthly progress.
Mistake #3: Refuse to compromise.
Why it’s bad: One of you is the spender, and the other is the saver. It’s good to have this balance, but one of you is likely to be more stubborn than the other. If one person is so stubborn that the other feels that they have no choice but to always give in, only one person wins.
What you should do: Both the spender and the saver should recognize that having this balance is a good thing, but that for most major financial decisions, you are going to have to meet somewhere in the middle. It can take some time, but you have to accept the fact that the financial habits which you have always lived by are going to have to change – and your spouse needs to accept that too.
Mistake #4: Fail to plan for worst case scenarios.
Why it’s bad: We never think something bad is going to happen, so it’s easy to tell yourself that putting money into an emergency fund can be put to better use somewhere else. But the fact is, unfortunate things are going to happen at some point or another, and if you aren’t financially prepared, your bad news just got much worse.
What you should do: Pay your “savings bill” first. If you have a large credit card bill one month, you should adjust your spending the next month, not your savings. It is a dangerous practice to pay for your overspending habits with your savings – doing so encourages you to continue to spend more than you had budgeted.
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