Avoid these common faux pas.
If you’re getting married, it’s critical to be on the same page as your partner when it comes to managing your finances. In addition to intertwining household bills and chores, you’ll also have to consider whether you’ll share a joint checking account, how you’ll file a joint tax return and other money matters. So, to avoid common disagreements about money and start your marriage off right, it’s crucial to ensure you share the same financial values and attitudes about spending, saving and debt. With that in mind, here are common financial blunders newlyweds make – and how to avoid them.
Ignoring differing financial attitudes and beliefs
You and your partner may think differently about budgeting and spending. The key is being open about your money mindset. “Often, newlywed couples tend to gloss over their differences in money matters and fail to establish clear expectations around money within the marriage. This is a great pitfall and can ultimately lead to trouble down the road,” says Gabrielle Hartley, a divorce attorney and owner of Hartley Law and Mediation in Northampton, Massachusetts. She is also the co-author of “Better Apart: The Radically Positive Way to Separate.” Share your perspective and talk about your goals, Hartley says. “It is super important that you communicate with one another about spending and saving, right upfront.”
Hiding financial secrets
Concealing a financial predicament from your partner can be particularly problematic, says Melissa Fradenburg, a wealth advisor with Lakeshore Financial Planning in Saint Clair Shores, Michigan. “Whether it’s a bad credit score, a large credit card balance or outstanding school loans, these things should be discussed prior to tying the knot,” Fradenburg says. “If you think your future spouse will no longer want to marry you over these secrets, it probably isn’t a relationship built to last anyway.” If you’re buried in debt, your spouse will find out sooner or later when you go through the process of buying a home or filing taxes. “It’s best to be open about your financial situation from the start,” she says.
Not having a future money plan
Aside from fixed monthly expenses, such as a mortgage, utilities, car payments and so on, you need to discuss how much you want to allocate for extra expenses, such as clothing and travel, Fradenburg suggests. Many couples have joint checking accounts, “but I recommend that couples keep some spending autonomy when combining their finances,” Fradenburg says. “Spending autonomy and money secrets are not the same thing. When you open a joint account or work through a household budget together, a newlywed couple should come up with an amount that they can each spend on miscellaneous items each month.” This can be accomplished by having individual credit cards or separate checking accounts as well as a joint checking account.
Neglecting to set a budget
Let’s face it: Most newlyweds would prefer not to think about money and budgeting. That said, Elijah Lopez, a financial advisor with Manske Wealth Management in Houston, suggests coming up with a monthly budget – and trying it out before tying the knot. At the very least, you should start saving money before the wedding, Lopez says. “If you’re planning on saving or spending a specific amount when you’re married, just start doing that a few months before the wedding. Then, if the plan is not working, you can talk about it in advance and make adjustments as needed.”
Forgetting to discuss your budget
You should review your household budget together at least once a month, Lopez says. “Many couples dread reviewing their budget, so I suggest doing something fun to lighten the mood. Have your budget review conversation over a glass of wine or a cup of coffee,” he says. Don’t just discuss numbers, but “talk about the big picture,” he adds. “Discuss how that monthly review is going to lead you to your bigger hopes and dreams.” It’s important to keep the conversation positive, he cautions. “Some couples turn their monthly budget discussions into a pecking war, and that is not the purpose of that discussion.”
Failing to create a system for getting bills paid
After you talk about your financial differences and decide how much you each have to spend as you wish, you must discuss logistics for getting bills paid. Will you have a joint account for the important bills and each a separate account for your extra income? Is one spouse responsible for making sure the bills are paid, or are you going to automate payments or share that responsibility together? While these are simple and straightforward money management steps, it’s important to discuss your saving habits and hatch a concrete plan to ensure bills are paid on time.
Being unprepared for the future – or a financial emergency
It’s critical to ensure each of your names are on your savings accounts, money markets and CDs, says Tiffany Welka, a financial advisor and accredited wealth management advisor and vice president at VFG Associates in Livonia, Michigan. Even if one spouse will pay the bills, ensure both partners have access to all of the financial accounts, Welka says. “Couples may want to add a beneficiary to these accounts as well, in case they pass away together,” Welka adds. While no newlywed wants to think about end-of-life affairs, you don’t want your loved ones going through the probate court process. It’s also a smart time to think about getting a life insurance policy and writing out a will.
Making big purchases early on
After blending your finances, it’s easy to be tempted to buy an expensive house or lavish items. But this approach can quickly backfire. David Pipp, co-author of the personal finance and frugal living blog LivingLowKey.com, says shortly after he got married, he and his wife, Cassie, decided it was time to buy new cars. “Without even thinking about it, we found ourselves in over $30,000 of debt,” Pipp says. “At the time, I was about three years into my military service and Cassie was a full-time student. We weren’t making a lot of money.” After about two years of careful budgeting, they paid off their debts. Still, it’s an important reminder to consider your long-term financial plans to avoid winding up in debt.