Don’t Get Caught Making These 8 Newlywed Money Mistakes

Good. Nobody is perfect. We all have some bad money clothes. A fondness for shoes, loans to friends who never make the payments, a credit card bill that has been unpaid for too long. As you join their financial lives, acknowledging your money mistakes is absolutely imperative so that you can avoid major mix-ups later on. A study funded by Smart Money magazine and Redbook found that more than 70 percent of couples talked to their partner about money at least once a week. These are the main rules of what NOT to do.

1. Don’t keep money secret

The most heated arguments arise when you have tried to hide financial infidelity. Or at least that’s how your spouse sees it. Sometimes it’s just a difference in attitude, background, and expectations. Most people have been away from their parents and have earned income for several years before marriage without being accountable to anyone. “Whoa! Didn’t I tell you my credit score was below 600?” It’s not something your spouse wants to find out after he’s started shopping for a home loan. So he spends time talking about his debts, his past bad purchases, and his financial weaknesses. Together as a team they will be able to overcome them and become stronger as a couple.

2. Do not stop making a spending plan

Let’s be honest; a budget is too tedious and limiting. Think of it more like a spending plan where you decide what your spending priorities will be and how they align with your income goals and expectations. You will be combining two clothes to spend and two clothes to save in a single plan. Write down what your income is likely to be; conservatively. Don’t count that raise until it shows up in your paycheck. Write down the bills that MUST be paid every month, including the prorated portion of those that are paid only once or twice a year. Don’t forget debt payments, savings, and cash at ATMs. Lastly, try to estimate things that seem to go up and down every month, like food, clothing, restaurants, and utility bills.

Although there is usually never any ‘extra’ money, don’t overlook finding something to save on a monthly basis. Otherwise, emergencies will cut you short and become a major source of marital stress in the future. There are several good budgeting worksheets on the web, or give me a call and I’ll help you find one that suits your specific needs.

Laying out your spending plan is a great starting point for talking about short-term and long-term goals like vacations, your kids’ college, and ultimately, financial freedom. Then you will have the opportunity to build your relationship while talking about expenses.

3. Don’t push the money job on one person

Which one of you sits down and pays the bills? Who files the taxes? Who makes the investment decisions? While one of you may have better skills and be more interested in finances, it’s a mistake to hand the job over to just one of you. The result is that the second person loses perspective, the opportunity for a valuable education, and potential skills that can be used in a crisis. You may need to cover when the other is sick, traveling, or too busy at some point in the future. I am not advocating that every financial detail is a joint effort. It is more important to be included in the discussion of some details on a regular basis about day-to-day activities. Share passwords and account information regularly, and occasionally sit down with the person while bills are paid, the checkbook is balanced, and investments are researched. And finally, set aside time to regularly discuss your progress on your spending plan, debt, emergency funds, and investments at least once a month.

4. Don’t let your debt become a ball and chain

A Dunn & Bradstreet study found that people spend 12-18% more when using credit cards than when using cash. Your wedding alone probably gave you credit card debt before your marriage even began. The perfect wedding, the beautiful honeymoon and the new furniture needed to combine your lives can add up to many dollars to pay. Regardless of which spouse brought the debt into the marriage, paying it off and maintaining it is now a job for both of you. Create a plan to pay off the debt. Combine that into your monthly spending plan and review debt regularly.

If after a few months you find that your debt isn’t going down, try a few tricks. Take a vacation from your credit cards by putting them away in a drawer. Put all non-essential purchases on a 30-day wish list before you shop. Put a big red tag on your credit card to remind you of the evils of overspending. Get help. Anything. Before your debt becomes a big problem in your marriage.

5. Don’t let everything become a battlefield

Don’t worry about the little things. A few lattes a week won’t break the bank. Nor will getting your nails done monthly. It’s not one thing that will cause money to break down, it’s lifetime patterns. Buy brand cereal vs. No brand for a dollar less is not the issue, but if you must always buy name brands adding $50-$100 per month more to an otherwise stressed financial shortfall. Marriage is about communication and commitment. While it may be simpler to blame your spouse for their ‘expensive’ ways and start an argument over cereal, that won’t ultimately solve the problem. Discuss your spending plan and the little details that go into your regular money chat. Make a goal of finding the next $100 wasted a month together by making it a brainstorm, not a blame game.

6. Don’t forget emergencies

As a consumer and financial planner, I’ve found that most money surprises are powerfully bad. An unexpected medical expense, a car that breaks down, a leaky roof, other life events that always seem to require money to fix. So it’s vitally important that you set aside a little each month for the unexpected. Even if you can only start with a little, just start. If you don’t have three months of living expenses set aside (currently considered the minimum necessary), start with a smaller goal. Start with $1,000 as a goal. Then increase it to $1,500. Don’t fall into the trap of waiting until your credit cards are paid off. Having cash for emergencies can help you break your reliance on credit cards.

7. Don’t automatically merge all your money

The Smart Money magazine study found that most couples (64 percent) merge all of their money into joint accounts when they get married. However, this is not always the best option for everyone. Having your own personal account with some money to splurge can help avoid fights over small expenses like lattes and haircuts. It’s okay to have a joint account from which household and family bills are paid if you both contribute proportionately from your paychecks. That will give you some control over your individual credit scores and ensure that you both maintain an individual credit history. Lastly, retirement accounts like IRAs, Roths, and 401(k)s must be in the name of one person. Both of you should be saving for retirement, not just one. An exception would be temporarily when one of you has a 100% employer match and that is the total savings you can both afford right now.

8. Don’t ignore your credit score

Right now we are in a credit crunch caused by home mortgages given too freely in recent years. This has caused banks to go the other way, requiring better credit and higher down payments on home loans than in the past. A better credit rating can give you lower interest rates and lower monthly payments. If your score is low, it can take years of diligent and timely payments to improve. It’s best to start now before you’re ready to buy a home. Check your credit on the web by searching for “free annual credit report.”

wow. That’s a lot to talk about. Combining two lifestyles is part of the joy of marriage. Nobody is perfect; so take it easy and bring your financial soul to your soul mate.