Financial issues are often cited as a leading cause of divorce in the U.S., which means it likely makes sense for young couples to take a long, hard look at how money and marriage can work together. Many newly married couples make common money mistakes at first because they don’t think about and plan for important financial decisions.
After you’ve said “I do” to your significant other, take certain steps to avoid these money mistakes newlyweds make. Doing so may bring you closer to achieving your financial goals.
Not getting joint bank accounts
It’s natural to feel like the money you earn and put into your savings account or checking account is yours. You may have been living like this for many years. But when you get married, you enter into a partnership with your spouse. You share things and work together to achieve common goals.
But if you don’t share your money, it can be difficult to share a feeling of cohesion and stay on the same page with your finances. Getting a joint account, such as a joint savings account, makes a lot of sense for married couples. You both get to contribute, if applicable, to your shared funds and it could make it easier for both of you to track your finances.
Use the best savings accounts to help boost your savings. These accounts typically outperform traditional savings accounts when it comes to how much interest you can earn over time.
Avoiding tackling your pre-existing debt
If either party enters a marriage with pre-existing debt, it may be up to the both of you to work on erasing that debt together. This could involve dealing with student loans, credit card debt, or other types of debt. You may have promised to take care of each other, which includes being there for each other in a financial sense.
Becoming debt-free is important for anyone. But learning how to manage your money as a married couple can help strengthen your relationship and financial knowledge. In contrast, letting your spouse tackle their pre-existing debt without offering your support probably won’t foster a feeling of mutual understanding and kindness.
Putting retirement savings on the back burner
Newly married couples often have a million things on their minds, but retirement savings likely isn’t one of them. When you’re worried about buying a house, starting a family, or paying for your honeymoon, what time is left over to worry about retirement?
Unfortunately, it’s a good thing to think about sooner rather than later. Retirement planning doesn’t automatically happen as you get older, and it can get more difficult to save up the retirement funds you want the longer you wait.
Learn how to save for retirement today instead of putting it off for tomorrow.
Not establishing a budget
Budgeting is essential if you’re newly married and working to achieve financial goals together. Creating your household budget typically consists of reviewing your monthly income, monthly expenses, and spending habits. Once you know what you have coming in and what’s going out of your budget, it’s easier to find areas where you can adjust things.
This can include cutting down on expenses, especially if you’re trying to achieve certain savings goals. You may not be able to remove necessary expenses, such as groceries, but figuring out ways to reduce your overall expenses can help you budget more efficiently. This is possible on your own, but using budgeting apps can help streamline the process
Not saving for a house
The price of a home will vary depending on where you live and what you’re looking for. But no matter what, it’s unlikely to be cheap. In many cases, you’re looking at hundreds of thousands of dollars. Of course, if you’re saving up for only the down payment, it will be a lot less.
Let’s say you want a $250,000 home. It’s often recommended that you pay at least 20% as a down payment, which would be $50,000. If you want to buy a house in five years, you would need to save $10,000 per year or about $833 per month for five years. However, these calculations work only if you start saving right now.
In addition, it could help if you improve your credit score so you can qualify for loans from the best mortgage lenders.
Forgetting the costs of starting a family
If you’re planning on having a family down the road, your finances should be top of mind. But knowing how to save money before you have a family is key. This could mean cutting down on costs in a variety of ways and places, such as your monthly utility or cable bills, groceries, or your cellphone.
If you can put aside money now into savings, you could potentially have a lot more financial stability when you add to your family. Consider the many costs associated with having kids, such as diapers, clothes, toys, food, entertainment, and much more. Now calculate how much that could all be and you’ll be in the range of what you need to start saving.
Putting off saving for college
In addition to providing life’s necessities, you might also want to give your kids the opportunity to get a college education. It may seem like it’s far enough away to hold off on planning for it, but making the right moves now could potentially help you build a college fund over time.
When you first get married, you might not be able to afford much. So putting tens of thousands of dollars into a bank account for your kid’s future college education probably won’t be possible — at least not right away. But if you learn to budget and put away a little money at a time, your goal becomes more attainable.
For example, $100 a month for 18 years is $21,600. That’s nothing to sneeze at. But you can adjust the amount of money you save each month, especially if your income increases.
Forgetting about life insurance coverage
Life insurance probably wasn’t more than a passing thought when you were single. But getting married and potentially starting a family means there are more people in your life to worry about than just yourself.
The purpose of life insurance is to make sure the people who depend on you financially will be taken care of if you die. The money from life insurance can help cover lost income, pay for funeral expenses, and give your loved ones time to grieve instead of having to worry about finances.
See our list of the best life insurance companies to find a policy that fits your situation. Keep in mind that life insurance is typically more affordable when you’re young.
Not drafting a will
Drafting a will has a similar purpose to getting life insurance: You want to make sure everything is taken care of financially if you die. However, a will is more about who gets what instead of a beneficiary receiving a certain amount of money from a death benefit.
This is important because the state you reside in will decide what happens to your money, property, and assets if you don’t have a legally binding document (aka, a will) to dictate your wishes. If you want everything divided according to your wishes, get a will drafted up and set in place.
Avoiding honest conversations about money
Money can be a hot topic, and it’s a subject some married couples don’t want to bring up. But avoiding honest conversations about how you’re going to handle financial decisions in your marriage isn’t a solution that’s likely to pay off.
It might be difficult to approach, but sit down with your spouse and discuss your finances. Make sure it’s an honest but productive conversation. The purpose is to help each other set goals and then encourage each other to reach them.
Overspending on home furnishings
Starting a new life together may coincide with moving into a new place or starting to live together. This can prompt a desire to make changes in your home, like upgrading your furniture and home decor. Although it sounds exciting, and you might be riding the excitement of getting married and going on a honeymoon, home furnishings can be expensive.
Purchases for new couches, tables, paint, chairs, and other home decor items will quickly add up. It’s tempting to have everything be brand new and to make big, dramatic changes after such a huge life event. But spending money on unnecessary things may not create the best financial situation to start off your marriage.
Instead of spending money, focus on budgeting and saving your money.
Not seeking financial help
Learning how to manage your money doesn’t happen overnight. And sometimes it makes sense to seek additional help. If you feel like you could use some financial guidance, work with a financial advisor to help you establish a clear path.
Financial advisors can vary depending on their specialty. Before going with the first financial advisor you see, be sure they have the knowledge and experience to help with your unique situation. This could include experience with tax planning, investment management, budgeting, getting out of debt, and more.
It may be an investment to hire a financial advisor or planner, but if it teaches you important financial lessons you can use for the rest of your life, it could be worth it.
The bottom line
Everyone makes mistakes, especially when you’re adjusting to new circumstances or going through a learning process. But that doesn’t mean you can’t prepare yourself ahead of time to make as few mistakes as possible. And that includes learning how to manage your money as a newly married couple.
Take money tension out of your relationship by setting and working toward financial goals together. This will help you increase your overall financial awareness and keep you both on the same page when it comes to shared money. Not to mention, you’re likely to have increased financial stability years down the road if you work to avoid money mistakes now.