Don’t Let Money Ruin Your Marriage: Financial Advice for Newlyweds
As you’ve started your lives together, you and your partner have probably figured out that money makes you both a little crazy.
Spending habits, different financial goals, and learning the power struggle when your spouse makes more or less than you. These questions can add unnecessary strain to your marriage. Don’t let your financial differences ruin your relationship by using these simple tips:
Simply talking about your financial goals, habits, and concerns is a great place to start. Money gets complicated when two lives are joined together. And just like in your relationship, communication is key. Be willing and open to discuss your differences to come together and set goals.
Your partner looks at money differently than you do. To prioritize and set goals together, you need to hear what they have to say and consider their recommendations.
Create a Budget
Budgeting isn’t always fun, but it is a necessary evil in planning out your combined finances. Since there is no “right” way to budget, how you set it up is entirely up to you. Just make sure you are planning for long-term savings, short-term savings, and have designated spendings for living within your means of income. Setting up a budget is one of the hardest things a couple can do—consider seeking out professional help for this process.
Set Some Goals
This one might be obvious, but important to mention. Couples need both short and long-term goals.
Short-term goals are anything you would like to accomplish within two years or less. Things like travel, upgrading your apartment, having a kid, or buying a home. Consider setting up a separate saving account for each short-term goal to make allocating money to those funds easier.
Long-term planning is anything farther out than 2 years. Maybe you want to put your kids through private school or college, buy a vacation home, retire when you’re 50, or care for aging parents. This is where investing comes in. You’ll want your money to work harder for you since these goals are farther out.
Deal with Debt
According to the Federal Reserve’s Survey of Consumer Finances, the average American carries around $133,000 in debt. Most of us have it, nobody likes it. That being said, debt is an issue that demands to be dealt with. Talk with your spouse about your approach to debt and how you plan to pay it off. Some couples view any debt as household debt—meaning, if either person brought debt into the marriage, household funds are used to pay it off. Whichever method you decide on, here are some helpful guidelines:
- Pay off the highest interest debt first
- Pay off the smaller principals first – not focusing on interest (known as the snowball method)
- Refinancing could be an option
- Don’t forget about your other goals (emergency fund, home down payment, etc.)
- About 20% of your monthly income should be set aside for debt repayment
It’s important to approach investing with goals and a proper strategy. Investing just to invest, is gambling. Think about all your options and the amount of risk you can take based on your priorities. While saving for retirement is important, also keep in mind the other goals you are hoping to achieve. If you put all your money into one bucket, you’ll have nothing left for everything else. Budgeting will provide balance to your life.
Think About Credit
Your credit score is the key to your financial life. Good or bad credit can determine if a bank will extend you a loan, limit your choice on credit cards and interest rates, change the costs of insurance, impact the kind of apartment you can rent, and much more. Bad credit says a lot about how you handle your finances. Chances are, most businesses won’t take a risk on you.
Don’t forget about the perks of marriage
You’re married now! Not only do you get to spend the rest of your life with your best friend, but marriage also comes with a few financial perks. You have two incomes contributing to household expenses and one rent/mortgage check. Talk to your tax professional or financial planning to learn more about which tax breaks you qualify for.
Love, trust, and honesty
Approach your financial discussions the way you want to be approached. Talk about difficult decisions with care and understanding. Try to be considerate, honest, and trust that your spouse will be equally responsible for handling finances.
Consider Speaking with a Financial Advisor
Seeking out advice from a professional planner could help you strategize the critical financial decisions that all married couples face.