Managing Your Marital Money: 7 Mistakes Newlyweds Make with Their Cash

Getting married means intertwining your life with someone else’s.

Their family becomes your family.

Their pets become your pets.

Their name becomes your name.

In many cases, you’re merging finances, too – that means their paychecks, debts, credit scores and spending habits become yours, too.

Why Merging Money’s a Big Deal

Sharing a bank account is pretty common with married folk. It makes it easier to pay the bills, and it’s a simpler way to track cash flow and spending for the household.

But merging your money with someone else’s can also make you vulnerable. Their spending habits, debts, late payments, collections and financial mishaps can all impact your credit  – as well as your ability to use that credit to take out loans or buy a home.

Want to make sure you’re safeguarding your financial future? Avoid these too-common marital money mistakes from the start:

Mistake 1: Not Getting the Full Picture

You really need to understand the full scope of your spouse’s finances before agreeing to merge money or bank accounts. What’s the balance on their student loans? How much do they pay every month for their car? What do they have in savings and how much do they add to it every month and year? What about credit cards and other loans? You can even pull your credit reports to get a full breakdown of exactly what your financial histories look like. Be sure to talk through anything that seems alarming or makes either of you uncomfortable.

Mistake 2: Not Having a Plan for the Future

Now I don’t just mean having a retirement account or a few grand in savings for a rainy day. By future plans, I mean knowing what’s on you and your spouse’s long-term radar. Do you plan to have kids? On average, one child costs about $233,000 by the time they’re 17. How will you cover those costs?

Do you plan to get more pets? Buy a home? Move to a different city? Travel to 10 different countries? Talk about these future goals with your spouse and make sure you’ll have the resources to cover these upcoming costs without going into debt in the process.

Mistake 3: Failing to Designate Roles

Just putting both of you on the bank account isn’t enough. In fact, if you’re not careful, it could lead to missed payments or, worse, double-paid bills! Sit down and talk through what role you’ll each play in managing your finances. Who will pay which bills? When will they be paid? Who will transfer money to savings each month? Who will handle the tax returns? Knowing what each of you is responsible for ensures nothing falls through the cracks.

Mistake 4: Spending Too Much All at Once

Combining incomes can make you feel flush with cash, but temper that excitement until you get into the groove of things. Don’t throw down a mint on a brand new Ferrari or take a one-month tour of Italy your first year in. Make sure you can manage your bills and expenses as a couple, and that you’re saving enough to cover your future plans (home, children, retirement, etc.) If you want to spend big on a new car or vacation, set up a separate savings account for it, and funnel a small percentage of your income to it every month until you reach your goal.

Mistake 5: Separating Your Debts

Your spouse’s student loans may have been in their name, but it’s important you approach the debt as your own – especially if you don’t want to spend too much in interest. Make an exhaustive list of all the loans, debts and credit card balances you have, and rank them in order of payoff preference. Then work on paying those down together, gradually over time. High-interest, high-balance debts should always come first.

Mistake 6: Ignoring Someone’s Credit

Don’t let just one spouse take on all the credit. In the event something terrible happens or the two of your separate, this puts one of you in a bad position. It will also make it harder to co-borrow on a home in the future. Make an effort to boost both of your credit scores by taking out loans and credit cards together, and making sure to keep those balances low and paid on time, every time.

Mistake 7: Being Unprepared

Take steps to prepare for unforeseen circumstances. Make sure you have life insurance policies in place, as well as a will and advanced medical directive that stipulate how your finances and care should be handled if something happens. You should also have a rainy day fund in place with at least $5,000 to $10,000. This can be used for anything from medical expenses or car repairs to a down payment on a home. You never know when you might need a little cash, and having some on hand just in case can keep you from racking up debt and hurting your credit.

Your Money, Your Future

It’s important to remember that the way you handle your finances doesn’t just impact the here and now, but will play a huge role in what you’re able to do as a couple five, 10, 30 or even 50 years down the road. Want to go on a vacation? Have kids? Retire and buy an RV? Your actions now will impact your long-term credit and your ability to make your goals and dreams a reality.

Want more financial advice? Ready to take the next step and buy a home? Contact SnapFi today.

Photo by Micheile Henderson on Unsplash

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