Navigating finances as a couple can be hard. It involves balancing your own needs and wants with those of another person, especially when there are differing income levels and personal financial priorities.
Managing money effectively is a significant factor in relationship satisfaction and financial issues are a leading contributor to divorce rates in the U.S. By avoiding common pitfalls and using some informed strategies, couples can build a healthy life together.
Let’s explore the major mistakes couples make regarding money and how to overcome them.
#1: Not Communicating About Money
Not communicating about financial matters can lead to major issues. Being uninformed about your family’s financial situation can result in severe consequences, including the potential loss of income, your home, or even your retirement savings.
Regular reviews of your finances and goals are important because they allow for necessary adjustments and both partners are working towards the same thing.
If you are the partner who typically manages the finances, have patience. Financial management may take more work for your partner. On the other hand, if you are a partner who is less involved in financial management, try to be proactive and ask questions.
The worst thing is being clueless about your family’s finances, which can lead to serious problems.
#2: Not Having a Budget
Having a budget can help you and your partner manage your money better and achieve your financial goals. There are many methods and apps that can help you create and stick to a budget as a couple. Here are a few:
- The 50/30/20 rule: This is a simple way to divide your income into three categories: 50% for needs, 30% for wants, and 20% for savings and debt payments.
- The envelope system: This is a cash-based method that involves putting a specific amount of money in different envelopes for different spending categories, such as groceries, entertainment, utilities, etc. You can only spend the money in each envelope for that category, and when it’s gone, it’s gone.
- Mint: This free app automatically tracks your spending and has budgeting tools to manage your finances jointly.
#3: Not Discussing Long-Term Goals
Discussing long-term goals, such as retirement or purchasing a vacation home, is crucial. Open communication about your aspirations supports your planning and makes dreams more attainable. Once goals are decided, set specific targets and adjust your budget accordingly.
Prioritize savings over impulsive spending, and consider using financial tools for realistic projections—every dollar counts towards achieving your shared vision.
#4: Not Knowing Your Partner’s Spending Habits
Understanding your partner’s spending and saving habits is important in relationships. Couples should have open and honest discussions about past financial experiences, current habits, and spending habits.
Explore the reasons behind your partner’s spending habits to uncover the “why.” Different spending styles can even complement each other, with a saver’s discipline balancing a spender’s spontaneity.
#5: One Person Controlling the Money
Allowing the higher earner to control finances and make all decisions can lead to resentment and hidden spending.
Both partners should understand the financial situation and participate in future planning. Open communication about income, expenses, and goals builds trust and strengthens the relationship. Have open discussions about money, including income, expenses, goals, and concerns. Create a budget together that caters to both people’s needs and wants.
In a healthy relationship, financial decision-making should be a joint effort, regardless of income differences.
#6: Keeping Secrets
Keeping financial secrets in a relationship can erode trust and foster suspicion. A partner might rationalize withholding the truth as a way to safeguard the relationship, but this approach is misguided or, even worse, will lead to bigger problems down the road.
Honesty can be uncomfortable and even painful. But you need the truth so that you can address the situation and start working on solutions.
Hiding or lying about money can ruin your relationship. It breaks the trust. And if you are dishonest about money, your spouse may doubt everything else. Don’t keep money secrets.
Final Thoughts
Every couple is bound to have their share of arguments about money. But both partners should share the responsibility of managing finances and have involvement in financial decisions.
The key to managing finances within a relationship is having open and honest communication, aligning values and goals, and having shared respect.
