Find out the 5 worst financial mistakes that couples make - and how to avoid them for a happy future.
Money Mistake #2: Letting Emotions Run High
Money is an emotional issue for most people. We work hard for our money and get scared when we think our financial well-being is in jeopardy. But when emotions run high, we can say things that we don’t mean.
So never ambush your partner about money. Agree on a stress-free time to have a money discussion and treat it like a business meeting. Do your best to stay calm and objective, no matter what.
Money Mistake #3: It's All in the Details
When I say that you should disclose every detail about your finances, I mean every detail. Your significant other should know how much you earn, the taxes you pay, the balance of every debt, bank account, and investment that’s in your name.If each of you doesn’t have an up-to-date personal financial statement, you should create one. This is a document that lists your assets and liabilities, such as cars, homes, retirement accounts, loans, and credit cards.When you subtract the balance of your total liabilities or debts from the total value of your assets, you’ve calculated your net worth. Nicole Marie should know her fiancé’s net worth and he should know hers, no matter if they are positive or sadly negative numbers.
In my award-winning guide to personal finance, Money Girl's Smart Moves to Grow Rich, I show you step-by-step how to create your personal financial statement.
Money Mistake #4: Not Communicating
Most couples talk about money only after they’re in financial trouble. This is really backwards. Communicating regularly about money is the best way to improve your financial health and stay on the right path.
You might set a time to talk on a weekly or monthly basis about following a spending plan, paying off high-interest debt as quickly as possible, or finding additional sources of income.
Money Mistake #5: Not Setting Financial Goals
While talking about money problems is certainly the first step, taking action is required to resolve them. You’ve got to be strategic by setting concrete financial goals, such as: pay $500 extra toward credit card debt each month.
If you need professional help to create a plan, consider using a financial advisor or a credit counselor. You can get counseling and education in-person, over the phone, or online from the National Foundation for Credit Counseling at nfcc.org.
Now let’s get back to Nicole Marie and her fiancé. One of the ways people end up in bad marriages is by fooling themselves that they can change the other person. If you think that simply saying “I do” will make someone more mature or wise with money, please think again. Someone who doesn’t care about paying bills or making good on their debts isn’t likely to change their tune very quickly, if ever.
Unfortunately, you can’t make someone “face the reality of their financial mess.” Nor should you make it your responsibility to fix the problem. Opening up joint accounts with someone in financial trouble isn’t the solution. Your finances could be devastated if he or she drains your checking account or racks up credit card debt.
Like it or not, when you marry someone, their debts can become your problem. In most states, you generally aren’t legally responsible for debt a spouse incurred before you got married. However, creditors can go after assets that the other spouse brings into a marriage.
My advice is for Nicole Marie to have a frank conversation with her fiancé about her concerns. If he isn’t willing to talk about openly his finances, she should call off the engagement. There’s no need to rush things. He might make a fun boyfriend, but won’t be marriage material until he understands that his financial actions have serious consequences.
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