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There is nothing tougher than handling money as a couple. You both have your own interests and incomes and must somehow straddle the line of helping to keep the family afloat while also meeting your personal interests.
It’s no wonder then that money is the leading cause of divorce in the US. With all of the missteps you can make managing your money, it might seem overwhelming. But fear not. In this post, I will walk you through the biggest money mistakes couples make and how to overcome them so that you can live happily ever after.
9 Biggest Money Mistakes Couples Make And How To Avoid Them
#1. Not Going Over Finances Jointly
Look, I get that not everyone is a finance nerd. But this doesn’t excuse you from knowing the family finances. The common thing that happens in many relationships is that one person handles the finances 100% of the time and the other person is left in the dark.
They think this is OK, but it spells disaster for many reasons.
- What happens if the person who handles the finances suddenly passes away? (I’ve seen this way too many times working for the wealthy.)
- What if the person handling the money is an over spender and is hiding a huge amount debt that is going to cost you your house or retirement?
- What if the person who doesn’t handle the money just spends without thinking?
You both have to be on board and review the finances jointly. If you are the finance nerd in the relationship, know that you need to dial it down a bit for the other person. Try to not get discouraged when your partner doesn’t understand something and you have to explain it again.
If you are the partner out of the loop, don’t be afraid to ask questions. The more you know, the better.
Remember you are a team and the most important thing is you are both aware of where you stand financially.
In our relationship, I am the finance nerd. At the end of the month, I calculate our net worth with my wife, showing her how much we saved and what our account balances are compared to the previous month. If there are large discrepancies, we go over it together.
For example, last year our one savings account dropped by close to $5,000 in one month. When we saw this, we worked together to realize that we were doing house projects, bought new carpet and hired a handyman to help with some painting.
It’s best if both people are involved. Even better is the two of you taking turns at the budget each month. At the very least, you should have a conversation each month about how your finances are doing.
#2. Not Talking about Long Term Goals
Speaking of a monthly review of your finances, another money mistake couples make is not talking about long term goals. How do you envision retirement? Where you do want to retire? At what age do you plan to stop working?
But it isn’t just retirement though. What if you want to own a beach house or your spouse wants to start their own business?
You need to sit down and talk long term goals. Doing this will help you to put emphasis on your spending and saving now so that your goals can become more of a reality in the years to come.
It will also help keep you close as you work towards reaching your goals together.
For this, we like to use Personal Capital. They have a free retirement planner that we use to project out our savings, income and spending. The planner crunches the numbers and tells us if we can meet our goals.
I like it because I don’t have to do the number crunching. My wife likes it because it is simple to understand and makes the idea of retirement and the future real. It is something she can see is possible and that excites her.
#3. Understanding Each Others Spending Styles
We all spend and save differently. If you are a saver, you need to know if your partner is a spender or a saver and how you can compromise if you are opposites.
If you are opposites, it doesn’t mean the relationship is doomed, it just means you need to lay out what each person needs in order to not resent the other person. It’s all about compromise.
Too many times couples ignore the spending style of their spouse and then get upset when one is a tightwad and the other spends money like it’s going out of style.
By knowing each other’s spending styles, you can set up checkpoints along the way so that the tightwad doesn’t cheap out when you need a new washer or dryer or the spender has a limit so they don’t get the family into a mountain of debt.
To figure out both your money personalities, check out this quiz.
#4. Controlling The Money
This is a big money mistake couples make and many times flies under the radar. What I mean by controlling the money is that the person who makes more money controls the flow of money.
They have the ultimate decision in what happens with the money.
This often happens when one spouse works while the other stays home. It’s easy to fall into the trap of giving the non-working spouse an allowance each month and treating them not as your equal but as your child.
No relationship works when one person is making 100% of the decisions. You have to remember that you are a team and that both of your opinions matter. When it comes to money, this is even truer.
In fact, the person who does not make any decisions might develop resentment over time and start hiding money or hiding spending, which opens up another can of worms.
#5. Keeping Secrets
This might be the biggest money mistake couples make. While you might think hiding a purchase here or there or hiding some income in another account is no big deal, it is a big deal.
Not for money reasons, but for trust reasons.
A relationship is built on a foundation of trust. Once you break it, you risk the entire relationship failing. Think about it. If you are hiding or lying about money, what else are you hiding or lying about?
Suddenly your spouse begins to question everything you say and do. This is not a fun place to be in for either person, so I urge you, don’t keep money secrets. It only leads to trouble.
#6. Only Making Joint Decisions
This is another biggie that causes fights. It usually plays out as one spouse contributing a certain amount to their 401k plan and expecting their spouse to do the same. Depending on incomes and circumstances, this might not be possible.
Just because you decide to save more for retirement or start putting a certain amount towards a house down payment, you can’t assume the other person can contribute the same. Ideally they will be contributing something, but they might not be able to contribute the same amount.
When my wife and I first married, we were still figuring out how to best handle our finances. She would max out her IRA every year, while I wasn’t.
There was no disagreement about this as we both understood she made more and could easily max hers out while I was saving as much as I could.
The key here is that you are both contributing something to joint goals. This will keep harmony in the relationship and not let resentment build by the one person thinking they are doing all of the saving.
#7. Not Talking About Your Credit History
This one should be talked about early on in a relationship. Not because it is a reason to end things, but because it can have a big impact on your finances. It’s not fun applying for a mortgage together and finding out your spouse has a horrible credit score.
Be open an honest from the start. Tell each other what your credit scores are and if it is low, talk about the mistakes you made. Then work together to improve your scores.
If you don’t know what your credit score is, you can get yours for free through this link.
#8. How Will You Respond To Needy Family Members
This can be a real issue in a relationship. How will you deal with a family member who comes to you for financial help? Hopefully you will never have to deal with this, but it is smart to talk about it ahead of time as it can be extremely stressful.
Talk about who you would help out and who you wouldn’t and the situations for helping or not. Also talk about what the help would look like and what limits or restrictions you would place on the loaning of money.
The reason why you want to talk about this one now is because you are not emotionally involved. It is much easier to come to an agreement now than it will be when your spouse’s brother is standing in your living room.
#9. Not Keeping Separate Accounts
This one can be confusing and as a result, is one of the more common biggest money mistakes couples make. You need to join your accounts but also keep some separate. It’s just how it is.
When my wife and I married, we each had some assets so we kept everything separate at first. In the beginning it wasn’t an issue. But in time, we felt more like roommates than spouses.
We would have to talk about who is paying what bill. In reality, we felt both of us should be paying the bills. So we combined our finances and feel closer as a result.
But we still have our own accounts for fun money. I like to play golf and while a round or two isn’t excessive, if I end up playing a lot, it can have a negative impact on the finances. So I pay for my golf from my own account.
Doing this allows us to stay independent while also being a couple.
Overcoming The Biggest Money Mistakes Couples Make
So those are the biggest money mistakes couples make and I provided some insight as to how to avoid each one.
But there is one more important way to not only overcome these money mistakes but most mistakes couples make in general. And that is by having a conversation.
The more you two talk about money and figure out where each of you stands, the more likely it will be that you avoid these mistakes.
Have open and honest conversations. Make it a place where you both can open up and talk freely, without worrying about being judged or shamed if you overspent last month or you didn’t max out your IRA.
As you have your conversations, it is important to remember what a conversation is. It’s just two people talking. Voices don’t need to be raised. If you are at opposite ends of a topic, work together to find a middle ground. This might mean rephrasing your point in a different way so your partner understands where you are coming from.
By having these conversations, you can tackle issues much earlier and before they develop into larger problems. It’s like catching a small leak and fixing it before the pipe bursts and you have a home that is destroyed.
Finally, I want to share with you 2 resources that we use to help our finances tremendously. They are Personal Capital and Tiller.
I briefly mentioned Personal Capital above but wanted to explain why it is so great. At any time, either my wife or myself can log on and see where we stand financially. We see our net worth, our investments, the current status of our early retirement, and more from the app.
It’s all right there, always updated and free to use. I highly recommend using it. The finance person in your relationship will love how they can dig in deeper to fill their need and the person who isn’t that interested in finance will love how simple and easy to use it is.
The other resource is Tiller. This is a spreadsheet budget with a twist. The template is already created for you. All you do is set up your categories and spending amounts and link your bank and credit card accounts.
Tiller automatically downloads your transactions each day. All you do is go into your budget and assign categories from the drop down box. Your budget is always up to date.
I love this because as a finance nerd, I can still completely customize the budget template with charts, graphs and reports. My wife loves it because it is simple to use. As a result, she will update the budget from time to time.
In addition to this, we get weekly emails showing us where we stand. This is great for the person who doesn’t update the budget all of the time. They are always in the know.
Finally, make sure you stay organized.
Having your financial records orderly will keep stress at bay no matter what life throws at you.
Take the time each month to sit down and talk about money. How things were financially last month, where you currently stand, where you are going and where you want to be one day.
At first it might not seem like a fun thing to do. But as you start making progress on your goals and seeing results, you will be excited to have your monthly financial review. You will feel closer to one another as you work together to reach your dreams and will enjoy the extra time you get to spend together as a couple.