Deciding to live with your significant other isn’t just a next step in your relationship. It’s also a substantial financial cornerstone you reach that you are responsible for. Work towards avoiding these frequent financial mistakes couples make and live a happy and worry-free life.
1. Not Setting the Rules
You may consider the establishment of a framework as an insignificant thing to do at the beginning of your relationship. But, it’s an important step that will help avoid further financial crises.
Formalize the Rules
Write down with your partner a plan on how you can make, spend and save money together. Make sure to understand your needs and partner’s needs as well. Try to understand your partner’s point of view. Negotiate. Then, most importantly, mutually agree upon all aspects.
Legalize the Framework
You may also take into consideration a prenuptial agreement. It’s a document that explains how your assets and debts will be handled in case of divorce. Couples who plan to marry are free to create a prenuptial agreement (prenup).
There are also couples who don’t intend to get married. They can opt for a nonup. It’s a similar document that contains provisions on how your assets and debts will be handled if your union ends.
The best way to avoid stress in the future is to discuss and write a relationship agreement. You can use a template like those provided by Rocket Lawyer.
In the end, you need to foresee what will happen to your financial status if your relationship fails. Having clarity on home, leases, financial accounts in case of a break up will make your life easier in a difficult time. We are sure that you don’t want to end up with frustrations.
2. Not Having a Financial Plan
It’s unbelievable how many couples don’t have a plan on incomes and expenses. Having a common financial plan should be more like a teambuilding exercise. It will have beneficial impacts on you as a couple.
What to Plan
First, you have to determine if you have a similar vision on that, or you are better when you both manage your finances individually. Then, if you decide to share the joy of having a single strategy, a common plan, and the same approach, you need to see what your incomes and expenses are. Discuss all costs, such as housing, food, bills, insurance. Then simply split everything.
You could even consider merging your personal finance by having joint accounts, such as savings, cards or checking. Nevertheless, sometimes, it’s a better option to have individual accounts. If you know that your partner has needs that exceed your budget. It’s better for them to pay for themselves.
How to Plan
Well, for the creation of a functioning common financial plan you don’t have to be accountants. As a couple, it’s important to understand how to budget, how to spend money, how to invest, how to pay debts or buy assets. Working as a team will help you manage money easier and will help you overcome difficult times.
Many couples need help creating a financial plan. Do don’t hesitate to contact a professional. A fee-only financial advisor would do wonders. Check out sites like the National Association of Personal Financial Advisors or the Certified Financial Planner Board to find one.
3. Uncontrollable Spending Habits
Do not forget to take into consideration spending habits before creating a spending plan. Be aware that it is impossible to have similar spending habits. But sincerely discussing your situation will help to avoid disagreements.
Destructive Financial Habits
Uncontrollable spending habits of a partner (compulsive shopping, gambling, etc.) could cause serious financial issues to a relationship. This can lead to fights, and this is not what anyone would want. It’s important to be honest and have a healthy relationship.
When you’re married, discussing every detail about your finances with your partner is vital. Your partner should know how much you earn, the taxes you pay, the balance of every debt you have, your bank account details, and all your investments.
Think Twice and Anticipate
If you have major divergences in how you manage money, don’t ever think that by moving in together or getting married because you think you can change the other person. Someone who is irresponsible with their finances or doesn’t pay bills on time isn’t inclined to change their character very promptly, if ever.