Top 10 Financial Mistakes That Should Be Avoided By Couples

A large number of adults that are in relationships admit that money and finances are a point of conflict between them and their partner.  But what is it that actually causes this conflict?

Here are 10 mistakes to avoid that can help avoid this extra strain on a relationship.

1. Creating credit card debt

It is so easy to go shopping and just throw the purchase on a credit card and plan to pay for it later.  However, this is a bad mindset to get into.  Credit card debt has one of the highest interest rates, and once that debt is built up, it is very hard to get the debt back down.  Credit card debt is a very strong net worth killer.

We definitely recommend using credit cards for the purpose of getting credit card rewards, but only use them if you have the money already in your bank account to pay that credit card off at the due date.

2. Failing To Create a Budget

Budgeting is not fun; there is no way around it.  But, it is necessary to reach your financial goals.

You must have awareness of how much money is coming in, and how much money you are spending, and in what areas.  Often you will find that you are spending money unnecessarily and can cut that spending without feeling like it’s a sacrifice.

It’s very important for both partners to work at building the budget together, and then stick to the budget.  If one partner keeps spending all the money, it doesn’t matter how close the other partner sticks to the budget.

3. Lifestyle Creep

What happens when you get a raise? Buy a new car? A new house?

A lot of people start spending more as their incomes go up and as a result, their wealth never accumulates.  This is called lifestyle creep.  As your income goes up, your lifestyle creeps up also.

Once you have spent the time creating a budget that works for you both at your current income, freeze the budget.  If you get a raise, stick to your original budget.  The extra income can go straight to a savings account and be invested from there.

4. Not Having a Long Term Financial Plan or Goal

It’s important to have a long term financial plan together.  Take the time to sit down and discuss each others long term goals.  Discuss your goals and timelines for retirement, home ownership, investments.  If they align with each other that’s great!  If not, make sure to discuss how you can adjust them to align with each other.

5. Not Having Regular Finance Reviews

Life changes, unexpected things come up.  Maybe you move cities and change jobs.  This can change your financial picture significantly.

Review your finances regularly to keep your budget and goals up to date.  Check your net worth monthly and see how you are progressing towards your goals.

Changes may be needed to keep on track with your goals.  Without checking in regularly, you may not be aware that you are off track with your long term goals.

6. Failing To Save For Emergencies

Emergencies are going to come, that’s a guarantee.  However, if planned for, they can be a lot less stressful.

Create an emergency fund.  This is money that is saved up that you only access if there is an emergency.  Try to have 2-6 months of expenses saved up.

With nothing saved up for an emergency, couples are forced to put the expenses on a credit card, which will be very hard on your long term goals.

7. Ignoring Any Debts

Maybe it’s easier to just not talk about that big student loan and pretend that its not there.  Or maybe just forget about that credit card debt.  Its not a very big balance anyways.

Don’t do this!  Pay off the highest interest debts first, then start paying off any other bad debts that you have, before investing.

8. Not Saving Anything

Make sure you are saving a chunk of every paycheck you receive.  And pay yourself first!  Set up an automatic transfer that happens every time you get a paycheck to transfer money directly into a savings account.  This amount should be 10% of your income.

When you set up this transfer to automatically happen, you seldom miss the money at the end of the month.  However, when you leave all the money in your spending account, there never seems to be any left at the end of the month.

9. Not building any passive income

Passive income is one of the best things you could ever build up.  This is income that keeps coming in whether you are working or not.  Maybe you get sick and can’t work.  Passive income still pays you.  This can be achieved from investing in a business, dividend paying stocks, or real estate.  We prefer real estate as it is a very stable and secure investment over the long term.

The thought of investing in real estate can be very overwhelming for many people, but there are many real estate tools and real estate investing courses to help make this an easier venture for anyone.

10. Bad or No Estate Planning

Everyone needs to make sure they have a will.  Not having one will leave your loved ones with a legal mess when you die.

Make sure it clearly lays out what you want to happen with your financial matters. Without a will, there is a huge amount of work and expense wasted in dealing with the estate. No matter what age of adult you are, make sure you have an updated will.

Relationships can be tough, and everyone has their own ideas and goals.  Make sure that your goals align with each other to enjoy less strain on your relationship.

Start with the goal of being financially stable and once you reach it you can move on to the goal of financial independence.  The less you have to rely on your 9-5 jobs, the more secure you will be.  Follow the advice laid out here to reach your goals more quickly.

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July 5, 2019

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