When planning your wedding if often happens that practical details pertaining to your life afterwards are neglected. However, the financial future that you will share is just as important, if not more so. Following are some financial mistakes which as newlyweds you should avoid:
Not discussing money. Talking about money can be an uncomfortable experience for many couples. However, those who confront it without hesitation, will be better off. Make sure you understand your partner’s financial goals and spending habits. Although you may have different ideas, this discussion can help you to develop an approach to money management that can work for you both.
Not having a plan for your account. There is no correct way to manage your accounts. Couples can choose to have exclusive joint accounts, a joint account as well as separate accounts for saving and/or personal spending, or to keep matters completely divided. Discuss each one’s preferences and decide on what will make both of you feel comfortable.
Not compiling a budget. A mistake many couples make is to not compile a budget early in the marriage. Review your finances as a couple and determine how you are going to spend your money each month. Are there certain expenses which you have to curtail and others for which you have to save? To agree on these matters, compile a budget and stick to it will not only benefit the health of your bank accounts, but also your relationship.
Neglecting building an emergency fund. Life is full of surprises and some of these can be unpleasant and expensive. If you have an emergency fund, it will help you to avoid difficult financial situations when something unexpected pops up. It is important that you decide together how this money should be set aside.
Not developing a long-term financial plan. It is essential for you to have a long-term financial plan in place before your wedding day. This must include goals for retirement, home-ownership and starting a family (if the latter falls within your planning framework). Discuss your financial goals, time line, your budget as well as other problems you might face ahead of time.
Not having a set cost threshold for big expenditures. Although not all purchases require a discussion, it is important in the case of more expensive expenditures that could influence the family budget. Determine what the cost threshold is. For any expenditures above those costs you have to concur about whether or not it is a necessity.
Lying to your partner. Jokes often abound about how wives (and husbands) hide new purchases from their partners, but it can lead to serious financial problems in a relationship. Make sure both of you are very honest regarding finances and completely transparent about each one’s current financial situation.
Combining your finances before marriage. Most laws are intended to protect marriage partners. If you are only living together, you may encounter problems when the relationship comes to an end if you have bought a home or incurred debt together. Wait until after the wedding before you combine your finances fully. Rather use a domestic budget where both of you contribute to shared expenses.
Financing the wedding or honeymoon with a credit card. Rather pay cash for your wedding and honeymoon. This may mean that you will have to cut some of the things you were planning for your wedding day. However, it will be worth the effort as paying it off will not hang over your heads like a sword for months or even years afterwards. In so doing your wedding day will be beautiful while still falling within your budget.
Ignoring the warning signs. Keep an eye on issues such as overspending, a reluctance to discuss finances, or a poor credit score. However, also keep in mind that people make mistakes, and if your partner has made an effort to resolve financial missteps of the past, you should not hold it against him/her.
Ignoring debt. The best time to get rid of debt, is before you have kids or the extra financial stress of a home loan. You will probably have more spendable income in the early years of your marriage, so use the opportunity to pay off your debt. As soon as you are debt-free, you can start using any available funds to start working on your next financial goal (such as buying a house). Debt that is ignored early in the marriage makes it so much more difficult for you to realise your dreams.
Forgetting to add your beneficiaries. After having tied the knot officially, you will probably identify your partner as the person to receive the benefits of your will, life insurance policy and financial accounts. Don’t make the mistake of waiting until there is an emergency before handling it.