Communication in a relationship where finances are shared is paramount to ensuring you and your partner are on the same page. Money can be a sensitive subject for couples to broach. However, open communication and focusing on your shared goals and security can help reduce your stress and prioritize your objectives to remain on the right financial track.
Read more below, to learn the five mistakes we frequently encounter when working with couples, so you may avoid or overcome them.
Mistake #1: Not Setting Goals Together
You and your partner may have different spending and savings habits; perhaps one spouse wants to invest in experiences today while another intends to maximize retirement contributions. Setting goals together can help both of you understand where you’re aspiring to go, so you can make informed short- and long-term decisions. We encourage you to discuss your shared and individual goals, build a reasonable budget, and prioritize how you may succeed together.
Mistake #2: Thinking There’s Only One Way
There are many ways to manage your finances. It’s up to you and your partner to discuss what’s best for you rather than trying a one-size-fits-all approach based on how your parents or friends manage their money. For example, one couple may choose to have joint accounts for a comprehensive view of budgeting, payments, and spending that works for them. However, another couple may feel separate accounts with agreed-on monthly allowances provide more flexibility and freedom to spend independently. It may take some experimentation and tweaking to determine what will work best for the two of you.
Mistake #3: Not Having a Household CFO
Who is responsible for ensuring you maintain your finances and pay your bills on time each month? If you’re unaware of all your bills or when they’re paid, it may be time to assign a household CFO to manage your finances to ensure nothing unexpectedly falls through the cracks. You and your partner should discuss all your monthly financial obligations and budget together so you can do your best to avoid late fees and impacts on your credit score while having sufficient cash flow to meet your commitments and needs.
Mistake #4: Not Putting Yourselves First
When choosing to save for retirement or fund a child’s college education, we have found many couples overcommit to their kids’ savings first. As parents, we want the best for our children and tend to put their needs above our own. However, you may also consider the long-term effects of not building up your retirement income. Despite the best intentions, it could result in uncertainty and undue financial stress on your family later in life. We recommend speaking to a financial planner to discuss how you can save concurrently for both funds or create a strategy so you and your children can both fulfill your long-term goals.
Mistake #5: Not Having an Adequate Emergency Fund
When planning your family’s finances, you should also factor in the unexpected. According to a recent survey conducted by Bankrate.com, 39% of the respondents only had about $1,000 to cover an unanticipated or emergency expense. From a visit to the hospital to a car repair or layoff, your family should be prepared for variable or unstable income periods—and $1,000 may not provide much support when you need it. We recommend couples work toward at least three to six months of reserved living expenses. Life happens, and sometimes things don’t go as planned, but an emergency fund can at least help to minimize your financial worries amid an unexpected event.
We hope learning from these common mistakes will spark inspiration to begin discussing money with your partner. If you have additional questions, or would like to discuss your goals or learn how we help young couples and families plan for the future, please get in touch with our team, and we’d be happy to assist you.
CCMI provides personalized fee-only financial planning and investment management services to business owners, professionals, individuals and families in San Diego and throughout the country. CCMI has a team of CERTIFIED FINANCIAL PLANNERTM professionals who act as fiduciaries, which means our clients’ interests always come first.
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