Single consumers have plenty of challenges when it comes to personal finances, no doubt. For couples however, whether pre-or post-marriage, the consequences of making bad financial decisions can be a lot more expensive and damaging in the long run.
Below are 3 of the common financial mistakes that couples make and advice on how to avoid them. Enjoy.
Mistake #1: Not taking care of household finances together
In many relationships, one person is the money manager and, in many cases, it seems to work out just fine. Until it doesn’t. If you’ve never handled finances and suddenly find yourself divorced with a cleaned out checking account, trying to figure out where you stand, and possibly discovering that your spouse was very bad at handling finances, could be a real shock.
Simply put, both individuals in a relationship should take part in managing the finances of the house. Sitting down together and looking at all of them, managing checking and savings accounts together and working together to get bills paid every month is a great way to build your financial acuity as well as stay close as a couple.
Mistake #2: Putting off saving for retirement while you save for your child’s college costs
Many couples put off saving for retirement while they diligently put money aside for their child’s college education, which seems like a smart idea and a good choice as a parent. But here’s the problem; when you’re retired and need cash, the federal government isn’t going to give you guaranteed loans, grants and scholarships. They will give them to your children however.
Also, missing out on things like an employee match on your 401(k), and the long-term growth that it gives you, while you put away money for college expenses that you may never have, is a bad idea. There are a number of exceptions of course (as there always are) but, for most people, stuffing as much money into a retirement savings plan as possible is a better idea.
Mistake #3: Renting or leasing without a Cohabitation Agreements or Shared Lease
Not having a shared lease or cohabitation agreement is especially troublesome if you’re not yet married, simply because of the fact that, if you have an argument or breakup, you can easily find yourself out on the street if your name isn’t on the rental lease agreement. The same thing goes for all of the expenses that you’ll share, including rent, utilities and so forth. If you don’t have some type of cohabitation agreement that spells out exactly how you will share those costs, you could stand to lose quite a bit of money if your relationship ends.