Establishing responsible spending habits early in life is one of the key factors in avoiding debt and bankruptcy later in life. The earlier you start forming these habits, the better off you’ll be. One of the most difficult financial periods for most Americans happens early on in marriage.
Combining two bank accounts, spending habits, and lifestyles can often lead to disagreements and fights about money for many newlywed couples. In many cases, newlyweds tend to overspend and build up a significant amount of debt – many times, simply because they haven’t taken the time for financial planning.
If you’ve recently tied the knot, or if your wedding is fast approaching, these 5 tips will help you and your significant other create a solid financial plan and form responsible spending habits.
Talk about your money
More than anything else, talking about your finances and your new joint spending situation will help avoid debt. Far too many couples shy away from talking about money, but it’s quite possibly one of the most important conversations that should take place early in a marriage. Look at how much money is coming in and how much you’re both spending, and formulate a plan for the future. Think about where you want to be in one year, five years, and ten years, and create a plan that will allow you to reach your goals.
Set a budget and stick to it
Many studies have shown that debt is the number one cause of marital stress. In many cases, newlywed couples tend to amass large amounts of debt early on in the marriage when they’re still getting used to combined finances. Don’t let the honeymoon phase let you outspend your limits. Create a realistic budget and make sure that you stick to it. It’s important to have some “fun” money available in the budget for a few impulse buys, but a limit should be set for purchases over a certain dollar amount. If there’s something you really want, wait a week and see if it’s still a necessity – you’ll be surprised how often your outlook changes after a week.
Open a joint bank account
While it’s hard for most couples to combine finances, a joint account can be a huge help in avoiding debt. If a couple keeps their accounts separate, each person can only keep track of their own individual spending – which can lead to hidden spending habits and increasing debt. It’s ok to slowly merge your personal accounts, but opening a joint account to pay for major expenses like your house, cars, and utilities forces you to be open and communicate about financial issues.
Save for a rainy day
Bad things happen to good people all the time. Young couples don’t typically plan for lost jobs, health issues, or other bumps in the road that could affect their financial picture. If you create an emergency fund, you’ll be able to make it through any sudden problems that typically lead to increased debt.
Work on aligning interests and lifestyles
Besides merging finances and creating a joint budget, it’s also important to blend lifestyles. Many times when couples with large income differences get married, there’s a large gap in lifestyle as well. Vacations might be important for one partner, while the other can’t afford to take them. One person may prefer eating out at nice restaurants, while the other might want to spend any extra money on a hobby. The sooner you can learn to merge your lifestyles and compromise, the sooner you’ll be able to create a budget that you both agree on.