Welcome back to our blog series: M³ - Marriage Money Mistakes. The first financial mistake for married couples we discussed was to close all credit cards after you get married; this is a mistake because doing so will lower your credit score substantially.
Continuing our blog series, here is the second mistake we'll discuss:
Mistake #2: Continuing to spend like a bachelor/bachelorette after the wedding.
So you've said your vows, exchanged rings, and are now a "Mr. and Mrs." You're expected to return from your honeymoon, play house, and live happily ever after. Happily ever after, however, is different for each marriage.
Some marriages are individualistic, with the marriage thriving on husband and wife being very independent. Each person has his/her own cereal, cups, towels, and hobbies. If one goes to a movie, you can almost assume he/she went without the other. On the other hand, some marriages are very much a complete union. Everything is shared, from razors to favorite foods to political views. You see one half of the couple without the other and the other is likely just parking the car.
Although each marriage is different, all marriages should be weary of one common newlywed financial mistake: Continuing to spend like a bachelor/bachelorette after the wedding. Now that you're married, gone are the days of blowing your entire pay check on a new pair of Jimmy Choo's. Gone are the days of putting half your bank account balance on roulette black.
Well, okay, some of us still do enjoy a nice pair of stilettos or a night at the casino with the buddies, so I should say "gone are the days of impulse spending without regard for your spouse". Not as catchy, but that's the point. Keep spending the way you did when you were the only one dependent on your income and almost inevitably, your marriage will hit a bump in the road.
I'm not saying you shouldn't be able to spend your money when you want or on what you want, but you've just got to do it the right way. Some couples only spend money together, so an impulse buy satisfies both husband and wife. But for those individualistic marriages, here's a way to enjoy that buyer's rush without worrying about going home to a stone-faced spouse:
First, determine how much you need to set aside each month for necessary expenses, savings, and investments. Examples of necessary expenses are utility bills, car payments, insurance, mortgage and loan payments, and any other expenses that are needed to survive. You should also set aside a monthly amount to put towards savings. Creditnet recommends an emergency savings fund big enough to cover at least 6 months of expenses in case of a complete loss of income. You also may decide on an amount to invest each month for retirement, whether it be in stocks, bonds, money market accounts or any other type of investment vehicle.
Next, determine how much you have left to allocate as "fun funds". A simplified version of the "fun funds" equation is this: After-tax Household Income minus Amount Determined in First Step = Fun Funds. Allocation should be discussed and agreed upon by the both of you. Some couples may be comfortable with a 50-50 split. But if wife absolutely HAS to get her nails and hair done each month, husband may graciously agree to a 60-40 split in favor of his wife getting beautified. What matters most is that both husband and wife agree on the allocation percentage.
Last, setup separate bank accounts for this monthly spousal allowance. Each person has their own bank account, their own checks and ATM cards. When you have the urge to splurge, then just grab your own check card and spend spend spend! After all, it is YOUR money to spend!
This is just one idea that could help newlyweds to avoid the bumps in marriage that come from spending like a bachelor/bachelorette after the wedding. What do you and your spouse do that does or doesn't work?
