The 12 Most Common Financial Mistakes Made by Couples—and How to Avoid Them

by | BiggerPockets.com

Money: the most common source of strife between couples.

Roughly a third of adults in relationships say money is a “major conflict” between them and their partner, according to the American Psychological Association. What are these couples doing wrong?

Here are 12 financial mistakes made by couples, and more importantly, how you can avoid them in your own relationships.

1. Going Into Marriage Blind

It’s all rainbows and butterflies for a while, right? But that doesn’t last.

Before proposing or becoming engaged, have a series of candid, direct conversations about money. They won’t be easy—that’s how you know you’re doing it right.

The internet is chock full of financial questionnaires for couples to discuss before tying the knot, but here are just a few questions to get you started:

  • What’s your No. 1 financial priority? What about No. 2 and 3?
  • Where do you want to live, both on the city level and neighborhood level?
  • Can you afford to live in that neighborhood on your salary, or are you counting on my salary, too? What if one of us decides to change careers and takes a 50 percent pay cut?
  • Do you envision one spouse staying home with children or both spouses continuing to work?
  • Where do you see your career and income going? Where do you see mine going?

Most of all, keep probing until you and your partner are extremely clear on each of your financial visions, how the other one fits in, and both where your visions overlap and where they’re at odds.

2. Overspending on the Wedding

Last year, Business Insider reported the average cost of a wedding in the U.S. is a shocking $33,391.

Might that money be better spent on a home, a rental property, or your retirement investments?

Weddings are fun. Who doesn’t want to have a big party with friends and family? But a $33,391 party is not going to improve the day-to-day quality of your life. Quite the opposite if you go into debt for it.

Buying a home or investment property or other passive-income-producing asset will improve your day-to-day quality of life.

3. Failing to Create—and Stick With —a Budget

Budgeting isn’t fun or sexy. On the contrary, it involves sacrifice, discipline, and deferred gratification.

But while it’s not fun, it is a key ingredient for building real wealth.

If you spend every penny you make, you will never accumulate wealth of any kind, no matter how much you earn. Instead, wealth arises from funneling money into investments.

But it takes both parties to honor a budget. If one partner keeps spending every penny, it doesn’t matter how frugal the other partner is.

Want a budget challenge? Try living on half your income. And if you’re ready to get weird, try these unusual saving tips to really supercharge your savings.

Related: 6 Tips to Live on Half Your Income (& Invest the Rest!)

4. Lifestyle Inflation

You got a $10,000 raise—woohoo! What do you do with it?

If you’re like most people, you either move into a bigger home or buy a fancier car. And what happens to your wealth? Nothing. It doesn’t rise a bit, because even though you’re earning more, you’re not saving and investing more.

Once you’ve set a budget you can live with, freeze it. As you or your spouse get raises or earn more money from your investments, shunt that money right back into more investments. That way, your higher salary actually converts into higher wealth, not just the appearance of wealth.

man and woman looking at each other

5. Not Having Financial Check-Ins Regularly

Life isn’t static. As they say, the only constant in life is change.

Kids come along, or you move to a different town or take new jobs; conditions on the ground change. You need to adapt, and the only way to do that is in concert with your partner.

Start by reviewing your net worth every month. You can track it automatically through a service like Mint. By keeping your net worth in your financial focus, it stays real for you, even in the face of all the more tangible “things” you’d rather be spending money on.

Also track your monthly passive income. That’s a key number to work toward growing every year.

Most of all, keep an ongoing dialogue about your financial vision and goals.

6. Failing to Agree on a Plan for Aging Relatives

What happens when and if one of your parents becomes incapable of living on their own?

No one likes to think about that possibility. But it’s very real, and if you ignore it, then you’ll suddenly find yourself faced with needing an urgent answer when your dad falls and breaks his hip.

Don’t assume your spouse would embrace the idea of your parent(s) moving in, and don’t assume your spouse wouldn’t invite their parents to move in, either. Talk it over now, before it becomes a household emergency.

7. Failing to Protect Against Financial Emergencies

Emergencies come in many flavors, none of them pleasant. And in the good times, you need to protect against the risk of sudden bad times.

First, review your insurance. Health insurance is the most critical; if your spouse were diagnosed with life-threatening cancer tomorrow, could you afford good care? If not, get a better insurance plan.

If one spouse generates most of the income, also look into buying life insurance. The last thing you want is to find yourself both emotionally and financially crushed when a spouse dies.

How’s your emergency fund? Can it cover at least one or two months’ expenses?

Lastly, look to your career security. What would happen if you lost your job tomorrow? Could you find a replacement job easily, or would replacing it prove challenging?

Put protections in place against financial emergencies while you can. By the time they rear up and bite you, it’s too late.

8. Putting Retirement Savings Last Instead of First

Your retirement contribution should be the first “expense” to come out of every single paycheck. Find a way to automate it, whether it’s a deduction through your company’s 401(k), an automated recurring transfer to your IRA, or a savings automation app like Chime or Qapital.

Becoming financially free is the ultimate goal, the top of the ladder from middle-class to wealthy. Or, at the very least, being able to live without clocking into a job every day needs to be your first priority.

It should be a priority over other types of savings, too, such as your children’s college tuition. Your children would be better off paying for their college through tuition hacks, scholarships, grants, and even student loans, rather than having to support you in your golden years because you didn’t save enough to reach financial independence by the time you’re no longer able to work.

That day comes faster than you think, by the way. A troubling study by the Urban Institute and Propublica found that 56 percent of workers over 50 have been pushed out of their jobs involuntarily, and another 9 percent have been forced to resign and retire early for personal reasons, such as health or caring for a loved one.

Your retirement must be your first priority.

Related: Financial Freedom: 14 Steps to Stop Relying on Your 9-5 Job’s Income

9. Ignoring Unsecured Debts

Now that I just finished saying retirement must be your first priority, it’s time for a caveat: pay off high-interest debts first.

Think about it: if you’re paying 24 percent interest on a credit card balance and have the opportunity to invest in a rental property or stocks for a 10 percent return, it makes no sense whatsoever to invest when you still have high-interest debts outstanding.

Pay off credit card debt first and any other unsecured debts with interest rates over 7 to 8 percent. For debts costing under 7 percent in interest, the line gets blurrier, and it may make sense to invest rather than pay off debt.

Until then, funnel all your savings every two weeks into paying down debt. Instead of setting up automated savings, set up automated debt payments.  Get rid of unsecured debts as fast as humanly possible so you can start accumulating real wealth.

10. Financial Infidelity

According to a CreditCards.com study, as many as 33 percent of U.S. couples commit financial infidelity. In fact, many respondents said they consider financial infidelity worse than sexual infidelity.

Financial infidelity is when one partner hides money or assets from another, whether for their own private use or as a protection against future divorce losses. It’s an enormous betrayal of trust to tell your spouse your net worth is $50,000, when in reality, you have another $250,000 squirreled away in the Cayman Islands.

Don’t get me wrong, I get tempted occasionally to just go out and buy a rental property without talking to my wife about it first. It’s not easy to win your spouse over to real estate investing if they’re skeptical. But you’re asking for serious marital problems if you hide financial transactions and assets.

If you can’t trust your spouse with your finances, you have no business being married. Period.

11. Not Keeping at Least Some Money Separate

With that said, being married doesn’t mean you have to surrender every penny to your spouse’s scrutiny. It’s healthy for couples to have some independent money with no strings attached.

For example, you could set a monthly personal allowance of $200 per partner. With that $200, you can buy whatever you want: gadgets, manicures, beer, you name it. It’s your personal play money.

Everyone needs to feel like they have something of their own. Just make sure it’s transparent, fair, and systematized.

12. Shoddy Estate Planning

Everyone needs a will or living trust. Not having one is unfair to your loved ones, who would be left with a tangled legal mess when you die.

And it could happen at any time (sorry to be morbid about it). Any of us could randomly get hit by a bus. That’s life.

If you’re unmarried and want to leave something to your partner, it better be in your will. And don’t assume that everything will just go to your spouse if you are married. They may be in the car with you when the bus hits.

There’s a word for dying without an estate plan: intestate. It’s a legal nightmare for your family and loved ones, who will already be reeling from the loss. Don’t add to their pain by failing to plan for your estate and forcing them to untangle it for you.

The Bottom Line

Relationships and marriage are hard, especially after the first year or two when the honeymoon phase is over. Everyone has their own financial priorities, and they won’t necessarily align.

It’s your job to align yourself with your partner. Discuss your goals and priorities, and negotiate them. While you can’t get everything you want, you can probably have most things—it just means sacrifices and compromises elsewhere.

Start with financial stability as a shared priority, then look at financial independence. The less you rely on a 9 to 5 job for your household income, the more free you’ll be to pursue other goals and dreams.

Just make sure your spouse wants to go in the same direction you do, or you’ll face a life of never-ending conflict and struggle.

What are your tips for coordinating your financial goals with your spouse? What mistakes have you made over the years?

Leave a comment below.

About Author

G. Brian Davis

G. Brian Davis is a landlord, personal finance expert, and financial independence/retire early (FIRE) enthusiast whose mission is to help everyday people create enough rental income to cover their living expenses. Through his company at SparkRental.com, he offers free rental tools such as a rental income calculator, free landlord software (including a free online rental application and tenant screening), and free masterclasses on rental investing and passive income. He’s been obsessed with early retirement since the early 2000s (before it was “a thing”). Besides owning dozens of properties over nearly two decades, Brian has written as a real estate and personal finance expert for publishers including Money Crashers, RETipster, Think Save Retire, 1500 Days, Lending Home, Coach Carson, and countless others.

20 Comments

  1. Jaron Walling

    No sugar coating on this article! I really enjoyed this list and believe me #12 is really sucker! My dad’s side of the family had to deal with my grand fathers estate. It was a year long nightmare until the house finally sold.

  2. Mason Fiascone

    Great article, thanks for writing and sharing. I personally disagree with #11, but it can work for some people. I disagree because I’m a believer that shared experiences create a bond between couples and unshared experiences create a divide. We already don’t share so much of our lives together – particularly our work lives for most – and so adding little separators along the way can do damage to the long-term health of a relationship. If you have separate allowances to spend on things, you’ll be making unshared choices and will both have to live with those things/choices – which can add up over time! I’d rather share the allowance, make strong joint decisions, and both benefit from the fruits of the decision. But that’s just how my wife and I work 🙂
    Again, great points and thanks for sharing!

  3. Rob Barry

    Great article! My wife and I plan everything together. She’s smarter than me, so I wouldn’t have it any other way!

    We’ve organized ourselves quite equitably. While I brought more assets to the marriage, she has a very strong corporate career. Since we got together, we organized our lifestyle to fit under her income alone and I sold my small business to go full tilt into investing everything I’ve got. She handles our present, I handle our future. We do it all together.

    That feeling of teamwork is just the best.

    • G. Brian Davis

      Thanks Rob, and that’s great to hear that you and your wife worked together to find an arrangement that suits you both. And congratulations on being able to live on one income! It’s something my wife and I aim for as well.

  4. Andy Sirulnik

    #12 Shoddy Estate Planning “dying without an estate plan: intestate. It’s a legal nightmare” That’s a bit of an overstatement. The law imposes has straightforward rules as to who gets your stuff if you die without a will–sort of a default will. The only problem is that that “default will” might not divvy up your stuff as you might have wanted.

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