You're young, you're seriously in love and you want to start your relationship off right - including your finances.
In June 2015, Credit Karma teamed up with research company Qualtrics to survey millennials and baby boomers about their beliefs and behaviors toward getting married and building a future with their spouse. After looking at the numbers, we've pulled out some key lessons that millennials can take away. Here are four financial mistakes to avoid to help get your relationship off to a solid start.
1. Going into debt to pay for your wedding.
How much are you willing to pay for your special day? According to the survey, 30 percent of millennial couples spent $10,000 or more on their wedding. In contrast, almost half of the baby boomers surveyed reported spending less than $1,000, or around $3,000 after adjusting for inflation. Not surprisingly, the cost of a millennial wedding was nearly three times more likely to send someone into debt than a baby boomer wedding.
While part of this difference in cost can probably be attributed to today's higher cost of goods and services, another possibility is that some millennials are simply more willing to pay whatever's necessary for the perfect wedding.
Instead: If you don't want to start your new life together in debt, here are some strategies that may help:
- Use your savings. Consider only using money you've saved up instead of taking out a loan or putting your wedding expenses on a credit card. This requires saving in advance, so this strategy may not work if you're getting married next month. However, if you're just starting to plan your wedding (or even if you're just entering a new relationship), it doesn't hurt to set some money aside each month to pay for your upcoming nuptials.
- Look for areas you can cut back. One of the keys to saving money on your wedding is cutting back on aspects you care less about and funneling more money toward the areas you really care about. For example, since you'll probably only wear the dress or tuxedo once, consider renting and using the money you saved to splurge on a great photographer, or whatever matters most to you.
- Set a budget. The word "budget" may leave a bad taste in your mouth, but it could be worth making one if it decreases your chances of overspending. Just don't forget to allow yourself some extra money for easily forgettable costs, like postage, gratuities and your wedding license!
2. Joining your finances too early.
Our survey found that 50 percent of millennials joined their finances before marriage, whether combining all of their accounts or sharing at least one bank account. On the other hand, 67 percent of baby boomers surveyed didn't have a joint or shared account with their partners. In addition, millennials were 50 percent more likely to split all their finances evenly prior to their wedding day than baby boomers.
Instead: Don't worry -- this doesn't mean you shouldn't join your finances before marriage. However, try not to rush into combining accounts. Your partner's credit score and overall financial situation could impact your ability to buy a home or other significant purchases together, so it's important to make sure you trust your partner and talk things through so you know what you're getting into.
There are many horror stories about exes ruining their partner's credit, so think carefully before you blindly cosign a loan or add your partner as an authorized user to an account without knowing what these decisions entail, as they could have a significant effect on your finances and credit. Any financial irresponsibility on your partner's end could end up hurting your personal credit health.
3. Hiding financial matters from your partner.
Do you tell your significant other everything about your finances? If you answered "no," you're not alone. 17 percent of millennials confessed to hiding purchases from their spouse, while 11 percent said they had a bank account or credit card their spouse wasn't aware of. According to a June 2015 survey by Money, 70 percent of married couples argue about money. Hiding financial matters isn't the best approach if you want your marriage to be as friction-free as possible.
Instead: Regularly have open and honest financial conversations with your partner. You're in this journey together, and hiding skeletons in the closet won't help inspire trust. If you haven't yet, start by discussing your current debt obligations, like any student loans or outstanding credit card balances.
In addition, it's prudent to discuss how you're going to split up the bills, manage your money and plan for the future. It may be uncomfortable, but just talking could end up saving a lot of headaches and prevent fights in the future.
4. Not talking about credit.
When was the last time you talked about credit with your partner? Credit is such an intimidating topic to millennials that they were more likely to know how many sexual partners their spouse has had than know what their spouse's credit score is. Other pieces of information both generations were more likely to know than their spouse's credit score: how much their spouse makes each year, how much their spouse weighs and how their spouse likes his or her eggs.
Instead: Your credit scores can have a significant impact on your lives as a couple, potentially affecting where you'll live, what car you'll be able to afford and more. If you ever apply for a joint credit card or loan, both of your credit files could be taken into consideration, so it's important to work on your credit together and make both of your scores the best they can be.
Financial harmony plays a big part in marital bliss, and while it may seem unromantic to budget for your wedding expenses or have a serious conversation with your partner about his or her credit score, doing so could prevent you from making some serious mistakes in your future.
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