Editor’s Note – Welcome to Money Under 30’s new column we’re calling “My Biggest Financial Mistake.” We are excited to share with you the financial lessons and experiences of our writers and readers. When it comes to relationships, there comes a time when most couples consider joining finances. While this can make some of the regular monthly bills easier to handle, it can make things a lot more difficult, in some instances. This is due to the fact that all of us don’t all have the same relationship with money. And all of us aren’t all necessarily speaking the same financial language as our potential mate. This can make life a whole lot harder.
I know, because this was my own biggest financial mistake. And it ultimately cost me thousands upon thousands of dollars to finally right my ship. So, if you are considering joining finances in the near future, please read my story first. Hopefully, it will save you some heartache and a whole lot of money!
Initiating the money talk
When my former spouse and I got together, we never discussed finances or money. It is evident that I was much younger and naive at that time. I figured everybody had the same basic information about finances. Things such as:
- Pay your bills on time every month.
- Know how to balance your checkbook.
- Put money away in savings.
- Never spend more than you have.
- Consumer debt is not something you must have.
Boy was I wrong! Because I didn’t initiate an in-depth money talk with my ex-husband before we married, I ended up in a world of financial trouble. While the aforementioned things were taught to me by my parents, that, apparently, isn’t the case across the board.
I learned the hard way that I should have initiated the money talk long before we ever discussed marriage and children. While I did try to bring it up a few times prior to marriage, I never pushed the topic because he seemed uninclined.
That should have been my first clue! Once we married and began joining our lives and finances together, it was too late. I found out that he had a lot of debt and unpaid bills. He also didn’t have a checking account or know how to balance a checkbook. WHAT?!
Instead of bowing out whenever he wanted to change the subject, I should have pushed the money talk more aggressively. It would have saved us a lot of money fights, and thousands of dollars when we divorced.
So, if you haven’t initiated the money talk yet, this should definitely be on your radar before you jump into anything serious. And if they keep avoiding the discussion, for any reason, I would consider that a red flag.
Learning about your partner’s history with money
When digging into the money discussion, history with money is the first topic I would hit. What I was taught about money from my parents shaped how I think about money. The same was true of my ex-husband.
However, I didn’t realize just how much of an impact both of our parents had on our current handling of money, as well as our future thoughts about it.
My parents were very open with us about every topic, including finances. They talked to us about:
- How much they spent on the house.
- How much each car cost.
- What regular groceries cost.
- How much they made.
- How much they tried to save.
- Why it was important to save for retirement.
- Never to live beyond your means because you never know when you could end up in a tight spot.
So, to me, all of these items seemed like common sense. But, to my ex-husband, they were completely foreign topics. His parents didn’t discuss money or finances with any of them. They were taboo subjects.
This set us up to speak completely different financial languages. Which, in a marriage, or any partnership where you combine finances, can be the kiss of death.
Perspective on credit cards and credit scores
When we married, I had no consumer debt whatsoever. I had a small mortgage on my house and owed a little bit on my car. But, I also had savings and enough money to regularly live on. I used a credit card for some purchases because I got points for using it. But I always paid it off in full every month. And my credit score reflected that, as it was above 800.
Enter my ex-husband. He had never had a credit card before. So when I added him to mine as an authorized user, he thought it meant free money. He simply did not understand the concept of paying it off every month or how interest rates worked.
Due to that mentality, this was one area that we fought about regularly. This began to happen after my son was born and I became a stay-at-home mom, briefly.
I didn’t go back to work full time while we were married, but took on some part-time jobs. Therefore, we were living on much less income. He was spending so much that we weren’t able to pay it off in full every month anymore. And no matter how I presented the information to him, he simply did not understand how much more we were paying in the long run due to interest alone.
Unfortunately, because we weren’t speaking the same financial language, we ended up with over $20,000 in credit card debt by the time our marriage ended. And that meant we had to split the debt in the divorce. My half of that debt took me over four years to pay because I suddenly became a single mom of two small children, and wasn’t working full time. It also tanked my credit score for years!
So, if you and your partner don’t have similar outlooks on credit cards, and how to use them, as well as credit scores, you may want to take a step back. Or, take a deeper dive and find out why they look at both the way they do.
Discussing future financial goals
If you are considering joining finances, then you are obviously planning to spend your future with this person. And that means that having a talk about the future, and future financial goals, is imperative. I can tell you that we NEVER did that.
Oh, we discussed how it would be great to retire someday, but that was the extent of the conversation. We never discussed what our action plan was to get to that point, or how we wanted to utilize our funds in retirement.
Both of those are extremely important points to discuss to make sure you are on similar pages.
As humans, change is just part of our nature, so it is to be expected. But, if you and your partner have similar future goals, and talk about it regularly, you have a better chance of growing together, instead of apart.
Since my ex-husband and I never hashed this information out, it was only logical that we grew apart. And fairly rapidly, at that, unfortunately.
How I got back on track
Once we reached the point of no return, and the fighting about finances became too much, divorce was inevitable. This turned out to be a much more difficult, and expensive, process than I ever could have imagined.
After the dust settled from the divorce proceedings, I was left with thousands of dollars in debt, and a single mother of two young children. And at that point, I had been out of the full-time workforce in my area of expertise for years.
My son was starting kindergarten, but my daughter had only just turned two. I didn’t want to take that time away from her while I went back to work full time. Of course, that was my choice, which only made things harder on me financially. So, I chose to only work when my mother could watch my children, which boiled down to only working part-time one to two days a week.
This meant I was living on approximately $800 a month, plus a little over $400 in child support. I kept the house, since it was mine before we ever met, which meant I had to pay the mortgage. Things got so tight for me that I ended getting on food stamps to help with groceries because I couldn’t afford them. While this time was extremely embarrassing for me, it was also wholly humbling. I learned never to take anything for granted and to be grateful for all that we did have.
I started using a budgeting system
After a year or so, I began looking for ways to help me figure out my budget more effectively. And that is when I stumbled upon Mint. A friend who worked with me part-time told me about it and I am glad they did. Because it helped me take a look at everything all in one place. I could see how much I was spending, where, and it helped me learn to shift where the money went so that I could pay off the debt faster.
I used this platform for a couple of years until I found Personal Capital. I slowly began to switch over to that platform because I liked how streamlined it was. While Mint broke things down into specific categories, which I needed at the time, Personal Capital helped me see my net worth and debt.
This was at a time when I was getting close to paying off the rest of the marital debt, so I tracked it fairly aggressively. I wanted to see my net worth grow on a monthly basis, and this platform helped with that. I still use it today to check on my net worth monthly.
I started investing
The next step I made was after I got the debt paid off finally. By this time, I was back to working full time because both children were in elementary school. That really helped my financial health greatly because I could throw more money at the debt. And once I got it all paid off, I heard about Betterment.
Since I didn’t know enough about investing on my own, I was drawn to the idea of a robo-advisor that does all of the heavy lifting for me. At first, I could only invest $20-$30 per month, because that is all the disposable income I had. But, that was still better than nothing and it has grown exponentially now.
Today, I still use Betterment as one of my investment tools and am still fond of the platform. Overall, it took me about five years to fully recover financially, which is exactly how long we were married.
Ultimately, not speaking the same financial language is what caused the demise of my marriage. Of course, there was a lot of fighting thrown in there for good measure also. But, it was usually about finances. So, if we had spoken the same financial language in the first place, we could have saved ourselves a lot of heartache and financial devastation.
Because I didn’t push having the money talk with him before we married, I set myself up for some major financial disaster. I just didn’t realize it at the time.
On top of initiating the money talk, I should have:
- Learned about his history with money.
- Gotten his perspective on credit cards and credit scores.
- Discussed what his future financial goals were.
So, if you haven’t discussed some, or any, of these topics yet, you certainly should. Even if you aren’t completely on the same page with all of these topics now, it is good to know where each of you are coming from. It is also good to know how each of you responds to the topic and where you can be flexible with your perspective.
My new spouse of four years and I have a regular budget meeting every week to discuss what is going on and where we want things to be. Even though we weren’t on the same page when we met, he was more than open to the conversation and wanted to be in a better financial place with me.