Three Easy Ways to Mess Up Your Finances

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We try to do our best when it comes to managing money. We make New Years’ resolutions, we set goals, and we even sort of budget a little. But there are three key ways we can really mess up our finances without really trying.

Clock1 – Spend it Before the Check Clears – We have heard time and time again that we shouldn’t spend what we don’t have. But it’s also important to see that you shouldn’t spend what you don’t have yet. If you have a small business on the side or you are getting a bonus or any other form of “extra” income, it is easy or tempting to spend that money before it arrives because you know it is coming soon. But is it? What if the contract falls through at the last-minute or the company you just did some freelance work for goes bankrupt? Or what if the tax return is not correct and you actually owe money instead of getting a refund? The point is that until the money actually hits your bank account, its not yours to spend.

Heart2 – Combine Assets before Marriage – If you are planning to marry, but are not yet there, then you may want to avoid putting your money together. Do I mean don’t have a joint checking account? Well, not if it’s your only checking account. But more importantly, don’t buy a car, a home, or even a dog together. Why? Because when you are legally married there are automatically certain protections built into the law. Not married? Not so much. Of course if you are years away from marriage or not even planning to get married, but feel the need to build a life together, then you need to have an exit strategy. That means written agreements in place that indicate who gets the house or who gets stuck making the rent payment, and who gets the dog when you split up. There are a lot of details that need worked out, but consider how you can easily separate your financial lives from each other if the relationship ends.

Spy3 – Keep Money Secrets from Your Spouse – Assuming you are married, it becomes very important to be open about your financial goals. Spouses should not have secret credit cards or loans or even bank accounts that the other is not aware of. That doesn’t mean you have to share each other’s passwords to every bank account, but you should know the accounts exist. You may need separate credit cards, such as travel for work, but the key is to be open and honest about your financial situation at all times. Communication is key. It is unfair if one spouse if diligently paying down the family debt while the other is racking up thousands on a credit card. This will lead to resentment and lack of trust – what else is the spouse hiding? You should have some money (like an allowance) that each spouse can spend on their own, but keeping secrets indicates a deeper marital issue.

Of course there are many other ways to mess up your finances as well. Send us s some of your ideas and we will give you a shout-out if we use them in a future article.

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Bill Pratt

Bill is an Assistant Professor of Business at Piedmont Virginia Community College. He speaks on topics related to personal finance on college campuses across the country and is the author of multiple books on personal finance. He left the financial industry to focus on helping people become personally and financially successful. He lives in Charlottesville, VA with his wife and their three pets.