By Wendy Mihm | February 24, 2011
My husband and I are really trying to save for a new house. We want a bigger one, in a safe neighborhood, with great schools. Coming up with a 20% down payment these days is no small task, so we are saving every penny we can to come up with the cash.
But those sweaters at Banana Republic sure are pretty.
When you are married and have a family, you may think your situation is unique, but the truth is, (as I have learned on Twitter) we moms have an awful lot in common. Sure, every family brings something unique to the table, but somehow we all turn out to be eerily similar in many ways. And in turn, we make a lot of the same financial mistakes, over and over again.
So, in hopes that we can learn to avoid them, here is a list of five common financial mistakes that many American families make, starting with how I gave my new house to Banana Republic.
Common Financial Mistake #1: Letting Seemingly Harmless Purchases Eat Away At Your Savings Goals.
When you have a financial goal in mind, the appropriate thing to do is to agree upon a well-defined target with your spouse, such as “We want to save $100,00 for a down payment on a house by 2012,” and then go after it with a plan. That plan could include agreeing to actively cut down on your spending in specific categories, establish a savings vehicle (such as a mutual fund or high-interest bearing savings account, if you can find one!) and set up automatic deposits from your checking account. Voila.
Now, the common mistake is to eat away at our spending goals in little dribs and drabs on seemingly harmless purchases. I did this for years at places that have beautiful merchandise and great sales, like Banana Republic, Anthropologie and Baby Gap. Now that I have begun my No New Clothes for A Year challenge, I find myself fighting the same mistake in the kids clothing department at Target. One time, a sized 4T dress and leggings set jumped right off the rack and into the cart while I was not looking, which I thought was totally unfair.
Common Financial Mistake #2: Putting Off Saving for Retirement.
Retirement always seems like such a long way off! Especially if you still have at least one kid in diapers, and 2Pac pulsing through your iPod speakers (moment of silence). You and your husband probably think, “Who us, retire?” Yes, you. Retire.
What can be even worse is if one spouse is committed to saving for retirement, and the other is committed to the lottery. If you are the former and he is the latter, first, whap him upside the head with a rolled up newspaper. Then, make him read this: Get Started Investing. If you are the former and he is the latter, whap yourself upside the head, and then read that article I just linked to. Investing for retirement need not be difficult, and you don’t need much money at all to get started.
Common Financial Mistake #3: Hiding Spending From Each Other.
According to Money Magazine, about 80% of couples spent at least some money in 2010 without mentioning it to their spouse. For both women and men, the biggest spending category was clothing or accessories, followed closely for men, by alcohol and for women, by gifts.
Everyone needs a little privacy, and should be able to buy a few things for themselves without being judged, right? But when does this “private spending” become a problem?
Figure it out by asking yourself, “If my spouse knew about this, would he be angry, and if so, why?” If the answer is yes, and the reason is that the purchases are hurting your chances of reaching your mutually-agreed-upon financial goals, you have a problem on your hands. You need to tackle that problem as a team—especially if you suspect your husband is doing the same thing.
Common Financial Mistake #4: Letting Debt Linger
If you or your spouse have credit card debt, you are severely shortchanging yourselves. Think of it this way: banks are getting rich just because they loaned you money to buy things a long time ago, some of which you might not even use any more. Isn’t that annoying? To make matters worse, if you are late on any of your payments, or the amount of debt you carry is too high in relation you income, your credit score could be suffering.
You’re a grown up. It’s time to deal with this and move on.
What I recommend is to sign up for our free email series on debt. It will kick your bootie right into gear. It’s simple, written in plain English and, did I mention it’s free? Move it, sister.
Common Financial Mistake #5: Assuming Love Will Conquer All
That makes a great pop song lyric, but it does not apply to a real marriage. Love is incredibly important and will conquer many things, but when it comes to finances, your marriage is a business partnership. To make it successful you must, among other things:
- Appoint a Chief Financial Officer (CFO) of the home, which should be whoever is organized and comfortable taking the lead with the money. I nominate you.
- Talk about your money goals, long and short term.
- Create a plan for each of your goals.
- Reward yourselves responsibly.
- Agree that it takes time to build wealth.
I have since learned from my mistake of letting our savings be eaten away in little dribs and drabs on seemingly harmless expenditures.
But sometimes I wonder how Banana Republic is enjoying living in our new house.
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