Everyone has heard the statistic: 50% of all marriages end in divorce. In reality, the rate is actually not that bad, and it's going down. But that doesn't mean that there still aren't millions of people who get divorced every year worldwide.
Money can play a huge role in the success of your marriage. Research conducted at Kansas State found that "arguments about money is by far the top predictor of divorce." Knowing that, we asked three of our analysts what big money mistakes couples should avoid. Here's what they had to say.
Selena Maranjian: Talk about it, early and often
One of the biggest money mistakes couples make is simply not talking about it. Here are some startling statistics: According to a 2012 American Express survey, fully 20% of married couples waited until after they tied the knot to discuss finances. An earlier study found that 30% of couples found money to be the cause of the most stress in their relationship and that 91% of those surveyed find reasons to avoid financial discussions. A Citi-sponsored survey found 56% of respondents having made major purchases without consulting their partners. Yikes.
So what, exactly, do couples need to discuss? Well, they need to be on the same page, financially, throughout their life together. They need to agree on their goals and on how they plan to reach them. They need to agree on how they will spend their money, perhaps by establishing a budget and sticking with it. There shouldn't be clandestine spending or secret credit cards.
This is important stuff, because once you entwine your financial fortunes with someone else, they can end up putting you in debt and/or derailing your plans and dreams. Discussing finances shouldn't have to be a painful process. Enter into it with a positive attitude, ready to compromise if need be, and perhaps even to write your agreements down on paper for future reference.
Remember that you can allocate money for fun and for discretionary purchases, too. Have financial check-ins regularly, such as once per quarter, to make sure you're still in good shape and on track to reach goals. If one person is the main keeper of funds and payer of bills, make sure the other understands what's going on and can do the job, too, because one day he or she might have to.
Brian Stoffel: Don't sacrifice retirement for your kids education
We all want to do right by our kids, and there's nothing wrong with that. Sometimes, however, we sacrifice a bit too much, and it can have serious implications for our financial security in retirement. Abandoning retirement savings in order to pay for college is one such instance.
While we might think that choosing retirement over our kids education is a selfish decision, the situation can be turned on its head down the road. That's when your children will be forced to care for you -- physically and financially -- because you were unable to put money away during your working years.
Of course, the perfect solution is to live within your paycheck and save for both. But even if that isn't possible, there are very affordable paths to help your child get a college education. Championed by fellow Fool Morgan Housel, if your child takes time off of college to work, completes his or her first two years at community college, and then transfers to an in-state university, it's possible to get a four-year degree from a reputable institution without crippling debt.
Jordan Wathen: Don't forget insurance
It isn't fun to think about, but we all have an expiration date. Basic statistics tell us that in any couple, one person will likely outlive the other, potentially by a wide margin.
Thinking and planning for events out of your control is a key part to a proper financial plan. One of the most important things any couple can do is make sure they have enough life insurance for both partners to cover necessary funeral expenses, and also pad the family's income should the worst come to worst.
Couples with young children need especially large life insurance policies. A life insurance policy should safely cover your current living expenses, at least as long as your children will live at home. One way to make sure you're covered adequately is to multiply each partner's annual income by 12-15. That's a good rough estimate of how much life insurance you'd need to make sure your standard of living does not change wildly while the children are home. Couples who have one working partner may need more life insurance to offset the loss of income over the other partner's remaining life.
Luckily, life insurance isn't particularly expensive for those who need a lot of it (young families with young children). And should you ever need it, you'll be very glad you have it.