This money mistake could be a detriment to your marriage.
Couples, who fail to discuss their finances and implement a plan of action to save, could pay big time when it comes to fighting about money.
“The No. 1 mistake is we avoid our money. We don’t talk about it proactively. We wait until something comes up, and then we react to it and we do that for the next 50 years,” personal finance advisor Ramit Sethi, host of the new Netflix series “How To Get Rich,” told The Post.
The eight-episode series follows Sethi, author of “I Will Teach You To Be Rich,” and host of the podcast with the same name, as he audits people’s personal finances and guides them on how to allocate their savings to live their best “rich life.”
On each episode, Sethi digs through people’s bank statements to determine income, debt, savings accounts and their spending history. This helps him see where folks are spending their money most.
Couples “lack a ‘rich life vision’ together, because they lack a vision of what their money should do,” he noted.
“People will argue over how much one person spends at Target. We’ve got to stop asking $3 questions, and start asking $30,000 questions.”
Indeed, rather than punishing your partner for shelling out on steak at the grocery store or a new designer purse, Sethi said the bigger picture on savings should be the meat of the conversation.
Instead, he said that couples should be asking: “What do our conscious spending plans look like? What is our savings rate?
“If you have savings rate of 4%, and you and your partner agree you’re going to increase that number by 1%, that decision for your savings and investing is worth hundreds of thousands of dollars.”
Being upfront about the financial future could save marriages. A shocking 62% of people admit to arguing with their partner about money, a survey from mutual pensions and investments provider Royal London, which was reported by the Independent, found. And 33% say they’re not compatible with their significant other regarding their views on spending and saving.
Outside of married couples, Sethi’s job is to help people understand the psychology behind their spending habits — and fears of talking about money. On the show, that involves helping a young woman homeowner figuring out how to afford her mortgage, and helping a divorced business owner avoid living paycheck to paycheck.
“For most people, finance is one reactive transactional decision after another. That’s because most of us deep down love money, but we also hate it. We love what it can do for us — travel, generosity, beautiful experiences — but we also hate the process of managing it. Many of us have negative beliefs,” he said.
Whether you’re married or living independently, the first step Sethi advises on the show is tracking four numbers. First, determine one’s fixed income — the cost of a mortgage, utilities, car payments, groceries and debt — and allocate 50 to 60% of take-home pay to it each month.
Next, 5 to 10% of one’s earning should be automatically deducted from a paycheck into a savings account to start an emergency fund — or what Sethi called “the money you don’t need for one to five years.”
Third, he said, allocate between 5 to 10% of take home pay to investments.
“Obviously the more the better, because that’s how you create wealth,” Sethi said.
And lastly, he urged people to set aside 20 to 35% of take-home pay for spending on discretionary things that makes you happy — whether it’s travel, dining out, movies or cocktails.
Sethi suggested setting up automatic payments on savings to ensure the proper amount of money is being allocated so folks don’t have to worry about doing it manually. Plus, it eliminates the daunting task of setting and sticking to a budget.
“You’ll often hear people say, ‘I try to save at the end of the month, but it’s really hard.’ Saving money is actually easier than brushing your teeth because you can set it up automatically. The minute you get paid. It shifts you from playing defense with your money to playing offense,” he said.