Getting married often makes managing household finances easier. Living on two incomes instead of one can give you more wiggle room in your budget. However, newlyweds can fall into some of the same financial traps as single people, such as spending above their means. As you begin your life together, you may be wondering, are dream homes the real reason newlyweds end up broke? Below we’ll explore some of the most common causes of financial struggles among married couples to help you avoid financial snags.
Are Dream Homes Making Newlyweds House Poor?
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Tying the knot and buying a suburban house with a white picket fence feels like the beginning of forever. But if you stretch your budget to purchase your dream home, the financial stress could strain your marriage. Financial experts recommend that you spend no more than 30% of your gross income on housing. However, recent studies have shown that 76% of Americans ignore this rule, potentially leaving them house poor.
Believe it or not, banks will sometimes approve you for a bigger loan than you can actually afford based on your lifestyle. Lenders mainly consider factors like your debt and income. They don’t factor in expenses like daycare costs or financial goals like saving for retirement.
Regardless of what the bank says you can afford, it’s important to do the math and set your own maximum purchase price. Sitting down together and writing out your monthly budget will help you understand how much house you can actually handle. In addition to your baseline bills and savings goals, don’t forget to factor in unexpected costs like home repairs and potential property tax increases.
If this exercise reveals that you can’t buy the perfect home yet, remember that you can work towards your dream together. They call it the property ladder for a reason! The equity you build in your first home will help you buy a bigger, better house down the line as you grow your family.
Many lenders will also allow you to put down less than 20%. However, it’s important to keep in mind that you’ll have to pay a monthly mortgage insurance fee if you make a smaller down payment. Additionally, your mortgage payment will be higher if you only put 5% or 10% down, which could make it harder to swing financially. Saving up a larger deposit and shoring up your emergency fund can help prevent you from feeling house poor.
Other Factors That Make Newlyweds Broke
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Housing is one of the biggest monthly expenses for most couples, so it’s important not to overstretch yourself when buying your first home. However, bad real estate decisions aren’t the only reason newlyweds end up feeling broke. Here are some common culprits that could be draining your wallet.
Dream Wedding
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Most couples dream of having a fairytale wedding, but unfortunately, throwing a big reception can be a major financial drain. In 2023, the average cost of a wedding ballooned to $35,000. Over half of couples had to take on debt to pay for their special day.
The credit card bills and loans from your nuptials can take years to pay off, putting financial strain on your newlywed life. Splurging on the dream wedding may leave you with less cash on hand for other important goals like buying your first home or starting your family. Pursuing a less expensive event option like a courthouse wedding could give you more financial breathing room as you start your new life together.
Poor Communication
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If you and your partner don’t communicate about your spending, you could end up feeling broke at the end of the month. Buying coffee or grabbing takeout for lunch seems like no big deal in the moment. However, small purchases can really add up if both spouses enjoy treating themselves frequently. It’s important to get on the same page about your savings goals and set a limited fun money budget. Many couples also agree to consult each other before making purchases over a certain dollar amount to improve financial communication.
Expensive Cars
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Many couples need two cars so they can both get to work and shuttle the kids around. However, car payments can drain your wallet and limit your borrowing ability when you purchase your first home. Buying reliable used cars instead of new ones that depreciate can help lower your transportation costs. Choosing vehicles that are the right size for your family is also important. If you’re just starting to build your family, you probably don’t need a minivan or SUV right away. Purchasing a smaller sedan can help you save on gas and car payments.
Wrapping Up
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Money is one of the top two reasons couples fight, so it’s important to manage your finances well as newlyweds. If you don’t plan properly, buying your dream home could leave you feeling house-poor and stressed.
However, you can still end up feeling broke even if you rent or purchase a property that’s within your means. Other expenses like fun spending and transportation costs can break your budget if you aren’t careful. Paying attention to all of the line items in your budget and cutting costs wherever possible will set you up for financial success.
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