Budgeting for couples is important for managing household finance and can help you achieve financial success.
Money has an impact on many aspects of our lives, and it is frequently associated with marital strife, but this does not have to be the case. We can make tiny changes and see results if we stay consistent.
There are three main ways for couples to budget.
This is not an exhaustive list, please do share other ways you budget with your partner not listed here.
In my home, we agreed to combine all of our finances, even if we don’t have a joint bank account.
Because we don’t have a joint account, some expenses will come from my account and some from my wife’s account
There is no sense of “my money or your money”, it’s our finances irrespective of what each person brings
Different approaches work for different people, and each style has its own set of advantages and disadvantages.
Financial infidelity is a significant downside of combining your finances.
Regardless of how you budget and handle your finances as a couple, the methods mentioned below will assist you in going from 0 to 100.
Learning about each other’s habits, histories, anxieties, and desires is the first step in budgeting for couples.
The goal isn’t to point out what’s right and what’s wrong, but to understand where you’re coming from, so non-judgmental communication is crucial.
In a relationship, we are connected to someone else with a different combination of history, culture, temperament, personality, birth order, and so on
This means that your approach to money will most likely differ from your partner’s, resulting in differing expectations.
Both partners must be willing to listen, share, and compromise or else we become unhappy and dissatisfied due to expectations not met
It’s also crucial to understand that you’re not attempting to mould your partner into your image.
Some examples of things you can talk about are your spending habits, fears, debt etc
When we had this conversation (or series of conversations) in our home, we realised that, while having similar childhood experiences, we had grown into different people.
This isn’t surprising because even siblings that grew up in the same house handle finances differently.
When I met my wife, she was the classic saver while I was the spender and risk taker but over time she has learnt to invest while I have balanced my risk appetite.
This first step will help you understand your partner and also learn a few new things about them and yourself.
Enter these conversations with the mindset of being vulnerable and naked, and it should be done at the right time and with the right questions.
So, rather than getting upset, you empathise with your spouse when they act out old programming that doesn’t agree with the new direction, and you get to build on each other’s strengths.
The second step in budgeting for couples is to categorise your financial goals into short-, medium-, and long-term categories.
A short-term goal is usually accomplished in a year or less, such as opening a brokerage account or setting aside X amount as an emergency fund or X amount of debt to be paid off
A medium-term goal is normally between two and ten years for example saving for a new home or saving/investing to take a six months mini-retirement
But a long-term goal, such as investing for retirement, will be ten years or more.
Dream together, but don’t stop there; instead, devise a strategy for achieving your goals.
Therefore to accomplish your goals, you must first pose the question.
What steps do we need to take to reach our goals?
Bringing your goals and dreams to life is a process
Begin by breaking down your goals into milestones, then identifying the activities, tasks, habits, and systems needed to reach each one.
For example, if you want to pay off three credit card bills (£5000, £2700, and £700), you might set the following milestones.
There will be a lot of activities to accomplish each of these milestones, but we now have a strategy in place to meet our goal of eliminating credit card debt.
Your goal isn’t complete without a plan in place
After you’ve determined your goals, the next step is to calculate your household’s net income (how much hits your account after deductions)
Make a list of all the sources of income, their amounts, and add them all together to determine the total household income.
Examples of income sources include but not limited to
If your income is consistent and not variable, this category can be set and forgotten
However, if your income is fluctuating, you should adjust this section frequently or use the minimum monthly amount in the last year to give a bit of consistency
Your expenses should not exceed your income
Congratulations you have sorted your income, the next step in budgeting for couples is to look at your expenses
It’s wise to determine your needs first before wants, needs will fall into these categories
Many of the items on this list are fixed month to month and can be automated via direct debits and standing orders, simplifying your family’s finances.
In addition, there are several ways to save money in these areas. Take a look at our post on ways to save money.
For those with variable income, the goal is for your minimum monthly income to cater for these expenses, giving you more wriggle room
If you both have debts, you must come up with a plan to address them together. Take a look at our post on how to get out of debt.
You’ll see that savings and investments are included in the list of expenses; this isn’t an error; I see it as a mandatory expense in my budget.
You can begin investing right now, no matter how small. Here’s how to get started investing in a few easy steps.
Add up all of your mandatory expenses and remove them from your income; perhaps, you’ll have money left over to spend on discretionary items or to get closer to your goals.
Here, you’ll have to agree on a number of expenses and amounts.
Some examples of discretionary expenses, which can be either household or personal are
An example would be taking a three month average of your grocery costs to get an estimate for the coming month.
Don’t forget about one-time or yearly expenses while figuring out your budget.
A sinking fund can help you plan for these kind of expenses. Here’s everything you need to know.
This has the potential to make or break your budget. It’s pointless to make a budget if you’re not going to keep track of your spending.
This keeps you on track and allows you to make adjustments to your budget during the month.
For example, I chose to spend 100 pounds on fuel in a month, but by the second week, I went on an unforeseen trip, indicating that at the present pace, 100 pounds will not enough.
With this knowledge, I can make adjustments by increasing my fuel budget to ensure that I do not spend more than my income.
It’s an opportunity to communicate on a regular basis, as the name implies; the value of communication in a relationship cannot be overstated.
Your goals are only as good as the systems in place to achieve them
Having a system in place to communicate regularly can be the difference between success and failure.
Why should you do this
You have complete control over the frequency and length. We used to do this frequently when we first started, but now we do it once a month for no more than 30 minutes.
Don’t let your finances add to the number of things that might make a relationship complicated, unpredictable, and sometimes frightening.
One of the smartest financial decisions you can make is to create a budget with your spouse.
You may work toward your financial goals as partners by budgeting together.
Begin forming solid financial habits today by taking action today
