Marriage should ideally involve communication on all major life issues – money being the most important one. It is an integral part of your lives as a couple, and setting up a budget together can help strengthen the bond between yourselves.
However, despite the importance of budgeting, a vast majority avoids this practice like the plague. According to a Gallup poll, fewer than 30% of Americans maintain some budget – an alarming insight into the public’s general attitude regarding financial planning. Meanwhile, two-thirds of households don’t even have a budget.
Budgeting as a couple
Couples have to manage the expenses and savings for two people, so conflicts over money aren’t surprising or out of the ordinary. But, a well-detailed plan can help reduce disputes a great deal.
“A relationship that doesn’t involve bringing the finances in sync is more often than not headed for trouble.”
Long-term financial well-being depends on your commitment to budgeting as a couple. A 2010 survey by Citibank found that 57% of divorced couples cited money problems as the root cause behind their split.
5 key steps to successfully budget together
Figuring out how to budget can become overwhelming, probably why most people don’t do it. Finding ways to do it together as a couple can be challenging at first but will help in the long term. Here are five simple steps you can easily follow together as a couple:
Step 1: Set and communicate goals together
Setting short-term and long-term financial goals together plays a huge role in keeping up the sync between you. These could include the three-to-six-month emergency fund, debt payments, retirement fund, and allocations for anything you plan as a family.
The goals you set should be precisely defined (explicitly lay out what it’s about), measurable, realistic, and time-based.
It is up to you to decide which goal belongs to which category considering your current financial situation. For instance, is buying a new SUV something you could achieve in the short-term, or will it take longer than that? Perhaps, getting a new washing machine is something you could do this month considering the bonus you expect to receive? Discussing this together can really help with decisions moving forward.
Step 2: Work out your net income
The next step is to take your monthly earning into account. Knowing the amount of money you have to cover the expenses in your budget is essential. List out any income you regularly receive from various sources, including your job, part-time work or gigs, bonuses, and more. Estimate how much you could receive from each source and add the numbers to get an idea.
If you earn an irregular income due to self-employment or freelancing, you can make projections based on what you earned in the past month or during the same period in the previous year.
Step 3: List and calculate all mandatory joint expenses
Once you have calculated your net income, begin estimating what you expect to be spending. Such expenses might include costs that incur monthly and are unavoidable in nature. For instance, food, house rent, mortgage payments, insurance, gas, parking, utilities, and debt loan payments usually stay the same throughout the month.
Grouping expenses as per these categories keeps the budget organized and gives you a better idea of where your money is going.
Step 4: Learn to track expenses
Tracking expenses is one the most crucial part of the process since it lets you know if you’re staying within the budget. If you aren’t saving as much as you could, breaking down your expenses can really help to understand what is going on precisely.
You can do so with the help of shared spreadsheets maintained on Google Drive or budgeting apps that let you connect your bank account and debit cards. The consistent tracking of expenses ensures that you evaluate progress towards the financial goals.
Step 5: Have weekly money dates
Having weekly money dates helps you and your partner efficiently touch-base without losing focus on the longer-term or short-term goals you have set together. The intent of a money date should be to review your spending, discuss financial habits, revisit and re-evaluate the financial strategy you’ve put together.
Feel free to discuss your dreams and goals and how you would achieve them over a glass of wine to turn the conversation into something fun. At the end of the session, you should reach a consensus on how each of you will be performing their responsibilities from that point forward. A study found that couples who regularly discuss their money are happier in their relationships than those who don’t.
Setting up an operating budget, staying on top of it, and conducting weekly meetings to work around conflicts can turn out to be the best way of solidifying a long-running marriage or starting a new relationship.
Doing this alone is tough, but together it can be less burdensome, as you know there is someone else working together with you to achieve something. By budgeting as a couple, you and your partner mitigate the risks of diverging separately and letting expenses get the best of your relationship.