Shifting gears from managing your money alone to handling it as a couple can be a challenge for some new pairs. Your joint financial success will depend on how much each person views money, whether you are a spender or a saver, and how disciplined the two of you will be as you master the skill of being financially responsible together.
Balance Wants vs. Needs
Honesty is the key to budgeting as a couple. You should each have an accurate picture of your finances, and neither of you should have to bear the brunt of your joint financial responsibility. Start by checking in with each other about how you spend money. This can be the lead-in to discuss wants vs. needs and how each of you defines their meaning. You may want to remodel the guest bathroom, but do you need to do it now?
Is one of you a spender and the other a saver? Splurge on that platinum cable package or cut the cable bill? Save money for a new car or schedule regular couple massages? It’s best to decide together what’s discretionary spending.
Laying the groundwork to set clear priorities is an important first step toward successfully managing your joint finances. Calculate just how much you both spend and try to compromise on what’s important to each of you. Once you’re on the same page, you can adjust your expectations as needed and a budget is a great tool to make sure you stay there.
Build a Budget
When it comes to budgeting for two, there are no shortcuts. Taking the time to build a budget may not be the most fun day the two of you will have, but it’s an essential task to accomplish in order to keep tabs on your finances and limit your debt.
As with almost anything, you’ll find a nearly mind-boggling array of budget templates online. Pick one that makes sense for your current life stage. Or use a Google Sheet, which lets you share, comment and make edits on the fly. Which ever method you decide on, these steps will make it easier to begin:
Step 1. Figure out your actual monthly income. You can’t build a budget without first knowing exactly how much money is coming in every month. That means basing your budget on your actual take-home pay.
To calculate your monthly income, take your weekly take-home pay and multiply by 4. If your income fluctuates, find an average or use your lowest amount to play it safe. And don’t forget to include any side gigs or income from part-time jobs!
Step 2. Determine your regular expenses. Start with mandatory household spending, including:
- Mortgage/rent, homeowner’s insurance and taxes
- Electricity, heat, water/sewer, Internet, phone
- Car payments, insurance and gas
- Health insurance and prescriptions
- Student loans and credit card debt
Consider opening a joint account to help you manage how you spend and save your money together.
Step 3. Project your variable expenses and discretionary spending. Account for one-time and intermittent expenditures, such as vehicle registrations, accounting fees, car and home maintenance. Any money spent on entertainment, gifts, vacations and dining out fall into the discretionary category. Try to plan ahead for these expenses as much as possible so they don’t sneak up on you and wipe out your budget.
Make a list of goals
Once you have a clear understanding of your income and expenses, individually and together, you can move on to the fun part – creating a list of goals.
Start with short-term goals like setting up an emergency fund, inexpensive home repairs, a weekend getaway or a class you want to take. Then tackle the long-term goals that will require more time to achieve. Stretch goals like saving money for a major home renovation, vacation abroad or new car fall into this category.
If you need to make cuts to accomplish your goals, be careful about where you shift your resources. Rely on your budget to spot areas where you can reduce spending and make adjustments as needed. And revisit your wants and needs to see if any compromises need to be made.
When it comes to balancing your goals with budget cuts, follow the SMART rule:
- Specific – If you make a cut, make it specific. For example: Don’t spend less on groceries next month. Cut the grocery budget by 20%.
- Measurable – If you spent $600 on groceries this month, spend $500 or less next month.
- Assignable – Assign responsibility for a goal like increasing IRA contributions to your partner while you take on the task of looking for cheaper auto insurance.
- Realistic – Cutting credit card expenses by 100% in one month may be unrealistic. It’s better to get there gradually over a period of months.
- Time-bound – Set deadlines to keep each other accountable.
Check in with each other
Once you’re on the same page about money, have developed a budget and set some financial goals, make sure you check in with each other on a regular basis to confirm your plan is still working. It’s a good idea to schedule a monthly budget meeting. That way if your budget seems off, you’ll have the chance to identify what is and isn’t working and make adjustments as needed.
When it comes to managing finances with your significant other, the bottom line is to be patient and communicate.