The Ultimate Guide to Budgeting for Couples
Financially managing jointly is a necessary part of marriage, yet can be especially daunting if both partners are used to keeping their money separate. But this transition needn’t be painful!
Understanding your budgeting goals, finding an approach that works for you, and sticking with it are keys to successful budgeting for couples. This guide will walk you through the basics of budgeting for couples – from determining income to splitting expenses.
Identify Your Goals
One important part of any couple budgeting plan involves discussing how you and your partner want to manage finances. You might decide to combine all or some of your money, or keep separate accounts; either way, having a discussion about this topic early on can reduce potential friction down the road.
Launch by setting your goals as a couple. This may involve setting short, medium, and long-term financial milestones such as how much is necessary in your emergency fund or when you can afford your dream vacation.
Once your goals are clear, the next step should be creating a budget. This step can be as straightforward or complex as you like; some couples use budgeting software to streamline this process. Scheduling regular money dates to review progress can help keep both partners on track with goals while providing opportunities to discuss any necessary adjustments together.
Track Your Spending
Maintaining a budget without tracking expenses is pointless; tracking is the only way to ensure real-world expenses match up with goals you set and to help determine what expenses can be cut to free up more funds for savings or debt repayment.
Start by compiling all your monthly expenses. Divide them into fixed and variable expenses; fixed expenses include rent or mortgage payments, utilities payments, transportation costs and insurance premiums while variable expenses such as groceries, gas purchases and entertainment may fluctuate month to month.
Use a notebook or app to track your spending throughout each week, month or semester you have a budget set for. As expenses come out of their category totals and are subtracted off, this will help identify where there may be cuts necessary and hold each other accountable; plus it offers an opportunity to discuss shared and individual budget goals for the future.
Divide Your Expenses
No matter whether or not you decide to combine or maintain separate finances, it’s essential that both partners start off by having an accurate picture of your combined after-tax income – this includes salary/wages, gig/side income, bonuses/tips/social security/alimony payments/distributions and dividends/passive income.
Subtract all mandatory expenses – housing, transportation, utilities, insurance and debt payments (such as student loan or credit card repayment ) from your income before determining how much is left over for needs, wants and savings.
Fixed expenses such as groceries can be estimated based on past spending and bank or credit card statements, while variable expenses like dining out, yoga classes and travel require doing some math or comparing costs over three months to determine an average monthly cost. Any discretionary expenses should then be allocated or split according to what best fits each person involved in your family.
Create a Budget
Once you’ve established your goals, a budget will help you devise a plan to save for them. Whether that means buying a home in the future, having children soon after birth, starting a side business or growing your retirement savings, figuring out exactly how much should be set aside each month and where any excess funds should go will help guide the plan.
Start by listing all of your fixed expenses such as rent, utilities and car payments. Add variable expenses (groceries, gas and entertainment), subtracted them from total income and any remaining balance can be set aside as discretionary spending (although keep in mind that groceries are necessities but drive-thrus are discretionary spending).
Regular budget meetings between you and your partner can be beneficial in keeping an eye on all categories, tracking progress toward shared goals and discussing any behavioral changes needed (for instance cooking at home instead of dining out or cutting down credit card usage). Many apps also automatically categorize expenses to make this process even simpler.
