Budgeting as a single individual is easy, but once you get into a relationship and become a couple, that process becomes harder. The challenge stems from the fact that now you’ve got to care about the financial needs of someone else beyond yourself.
If you decide to not talk about money, couples will find themselves stressed out about finances later. And that can impact the life and the direction of the relationship significantly.
If you care about one another and are looking for long-term success in this, you’re going to need to be able to budget. And budget properly at that. With this in mind, here are some of the things you can do to get started.
Learn The Basics
Like with every new skill you’re acquiring, knowing the basics will be crucial. It’ll set the foundation that can then be built upon over time.
The best thing about the basics is that they’re also not that complicated.
Before you even begin to set up a budget, you want to be sitting down and having a lengthy conversation on budgeting and money. The topics you want to be covering are:
- Your financial habits (and to a lesser extent financial philosophy)
- The financial goals you two have
- And the financial desires
These three things are crucial as they provide understanding of how the two of you approach money. It also helps knowing this, so you can provide support where it’s needed in certain areas.
The other thing to note is that even if you give completely different answers and have different styles, there is no “good” or “bad” style. The goal of this conversation is getting to know one another and being honest.
When everything is laid out, it’s easier for people to know how to proceed.
If your partner is hesitant with this idea, you’ll need to change the financial approach. See if you can create positive experiences and frame situations as working together as a team is better in terms of achieving a financial goal.
Contemplate On Combining Finances
Once the basics are covered, one other important aspect to consider is whether to combine finances or not. This is another big decision on budgeting: should couples combine their finances?
The answer to that question comes down to personal preferences. There is no right or wrong answer in the scenario. There are three main approaches to this:
- Combine finances – Everything you and your partner make and spend goes into one big pot. All the expenses and income are shared. There may be a small account for personal spending, but everything is shared
- Separate finances – There are no connected accounts and things are divided and then assigned to one or the other. You could take the 50/50 approach, but it may be nicer – though more technical – to base it on the percentage of income if there is a huge gap in each other’s earnings
- Hybrid Finances – The last approach takes a mixture of both. The idea is that when your goals align with each other, the money for that goes into a joint account. That joint account can also handle household expenses as well. All that you do is contribute to that account when it’s necessary. As for the amount it could be a percentage of income or a 50/50 split.
The idea with managing finances is to figure out each other’s preferences and determine what’ll be the best approach. You also want to consider this carefully as joint accounts can complicate things when and if you and your partner break up.
Figure Out Household Needs
Once you have a feel for each other’s financial styles, you want to determine the overall needs. These are things that you’ll need in order to survive. Things like rent or mortgage payments, utility bills, groceries, debt payments, and so on.
There are all kinds of creative ways to go about adjusting these costs. For example, settling with a used and older car may be appropriate for you, rather than getting a shiny new one. You can also cut back on groceries or consider downsizing.
As a couple, it’s important that you prioritize your needs over your wants while you budget together. This means coming with an understanding of what each other’s goals are and striving to compensate for that. For example, you may need to adjust your expectations if one of you wants to be the saver of money and live more minimalistic, while the other is more materialistic and spends more.
Furthermore, if either one or both of you have debt, it’s important to figure out how to handle it. You’ll need to put a plan together to ensure that you can handle it in a comfortable way.
Address Your Own Needs
Once you know the needs of the household overall, you want to look at individual needs and wants. Some of these can pertain to expenses like clothing, gym memberships, haircuts, and other personal expenditures.
The key here is to recognize that each other’s wants and needs are different and that you’ll need to compromise. You might give your partner a hard time for their obsession over a trading card game or other leisure expenses, but you may have an obsession of buying lots of shoes.
The idea is being able to strike a balance between these things, so they don’t hinder the overall financial goals. There are many ways to deal with this. One is to set up an allowance system, which allows one another to spend money on these items without being held accountable to the other person.
So long as both of you are sticking to a budget, there shouldn’t be any reason to argue or fight over these expenditures.
Have Long-Term Goals
The fifth step is coming up with long-term goals. We’re sure you don’t want to be living every single day “getting by” financially. You’ve got financial goals in there that you’d like to achieve. The idea is to formulate concrete goals and incorporate those goals into a long-term financial plan.
The idea with that is that it’ll provide you with a future glimpse at how long it’ll take you to reach that goal. How soon will you be able to afford raising a family? How long will it take you to get a house? What age will you be able to retire? You can get an idea of that if you have these desires and start working towards these every month.
What’s also nice about these is that now that your goal is at the forefront of your mind, you may find it easier to stick to a budget. The reason for this is that you now have a goal that you’re invested in achieving and you know part of that success stems from sticking to the plan that you put together.
In terms of great goals to be setting for yourself some examples are:
- Getting out of debt
- Making a certain amount of money every month
- Owning a home
- Having a strong retirement plan that you can contribute to consistently each month
Assemble The Budget
The final step is now that you know how you want to tackle your budget overall, you want to be moving forward with it. With everything that you know, you want to start drafting it and making adjustments.
A budget is a group effort though, so it’s important that both of you track your spending. One way to ensure this is having a weekly budget meeting.
During this meeting, you discuss the progress made towards shared and individual goals. You also want to touch on briefly the spending and what’s left.
At the start, this may be something you want to be doing on a daily basis to get a feel for it. But eventually, you can start doing these every week or have an extensive one every month.
The other thing to consider is that if one or the other makes a mistake financially, it’s important to stay calm through the process. Instead of lashing out, look for a solution. There is no point in dwelling on mistakes or getting angry.
All in all, budgeting shouldn’t be a frustrating process. Take some time to explore the potential of living together and combining finances.
Establishing this early will ensure you avoid serious disagreements later down the road.