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When you get married or are in a long-term relationship, two become one and this can be true for your finances.
Being a couple means making money decisions and budgeting together. This can be hard because people often don't like talking about money. It's important to take time to discuss your finances as a couple. If you don't know where or how to start, here are considerations around budgeting for couples.
Calculate Your Actual Combined Income
One thing to review as a couple is your joint income. It's important to sit down with your partner and look at your joint take-home pay to figure out how much you have coming in each month. You'll likely want to account for any deductions that come out of your salaries.
This can get tricky when one person has variable income or is self-employed. In these cases, you could either:
- Look at what you made in recent months and use the average
- Be more conservative and use your lowest-earning month as your baseline
The point is to get a realistic picture of how much you earn together as a couple.
Get a Full Picture of Your Expenses
Take a close look at your expenses. This includes fixed expenses, such as:
- Car and student loan payments
- Cell phone plans
- Gym memberships
- Child care (if applicable)
It may also include those sometimes-forgotten items, such as:
- Magazine or streaming subscriptions
- Dining out
- Clothing purchases
- Health insurance co-pays
- Visits to the salon or barber
- Car maintenance costs
If you use online banking, your bank may provide charts when you log into your account that show your monthly spending in broader categories, such as entertainment, housing and food. You can use these details as a starting point to break down your spending. Look at what each of you spends on average each month for all of these line items. You can use a spreadsheet or budgeting app to get a full picture of your expense habits, individually and as a couple.
Agree on Your Family Budget & Responsibilities
Once you know the numbers, it can be helpful to sit down and create a budget. If your joint income isn't enough to cover your joint expenses, you might want to review four key things:
- Your household necessities: housing, groceries and utilities
- Your long-term financial goals: saving for retirement or paying off student loan debt
- Your individual needs: such as going to the gym or funding hobbies
- Where you can cut back to reduce spending: like reducing your trips ordering carryout
Budgeting should be about both your needs and wants, so make sure to include "fun money" as part of your budget.
How to split the funds
You may also want to look over how you'll divide expenses either by:
- Splitting everything 50/50
- Each person paying a specific percentage of expenses, according to their income.
For example, if you earn 60% of the household income, then you and your partner might decide you should pay 60% of the expenses while they pay the other 40%. Also, if one person has student loan debt, you might decide that he or she pays this debt individually, while you cover slightly more of the expenses. You can decide what feels fair and works for your situation.
Bring in a Mediator — if Necessary
Another way to approach budgeting for couples is to bring in a mediator, such as a financial professional, to help you set a budget. Sometimes, a trained professional can help you see things more clearly by:
- Making a road map to achieve your long-term financial goals
- Share strategies that help improve your finances, such as 50/30/20 budgeting rule: allocate 50% of your budget to household needs, 30% to wants (shopping, dining out and hobbies) and 20% to savings or debt.
Talking about money isn't always easy, so having another person take a hard look at your finances may make things less difficult.
Decide Who Will Be the Money Manager
Budgeting and money management can be a part-time job. One partner may also enjoy it more than the other. If that's you, perhaps offer to take the reins to track your family's budget each month. Just make sure to keep your significant other in the loop. While the typical advice is to have monthly budget meetings, you can do this without making it formal. You might go out for dinner, chat after a run or walk in the park or sit down at home to discuss any changes you think should be made. This way, you can make it a part of your normal routine rather than a separate, stress-filled money conversation.
It's important to keep these considerations in mind when budgeting as a couple. Even though talking about money can be uncomfortable, working together to achieve your money goals can help you build a strong foundation for your family's financial future.