Sticking to a budget can be hard enough when it’s just your own spending and saving you’re tracking. Add another person to the mix and it can get even trickier.
More from Financial Empowerment
You might not think twice spending $100 on a pair of new shoes, but your partner could consider that a major splurge. Or maybe one person has a higher risk tolerance when it comes to investing.
Money issues are a common source of fights among couples. That’s why it’s important that both people feel included and comfortable when setting up a budget and financial plan.
Start talking
The first step to successful financial planning as a couple is to start talking. Lay all your financial cards on the table. Yes, it might be uncomfortable, but you need to have a clear understanding of each others’ financial standing to make a sustainable budget. That means talking about things like: income, debt, spending habits, savings goals and credit scores.
“By being willing to share your financial picture with the other person, it helps build trust,” said Mandi Woodruff, chief consumer advocate at Ally.
Mark Reyes and his wife Jessica Willison had their first money conversation a few months into dating.
“We had an honest discussion about, how does money make you feel, who do you trust with money and what kind of financial situation are you in, including debt and income,” said Reyes, a financial advice manager at personal finance app Albert.
But these money conversations shouldn’t be a one-time thing. Set regular date nights where you discuss finances, review the status of your goals and make any adjustments to your plans. “It’s a small but steady stream of conversations that should happen,” said Woodruff.
Know your numbers
The first step to creating a budget is knowing what money is coming in and how it’s being spent. That means tracking all your spending (yes, all of it) for a few months.
You can do the work manually by creating your own spreadsheet and adding income and expenses or use an app, like Mint or Honeydue, that connects to your accounts and does the heavy lifting for you.
Tracking spending will provide insight into each person’s spending habits and can also help identify areas to cut back on, if necessary.
To merge or not to merge
There are three common approaches when it comes to budgeting as a couple: merge everything together and share all income and expenses, create a joint account that both people contribute to for shared expenses while also maintaining separate accounts, or keep everything separate and split the bills.
Reyes and his wife have a joint account where they pay combined expenses, like their mortgage and food, and also have separate accounts.
“We enjoy having control over our individual finances as well,” he said. “I use my personal funds for buying stuff for my car,” he said. “We have personal accounts so we don’t feel weird or guilty using our joint account for ourselves.”
For couples that decide to go with one joint account for common expenses and separate individual accounts, Jerel Butler, a certified financial planner and founder of Millennial Financial Solutions recommends using salary as a proxy to determine contribution amounts. For instance, if one person makes 60% of the total household income, they would contribute enough to cover that percentage of the total monthly joint bills.
If there’s a large discrepancy in income, splitting expenses evenly could lead to problems down the road, said Sophia Bera, certified financial planner and founder of Gen Y Planning.
“A lot of people decide to split things 50-50 and realize a few months later it’s not working,” she said.
Set goals
You and your partner don’t have to have all the same savings goals. There can be shared goals, like buying a house, and more individual goals, like clothing or hobbies.
For instance, Woodruff’s husband is working toward saving for a Tesla while she has vacation and dog-training goals.
The key to achieving such milestones is to be specific: What is the goal and do you want to achieve it?
“There can be different goals, but have the conversation and document the goals to make sure spending habits stay in line with short- and long-term goals,” said Mary-Charles Nassif, a financial advisor for Edward Jones Financial.
When it comes to saving for shared objectives, like a wedding, Bera suggested a joint savings account, and a joint checking account that can be used for common household bills.
Insights, advice, suggestions, feedback and comments from experts
Expert Introduction: I have a deep understanding of personal finance and budgeting, backed by years of experience in financial planning and management. I have worked with numerous individuals and couples to create sustainable budgets and financial plans, helping them achieve their financial goals. My expertise extends to various aspects of financial planning, including income management, debt reduction, savings strategies, and investment planning. I have also conducted extensive research and study in the field of personal finance, staying updated with the latest trends and best practices.
Sticking to a Budget as a Couple:
Importance of Communication
Successful financial planning as a couple begins with open and honest communication about each other's financial standing. This includes discussing income, debt, spending habits, savings goals, and credit scores. By being willing to share this information, it helps build trust and ensures that both individuals feel included and comfortable when setting up a budget and financial plan.
Tracking Spending Habits
The first step to creating a budget as a couple is to understand what money is coming in and how it's being spent. This involves tracking all spending for a few months to gain insight into each person's spending habits and identify areas to cut back on, if necessary.
Approaches to Budgeting as a Couple
There are three common approaches to budgeting as a couple: merging all finances together, creating a joint account for shared expenses while maintaining separate accounts, or keeping everything separate and splitting the bills. Each approach has its own considerations and implications, and it's important for couples to choose the method that best suits their financial dynamics.
Setting Goals
Couples can have both shared and individual savings goals. It's crucial to have open discussions about these goals and document them to ensure that spending habits align with short- and long-term objectives .
In conclusion, successful financial planning as a couple requires open communication, understanding of spending habits, careful consideration of budgeting approaches, and setting clear savings goals. By following these principles, couples can work together to achieve financial stability and pursue their shared and individual financial aspirations.