As individuals we all have our strengths, weaknesses, passions and different outlooks on life.
This especially is true when dealing with finances as we usually prioritise our expenses according to our needs.
It is because of our different needs that couples so very often find it difficult to manage their finances together.
Couples and Budgets
Proper budgeting will lead to successful financial management regardless if you are doing it for yourself or with a partner. But how do couples get to budget successfully?
Be Honest with Each Other
For a relationship to prosper it should be based on honesty and trust. Without these important principles the relationship will not last.
When couples become serious in a relationship it is important to be open on all aspects of life, especially finances.
For some this might be a small stepping stone where for others this is a sensitive subject. Perhaps this is because one partner does not work or where poor financial decisions in the past have left the individual with allot of debt.
Feeling ashamed, many would rather withhold the information from their partner so to avoid judgment.
Regardless if you do not financially contribute to the relationship, it is very important to be a part of the budgeting process every month.
This will help both partners to form an understanding platform, and where different tasks could be allocated to form a well balanced relationship.
Determine Your Individual Financial Status
It is therefore very important that couples declare their current financial positions to their partners before tying the knot or when living together.
It will ensure that couples don’t blame each other later in life should their relationship be going through a rough financial patch.
It is each individual’s right to know how their partner has managed their own finances in the past.
Some individuals will prefer to combine their finances while others want to keep their own accounts separate.
Financial transparency in a relationship is therefore important to ensure that proper budgeting is done each month as a couple.
Couples and Budgets: 3 Real Life Stories
The following three examples are based on true stories and just highlight the importance of honesty and budgeting in a relationship.
Struggling with Debt
The first example is about a very close friend who got herself into short term debt over a couple of years, and before she knew it she could not handle the repayments anymore.
She made the right decision to swallow her pride and seek debt counselling. A proactive step in my opinion, and she will soon regain her financial freedom with sacrifices she had to make.
She had been honest with her partner when the relationship became serious and together they are working towards settling both their debt before marriage.
Surprised by Finances
The second true story is regarding a friend who finally met and married the woman of his dreams. She is a successful individual in the corporate world, but too has managed to get herself into short term debt over a couple of years.
Because their financial status was not discussed in depth, he only realised the severity of her debt after marriage. He felt cheated as he too was now responsible for helping to settle her debt.
As you can imagine, this is the basis of their arguments as he blames her for their financial problems.
Hiding Money Problems
The third example is of someone I know who had been married for nearly 15 years.
Finances and budgeting became her sole responsibility after so many years, and she could not bear tell him the truth of her financial problems.
Instead she is trying to hang onto her marriage and avoid judgement from him but now has gotten herself deeper into trouble.
In order to ensure a healthy relationship with your partner you will need to be frank and upfront about your current financial status.
If the partner judges you more than providing the necessary support then the relationship is doomed in anyway.
Determine Goals Together
When a couple’s financial status has been declared, both individuals should advise on their financial goals, both long and short term.
With this in mind individuals can try to accommodate and work towards achieving their goals.
This might include deciding on how to settle current debt, obtaining a student loan, purchasing a home, vehicle etc.
Set Priorities as a Team
List your financial priorities and goals from most important to least. If there is current debt that needs to be settled, do a little more investigation and determine which debt has the highest interest and which debt is the least.
You will save money in the long run by settling high interest debt first, but if this is a large amount and you have smaller debt elsewhere, it might be better to settle the smaller debt first.
When the smaller debt is paid, ensure you add this monthly saving to the repayment of high interest debt.
There will definitely be a difference in what you deem as important compared to your partner, but this is where negotiation and compromise are important.
There are, however, certain aspects that one needs to prioritize even though it may seem as a grudge purchase.
Insurance is deemed a grudge purchase because you pay for something you might not benefit from for a long period of time. However, should the inevitable occur, having insurance, whether life insurance or asset insurance will provide peace of mind by providing financial relief.
As with any aspect in a relationship, compromising in the financial arena is just as important. We know we all have different needs and operate on different reward bases.
You might find it satisfying to save most of your income each month where your partner might feel that he/she simply needs to spend money more frequently on entertainment or retail shopping.
Negotiate and discuss on how you both can compromise on the matter in order to attain a happy medium. Respect each other’s opinions.
Share The Burden
Debt will be settled sooner rather than later when both partners are motivated and committed to repay it.
Not all debt is unmanageable, but if you realize that it has become too much, it might be a good time to see a financial adviser or a debt counsellor.
This is a refiner’s fire process and when working as a team will only strengthen your relationship.
Compile a Budget
The information provided above is the start to successful financial planning. Now you need to draw up an official budget on paper or a computer spreadsheet.
Excel works well for this purpose and can be adjusted accordingly without having to start over each time.
On the left of the spreadsheet list your income on top and financial obligations beneath it.
In the next few columns list the current and following few months next to each other. From here, under each month put the totals of your monthly expenses next to each category on your left.
After this is done you can add up your expenses and deduct it from the income in order to determine your net financial status.
Learn how you can beat this economy by mastering your finances. Get tools and tips to easily set up your savings and invest for your future.
It’s not impossible to handle your finances in this economy.Getting your finances under control is completely doable if you take it step by step.
Get a Snapshot of Your Finances
You have to be able to answer these questions with specific numbers, not estimates.
How much am I (or are we) in debt?
How much income do I/we take home each month?
How much are the monthly expenses?
How much do I (or we) have in savings?
Am I behind or delinquent on any bills?
How much is in my retirement account?
What’s my (or our) net worth?
One of my favorite tools to pull that data quickly and easily is Personal Capital. We use to track our numbers.
It’s free to sign up and they have a ton of tools to grow your wealth.
Once you have a clear picture of where you are, you can see what you need to improve on.
If you’re behind on bills, your priority is to catch up. See if you can work a payment plan or have a yard sale to raise money.
Keep your expenses lower than you income.Drastically cut expenses until you have at least a month or two of expenses saved. See if you can receive rewards/discounts with from your bank or memberships. Cut down on transportation expenses. Use a free spreadsheet to budget to get a snapshot of your current situation and build a plan.
Pay down high interest debt as fast as you can. If you end up on unemployment, lower monthly expenses will make the check go further.
Set aside some money, even $100/paycheck, to grow your savings. Start small and automate your money to put into savings. You’ll become use to the slightly small paycheck as you start savings. You want a cushion in case something happens. Even if the economy gets better quicker than anticipated, you should have something set aside for emergencies.
Be Too Valuable to Fire
You have to try and keep your employment as stable as you can. If you have already done so, start using the following tips to stay on board.
Become a spokesperson for your company. Even if you’re not in sales try to see if you get another account for your firm. Search for idea that could being in money or cut expenses.
Be sure the boss knows your value. It is YOUR responsibility to make sure that your manager and boss knows your accomplishments. Keep a record of your achievements and tactfully include them when reviews come up.
Be a team player and occasionally lead. Pitch in when it’s crunch time and help the team to meet goal. Try to keep a positive attitude and avoid known complainers who sap morale. Without irritating your co-workers too much or your manager, take the lead on some projects.
Even if your job downsizes, you’ve been up a rack of wins and recommendations you can take with you on your next job.
It’ll also give you leverage in getting better pay when you negotiate.
Build up the emergency fund to the point that if you lose your job, you’re not immediately having a meltdown.
Tax returns, inheritance money, unexpected gifts…..when you receive “extra” income, deposit it straight into savings.
How to Build a Budget Quickly
Track what you spend in two weeks. It’s hard to cut back if you don’t what your weak points are, so grab a little notepad and write everything you spend for 2 weeks.
Withdraw from your bank’s ATM once a week. Take out money you need to eat, tolls, etc. If you run out of money, then make a peanut butter and jelly sandwich or bring leftovers for lunch. Do not go back until the next week!
Use your cash, not credit cards. Don’t defeat the previous step by switching over to your credit card. This will help you to stop acquiring new debt, which in turn can drain your savings. National average for standard, variable cards is around 14%, so eliminating new debt will help you.
Base a tentative budget based on what you learned the past two weeks. This will help you avoid a rigid or unrealistic budget, which will only frustrate and discourage you.
Repeat. Keep working at this. You’ll probably work on it a few times until you get it right for your circumstances.
Automate your finances as much as you can.
Set up free online bill pay with your bank. Most banks and credit unions offer money and time saving feature. Spend an hour setting this up with your bills, account numbers, due dates, and amounts, and you’ll only need a few minutes a month to keep it up.
Take advantage of your company’s 401k program. Try to at least set aside enough money to receive the company match as it’s basically free money in your pocket. Look for low cost index funds to put your money in.
Have a small portion of your paycheck transferred into an IRA account.Once your build up your emergency fund, eliminated your credit card debt, and have increased your income; funnel some money into an IRA. You want to still look for low cost index funds to put your money in.
Your Take on Mastering Your Finances
What tips do you have on keeping your finances in check?