Financial Planning For Couples – First Things First: Establish A Budget

When you become a couple you become a team, and both of your actions and expectations will define your future life together. Your choices today will shape your tomorrows. Keeping in mind your financial priorities, it’s time to create a plan for your spending and saving.

The first and most important step to achieving financial success is to make a budget. Simply put, a budget allows you to tell your money where to go, instead of wondering where it went.

Money often equates to power, but who makes what is irrelevant. The size of your paycheque does not determine your role in the family finances.

Consider these common situations:

  • Adrienne is a stay-at-home mom raising three preschool children. She is married to Nick, a successful architect. Nick pays the bills and makes all the family’s financial decisions. Adrienne has no idea how much Nick earns. She pays for the household needs from their joint account or credit cards, as required. There’s always enough, and that’s all she cares about.
  • Brett looks at his spending habits as his own business as long as he’s using his own money.

“Why should I be accountable for how I spend my own hard-earned money. I should be able to do whatever I want with it.”

Although Brett had never missed contributing his portion of the regular household expenses, he dodged any money related conversations with wife Olivia. Olivia never said anything about Brett’s spending.

  • Connor works as a graphic artist for a small start-up company. His wife Paige, a pharmaceutical sales rep, earns considerably more income. They combine both their salaries into joint chequing and savings accounts. One day, Connor spent an enjoyable summer day treating some of his old school friends to a day of golf and drinks afterward. When he returned home, Paige was furious. “How dare you spend my money on your loser friends!” Connor felt guilty about his spending, but he also resented his spouse for making such a big issue of it.

Now consider what can happen in the future if these couples don’t start planning their finances together:

  • Nick was in an accident. His condition is not critical, but he will have to spend many painful weeks rehabilitating. In the meantime, their house and car insurance came due. Nick normally shops around, compares coverage and negotiates the best price before renewing. However, Olivia, not knowing how to proceed, just paid the offered higher premium. She didn’t know which account the credit cards were paid from, and, because she didn’t know Nick’s budgeting system, the joint chequing account she normally used became overdrawn for the first time.
  • Olivia and Brett were living in a small apartment and had jointly been saving for a down payment on a house. They now felt it was time to buy. During an appointment with a mortgage lender it became clear that Brett had often gone over the limit on his credit cards and sometimes was late making his payments. His debts and poor credit history were going to be an issue and Olivia was angry that Brett had jeopardized their chances of owning a home. They may still be able to obtain a mortgage, but they lost the chance of getting a preferred interest rate. Brett realized that Olivia was planning for their future while he was frittering away his income on himself. He finally agreed to have the dreaded money conversation and work together with Olivia on a budget.
  • Connor and Paige ultimately ended their relationship. It was not merely caused by the inequality in their incomes, but by their attitudes about it. If they had worked together to discuss their dreams and how they would jointly achieve them the anger, resentment and bitterness could have been avoided.

A budget is a tool to track income and expenses, set boundaries, and support your financial goals. When you discuss your goals together you’ll both bring a different perspective to the table and you’ll be able to make better decisions. As a team, sticking to an agreed-upon budget allows you to spend less time worrying about money and more time on your relationship.

Respecting each other as equal partners with an equal say in money management is an important part of contributing to your goals.

Do you need to combine everything?

There are different ways of handling money – experiment to see what works for you. Find a way to blend finances comfortably without feeling like big brother is watching every financial move you make.

Should you merge everything you have and earn into one joint account, or should you maintain individual accounts and just open a joint one for household expenses? It’s not unusual for couples to keep individual credit cards, spending allowances, or accounts. Separate is not bad – as long as you co-ordinate.

What matters is not whether you have one account – or three. What matters is that you’re creating a budget or spending plan by communicating and making decisions together.

So long as you work together to achieve your goals as a team, your accounting structure is a non-issue. The benefits of combining accounts, loans, and assets are: fewer accounts to monitor, easy sharing, transparency and reduced banking fees. But sometimes when couples pool money, it creates the perception they’re flush with cash, which can trigger overspending.

Final thoughts

Many couples don’t do a formal budget. But when you are starting out together a budget provides structure, establishes direction, and creates accountability while avoiding finger-pointing and accusations. Creating a shared budget can help ensure you’re working towards the same goals which brings you closer as a couple.

It’s essential for the success of your overall financial future and the foundation for sound decision making.

Use technology to your advantage and try budgeting apps, software, and online worksheets – some you pay for, but many are free – to help you create your own budget. Or build your own personalized spreadsheet.

Once you know where you stand and where you want to go you can take the proper steps to get there.

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