Budgeting for Couples: Tips to Budget as a Team

A lot goes in to making a marriage work, and one of the biggest factors may be the last thing on people’s mind when they’re saying, “I do.”

It’s finances.

Money may not be what makes a marriage, but it can be what breaks one. An Experian survey revealed that 20% of divorcees believe finances played a big role in their breakup, and more than twice as many said it played some role.

It’s easy to see how this can happen. If both sides of a couple aren’t committed to living within their means, the resulting debt can create problems in their relationship.

Obviously, learning how to handle money with your spouse is important. Success in family finances is primarily about budgeting and saving. Fortunately, these are skills you can learn if you’re committed to communication and transparency. You’ll need to discuss your financial desires and habits so you can plot a course that helps you reach your goals.

How to Budget as a Couple

Each partner in a couple brings her or her own assets and income into a relationship. One of the biggest issues you’ll face is to what degree you will combine your finances. There is no one-size-fits-all approach to this.

One big pot: Combine all your income and share all your expenses. You can make exceptions by setting aside small amounts of money for personal spending, but merge everything else.

Divide everything: Each partner gets a separate account, and each has expenses he or she is responsible for. How you do that is up to you. This might be based on who has the higher income or who has the greater interest or expertise in paying for groceries, housekeeping expenses, mortgage/rent, insurance, taxes, and utilities. These are expenses which all couples face.

Find a middle ground: Paying the bills doesn’t have to be either-or. You may decide it works best if both of you chip into an account that covers household expenses and long-term plans while keeping the rest of their finances separate. How much each contributes might be 50-50 or based an equal percentage of their incomes, or whatever else fits your situation.

Obviously, if your expenses are larger than your incomes, the first order of business is finding where you can cut expenses or find additional income. Assuming you’re living within your means, your next step is planning what to do with the extra money.

Decide on Your Financial Goals, Both Individually and as a Couple

It’s not enough to decide who pays what. To budget successfully as a couple, you need to not only know where you are financially but where you want to go. That involves creating an intelligent plan for how you should set your financial goals.

Notice that saving comes first. There is a place for debt, but don’t make it your default mode for getting what you want.

So, what might you set aside money for?

• Buying a car
• Remodeling your home
• Vacation
• Creating a college fund
• Paying down debt
• New furniture or appliances

Which of these (or other) items should you prioritize? That’s where the two of you need to sit down and discuss. It’s likely you won’t agree on everything, so try to put egos aside and agree on the goals you can both be happy about. There are factors to consider besides the specific items you may want.

Do you have or plan to have children? Is it important for you to eat out at upper-scale restaurants or are you comfortable with simple, home-prepared meals to save money? These and more will affect how you’ll be able to save.

It may take several conversations for you to come to an agreement, and that’s OK. These are important decisions.

Talk About Your Long-Term Goals as Well

Consider what you want life to look like further down the road. What about retirement? Do you want that to happen early, or do you see yourself working longer? Where do you want to spend your senior years – in your current house, or do you want a beachside condo or cabin by a mountain lake? Do you want to start your own business one day? If you don’t plan for such things, they’ll slip up on your before you know it.

Be Honest About Money Obstacles

It can be quite a shock to discover that your significant other has a history. (No, not that history.)

Regardless of whether they’re caused by unavoidable catastrophes or bad financial decisions, financial woes can carry over into a marriage. Telling your partner about this may not be a pleasant conversation, but it’s a necessary one that should take place sooner rather than later.

Potential problems include bad spending habits, credit card debt, student loan debt and bankruptcy. The sooner your partner knows about it, the better the two of you can plan accordingly. If you’re facing multiple debts, strategies include the debt avalanche method (paying off the higher-interest debt first) or the snowball method (paying off the smallest loans first).

6 Steps to Start Budgeting as a Couple

After defining your goals and discussing any financial problems, spend some time figuring out your budget. Below are steps to help you start.

• List all of your combined income sources and amounts
• List all of your joint household needs and expenses
• Estimate your monthly costs
• Confirm how you will split expenses
• Track expenses
• Review how you’re spending against your plan regularly

List All of Your Combined Income Sources and Amounts

How much money does your family make? If all you can give is a ballpark answer to that question, you need to look more closely.

Obviously, you have your paychecks. Do you also get bonuses, Social Security, side hustles, dividends, rental income or royalties? Add them all up. Every little bit counts. Calculate how much you make per year and per month. You don’t want your expenses to exceed those numbers. The monthly income is important because so many of your expenses will be paid monthly.

Be extra careful about the monthly calculation: It’s not just dividing the yearly number by 12. If all your income doesn’t come in equal monthly amounts, as with commission payments, dividends, or bonuses, if you base what you can afford on your average monthly pay, you’ll come up short some months. A conservative approach would be to base your monthly income on the lowest monthly amount, then plan on what to do with extra income that comes in other months.

List All of Your Joint Household Needs and Expenses

Similarly, list all your household needs and expenses and put an accurate number by them. Don’t be alarmed that the list will undoubtedly be longer than the income sources. Be concerned if the total expenses are more than the total income.

Your list is likely to include:

• Housing (rent/mortgage and maintenance)
• Transportation (car payment, fuel, and insurance)
• Utilities
• Groceries
• Personal care and household expenses
• Health care
• Life insurance
• Debt payments
• Internet
• Cell phone
• Streaming services (music/video)
• Entertainment, including eating out

Estimate Your Monthly Costs

As with income, what you spend may not be the same every month, but you should be able to calculate your average total monthly expenses closely enough. For variable items like groceries, take a three-month average to figure a monthly cost. Some categories will be estimates but try to make them realistic.

You can do two things in this process. A close examination of what you spend may show you areas where you can cut back. Second, and more important, you’ll see how much you spend a month and can compare it to your monthly income.

The easiest way to estimate your expenses is to take an average of what you’ve spent over the prior months. An example would be taking a three-month average of your grocery costs to get an estimate for the coming month. Assuming your income exceeds your expenses, you can make decisions of how to save for your goals.

Confirm How You Will Split Expenses

Once you know your monthly incomes and expenses, you must decide how you’re going to pay for things as a couple. There’s no one right way to do this. Choose what works for you, but make sure you’re both clear on how to do it.

One option is to create a joint account where both of you deposit income monthly and use that to pay for everything. Joint accounts also can be used for saving for your goals.

You may feel more comfortable with separate accounts, so you must decide who pays for each bill: one of you takes care of the mortgage, the other handles utilities, and so on. The difference in the two partners’ income will probably play a role in who pays for what.

Track Expenses

At this point, you may feel that you’ve done all the important work. But you would be wrong.

All your calculations so far have been estimates – perhaps good ones, but still estimates. For this to work, you need to keep track of income and payments and make sure you get it right. Did you forget certain expenses or did new ones arise? Did an expected revenue stream diminish? Were you overly optimistic on how disciplined you would be about sticking to your budget?

Use every available tool to stay on top of this. Bank statements will provide hard information about how much is coming in and going out. Budgeting apps, which we’ll discuss below can provide a continuing snapshot of where you stand. If you want to double-check whether you asked yourselves the right budget questions, there are downloadable templates that can help you get organized.

Review How You’re Spending Against Your Plan Regularly

Regularly talk with your spouse about how your budget is going, especially early in the process. It’s vital that your budget becomes part of your lifestyle, not just something you talked about. Expenses and income seldom remain constant, and you need to adjust.

While this is a serious subject, it doesn’t have to be treated like a chore. It may help to create “budget dates” where you get out of the house in a casual environment to discuss how you’re doing, what needs to change and whether you need to adjust your financial goals.

What Are the Best Budgeting Apps for Couples?

You do nearly everything else on your smartphone, so why not your budget?

Budgeting apps are a 21^st century way to help you manage your finances. Some of them are designed with couples in mind. Look for ones that enable you to create personal and shared budgets and control whether bills are shared or handled by one of you.

Here are a few budgeting apps to consider:

• Goodbudget uses a simple method that is helpful for those new to creating and following a budget. The so-called “envelope system” has you designate money into categories like mortgage/rent, groceries and paying off debt. If you go over the set amount, the digital envelope will turn red to alert you. There is a free version the provides 20 envelopes and a premium version for $8 per month or $70 annually that provides unlimited envelopes and access on up to five devices.
• Mint is a free app that tracks your spending, income, and savings by connecting to your bank accounts, credit cards and retirement accounts. It will alert you if you go over budget, if a suspicious transaction appears on your accounts or you’re charged an ATM fee. Its bill tracker feature provides reminders on upcoming payment dates.
• Honeydue is a free app designed for couples. You can share checking accounts, savings accounts, investments, and loans with your spouse, and you each can select the accounts you want to connect to. Partners can also split expenses with each other directly in the app. Honeydue offers a joint bank account with no monthly fees, a debit card and free ATM access.
• You Need a Budget is more involved and more expensive ($14.99 a month or $99 a year) than comparable apps but it helps couples assign a purpose to every dollar they earn. That makes it especially helpful for those who are trying to get out of debt. YNAB also provides educational resources, including weekly online workshops offered every week y expert teachers.

Additional Budgeting Tips

As important as budgeting is, it’s not the only weapon in your battle for financial success. Maybe you’re spending too much on items you need. Maybe you’re overlooking ways to make money. Look for ways to save money in your budget and grow your income.

Speaking of saving money, everybody needs food, and if you limit how much you eat in restaurants, you’re off to a good start. But you may still be paying more than you need for the meals you cook at home. Check out these 14 tips to save more on groceries.

Saving may take on even more importance in retirement when you’ve traded your income-earning efforts into free time. Senior citizen discounts are nice, but one of the best things you can do for yourself in retirement is to enter it owing others as little as possible. Here are some tips for how to retire debt free.