Merging finances can be a tricky part of marriage. Wise Bread offers a few smart suggestions for how to do it right.
Sharing is hard.
When I was growing up, my parents would often only buy a single toy for me and my two brothers. That forced us to do something that we found very difficult — share. In my early 20s, my wife and I got married, and I was quickly thankful that my parents forced my brothers and I to share, because marriage involves a lot of sharing.
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Sharing doesn't come naturally. Sharing money is especially hard. Here are five steps for creating your first shared budget.
1. Determine Your Net Spendable Income
Your net spendable income is how much money you bring home each month after all taxes have been removed.
Your first budgeting task is to determine how big the financial pie is that you'll be sharing. Both partners will need to be completely open about income and fixed financial obligations (like alimony). It's going to be impossible to create a successful budget until you have a sense of your spending limit.
2. Hoard Financial Paperwork for a Month
While there are faster ways to set up your first budget, the most effective method is to slowly start getting all your paperwork in one place, so that you'll be ready to put together an actual budget. For an entire month, both partners should keep every receipt they get. If it's not easy to remember what you bought, then just write the item on the top of your receipt. Purchase a small notebook, and if you buy anything for which you don't get a receipt, write it in the book.
Designate a single place in the house where you'll conveniently keep the receipts.
During that month, get the totals for some of the bills you regularly pay. If it's something like power bills, try and get at least the last three statements, so you can have a fair idea of how much you pay.
Three more tips after the break.
3. Track Your Spending Using a Budgeting System
Most folks prefer to use budgeting software or a budgeting program, as they require the least amount of work. Some of the most popular software includes You Need a Budget, Moneydance, Mint, Quicken, or any number of budgeting apps.
If you'd rather set up an Excel spreadsheet or track things on paper, that's fine too.
As you're collecting your receipts, take some time at least once a week to enter all your purchases into your budgeting program.
4. Set a Budget
It's not the most romantic thing you'll do, but you need to set aside a few hours one evening to evaluate your spending for the month and determine how much money you should budget for each category.
This is where things can get sticky for some couples. One partner may want more money for decorations, and the other more money for a hobby.
Give priority to the items that you both agree are necessary expenses — things like housing, electricity, vehicles . . . Once those items are in place, you'll need to find a fair system for alternating how much you budget in categories of personal preference. It seems fair that both spouses should be willing to sacrifice some of their wants for the other for peace in the relationship. When you learn to share, you'll be sure that your budget fits within the cap of your net spendable income.
5. Maintain the Budget in Small Time-Blocks
Take 2-3 minutes every day to enter your expenses. I've always found that when I budget in these mini blocks of time, it is easier than trying to find a few hours in the month. Both partners ought to be clear about their responsibilities. (Who enters the expenses? Who pays the bills?) At least once a month, both of you should look over the budget to see how your actual spending compares to your budget. If you're spending more than you earn, it's time to take the red ink and start cutting out those unnecessary expenses.
What tips do you have for creating a first shared budget?
More smart stories from Wise Bread:
- How to Be Happy and Married: 24 Tips from a 24-Year-Old Marriage
- Coping Mechanisms for a Spender-Saver Relationship
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