Creating a budget with your spouse is a crucial aspect of building a strong financial foundation together. It’s not just about numbers; it’s about communication, shared goals, and aligning your financial priorities.
In fact, a lack of communication about finances is one of the leading causes of marital discord.
By following these seven steps, you can create a budget that works for both of you, paving the way for a harmonious financial future.
1. Set S.M.A.R.T. Goals
Start by establishing S.M.A.R.T. (Specific, Measurable, Achievable, Realistic, Time-based) financial goals. Categorize your goals into short-term, medium-term, and long-term:
- Short-term goals (1-2 years): Building an emergency fund, paying off credit card debt, or saving for a vacation.
- Medium-term goals (up to 10 years): Saving for a down payment on a house or paying off student loans.
- Long-term goals (40 years or more): Retirement savings.
Using the S.M.A.R.T. framework ensures that your goals are clear and attainable.
For example, instead of saying, “We want to save for a vacation,” specify, “We want to save $3,000 for a trip to Europe in two years.”
2. Determine Your Net Income
Next, assess your combined monthly net income, which is your take-home pay after taxes and deductions. If both partners have stable salaries, this figure should be straightforward.
However, if one or both of you have irregular income sources (like commissions or freelance work), track your earnings carefully over a few months to get an accurate average.
3. Add Up Mandatory Expenses
Mandatory expenses are non-negotiable costs that you need to cover each month. This includes:
- Housing (rent or mortgage)
- Transportation (car payments, fuel, insurance)
- Utilities
- Groceries
- Insurance premiums (health, life, etc.)
- Loan payments
Once you’ve compiled a list of mandatory expenses, subtract this total from your net income to determine how much you have left for savings and discretionary spending.
4. Calculate What You Need to Save
Refer to your financial goals from Step 1 to identify how much you need to save each month. Include contributions to retirement accounts and any other savings goals.
Subtract your required savings from the remaining amount after mandatory expenses to find out how much you have left for discretionary spending.
For example, if your remaining income is $3,000 and you need to save $800 for your goals, you’ll have $2,200 for discretionary spending.
5. Divvy Up Discretionary Spending
Discretionary spending includes all the wants that enhance your lifestyle, such as dining out, entertainment, and hobbies.
Together, categorize your discretionary spending into “joint” (shared activities) and “individual” (personal expenses).
Having an open discussion about how much to allocate for these categories is essential. This is often where couples experience the most negotiation, so be prepared to compromise.
6. Select Your Budgeting Software
Choose a budgeting tool that suits both of your needs. Here are a few recommended options:
- You Need A Budget (YNAB): This app emphasizes proactive budgeting, encouraging users to assign every dollar a purpose.
- Honeydue: Specifically designed for couples, this app allows you to track shared and individual expenses while setting monthly limits.
- Goodbudget: This app utilizes the envelope budgeting system, helping you allocate funds to specific categories.
By using software to track your spending, you can increase transparency and ease the budgeting process.
7. Schedule a Weekly Money Date
To maintain open lines of communication about finances, schedule a weekly “money date.” Use this time to review your budget, discuss any changes in expenses or income, and adjust your goals as necessary.
These meetings don’t have to be lengthy or formal—keep it relaxed by discussing your budget over a glass of wine or during a walk.
Conclusion
Creating a budget with your spouse is an essential step toward achieving your financial goals and fostering a healthy relationship.
By setting S.M.A.R.T. goals, determining net income, tracking expenses, and maintaining open communication, you can navigate your financial journey together with confidence.