When you decide to share your life with someone, there’s a lot to get used to. However, there are few things that upset your life more than the disagreements that can come along with money management. Whether you decide to combine finances or keep things separate, it’s smart to come up with a shared household budget.
Identify your priorities
The very first thing you need to do is figure out what’s important to both of you as individuals and as a couple. Acknowledge where you differ from your partner, and focus on where you are the same.
For example, my husband likes to live in a comfortable home with nice furniture, surrounded by action figures. I like to get out of the house and travel. He’s more about things, and I’m more about experiences. Putting together a spending plan that melds these priorities has been difficult, but we’ve made our peace over the years.
Part of that peace-making process involves focusing on the priorities we share. Of course we have regular bills to pay, and we meet these obligations. Our more discretionary priorities as a couple include donating to charity, planning for retirement, and eating out. We also agree that our son should have extracurricular opportunities.
This means that before we fund our selfish individual priorities, we make sure to take care of our shared priorities. We donate to charity, contribute to our retirement accounts, and identify enriching activities for our son—and we go out to eat on occasion.
Next we can move forward with our individual priorities. Some couples find it easier to provide allowances for each individual, and that can be one way to ensure that personal priorities are met.
TIP: Make sure you have a complete picture of your finances. Check your credit report to make sure you’re aware of your financial accounts and catch potential mistakes.
Know your cash flow
When you first decide to make a budget, take a month to track your income and expenses so you can get a better picture of your shared cash flow. Each partner should keep track of what he or she makes and where that money goes. Personal finance software or an online system like Mint.com can be helpful in this process. However, don’t get intimidated by fancy programs. You can just as easily track this on a piece of paper in your wallet.
Your shared spending plan should be based on your cash flow as a couple, which means that you both might need to make adjustments based on the new situation. If you keep some of your finances separate, you will need to figure out who is responsible for which bills. If you have “mine, yours, and ours” accounts, you will need to work out a cash flow to ensure that the account for shared expenses is adequately funded in time to pay bills.
Sit down and hammer out the logistics of your personal economy so that you know where your money comes from and where it is going.
It’s tempting to think of your partner’s priorities as “silly,” but remember that some of your spending priorities might seem equally silly to someone else. You have to remember to respect each other when you start putting your first shared budget together.
Keep in mind that you love your partner and that you’re together for a reason. As you work out the basics of your budget, make sure you both keep calm. If either of you needs to take a break from the planning session, do so.
In some cases, it makes sense to get professional help in creating your financial plan. Consider a trusted financial planner or expert who can help you both identify problem areas as well as come up with solutions that you can both get behind. Sometimes, having a third party involved can help smooth the process.
Creating your first shared budget can get a little tense. Remember, though, that you both need to compromise, and that a shared budget can help you both use your resources to get what you want out of your partnership.
Miranda Marquit is a freelance writer and professional blogger specializing in personal finance, family finance and business topics. She writes for several online and offline publications. Miranda is the co-author of Community 101: How to Grow an Online Community, and the writer behind PlantingMoneySeeds.com.