7 Best Budgeting Tips for Couples
While creating an effective couple's budget can be more complex than a personal budget, it's definitely possible. Check out our best budgeting tips for couples!
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Building a personal budget is a fairly simple activity. You list your income and fixed expenses and then allocate whatever's left over towards your discretionary expenses and goals.
But creating a couple's budget can be more difficult. Often each partner has their own income and individual expenses in addition to bills and goals that are shared. And these variables will complicate the budget-building process.
The good news is that despite these complexities, it's definitely possible for partners to create budgets that optimize their joint finances and minimize frustrations. Here's our seven best budgeting tips for couples.
1. Calculate Your Combined Monthly Income.
The first step towards creating a useful budget for couples is to determine how much money is flowing into your bank accounts each month. It might be tempting to just take your combined annual incomes from last year and divide by 12. But couples can run into problems with that approach. Here's why:
Let's say that in most months you and your partner earn a combined income of $6,000. But thanks to various end-of-the-year bonuses or commission checks you each receive, your total annual income is $84,000.
If you divide $84,000 by 12, you'd get $7,000 as the number that you input on the income line of your monthly budget. But as we already pointed out, your typical monthly income is actually $6,000. So if you budget your monthly expenses based on a $7,000 income, there may be several months where you go in the hole.
For this reason, we tend to recommend that couples use their regular consistent paychecks as the starting point for their budgets. Or if either of you work in commission-driven jobs where your paycheck amount is always variable, you may want to use your lowest amount from the past 12 months.
By keeping your expenses below these numbers, you'll minimize the risk that you'll ever have a month where you spend more than you bring in. Then in the months when extra income comes in, you and your partner can discuss how you would like it to be allocated.
2. List Your Shared Expenses.
This is one step that each couple could approach slightly differently. Some couples may choose to share all expenses, while others may only want to split a few. Examples of the most commonly shared expenses include:
- Rent/mortgage payments
- Utilities
- Groceries
- Internet
- Cell phone
- Streaming services (music/video)
Some couples may decide to keep "personal care" expenses out of their shared budgets. They may also choose to exclude debts that a single partner took out in their own name such as student loans, car loans, or credit card debt. Ultimately, each couple will need to decide for themselves how many (or few) individual expenses they want to include in their joint budgets.
3. Consider Your Individual Expenses and Goals.
Hopefully after you've listed your shared expenses, you'll still have money left over. But before you move on to shared goals (which we'll discuss next), it's important to account for your personal costs and financial goals.
Let's say you chose to keep student loans out of your joint budget. In this case, you'll need to deduct these payments out of your individual incomes before you can begin to discuss how to allocate leftover joint funds. And if you're each saving for personal goals such as a college tuition payment, a car purchase, or a new computer, you'll need to subtract these costs as well.
Let's return to the example of the couple that has a combined monthly income of $6,000. Of that $6,000, we'll say that you contribute $3,500 and your partner contributes $2,500. You have $3,000 in shared monthly expenses, which means that you're responsible for $1,500 each. So that leaves $2,000 for you ($3,500 - $1,500 = $2,000) to allocate towards individual expenses and goals and $1,000 for your partner ($2,500 - $1,500 = $1,000).
Again, this step is only necessary if you each have your own individual incomes and have decided that you want to keep certain expenses separate. Some couples choose to share all income and expenses. And in other cases, only one partner works while the other chooses to stay home with kids.
In cases where all income and expenses are shared, it's still important to clearly communicate your personal dreams and desires. For example, let's say that you're currently a stay-at-home mom, but you'd really like to return to school next fall to finish your degree. That's something you'll need to express to your partner so that, as a team, you can build a financial plan for making that dream a reality.
4. Determine Your Shared Goals.
Ok, now comes the fun part! Now that you've listed all your shared and individual expenses, you get to dream together about the things that you'd like to accomplish with whatever discretionary income you have left.
Returning once again to our couple with $6,000 in joint monthly income, let's say that after accounting for their personal expenses and goals, they have $1,500 left over. Now they can begin to list some of the purchases or experiences they'd like to save towards.
There are myriad savings goals, both large and small, that couples may want to include on their list. Here are just a few examples:
- Mortgage down payment
- Car purchase
- New furniture pieces
- Vacation
- Home remodeling projects
- Payoff of joint debts
- College funds for kids
During this phase of your budgeting process, it's important that you both take turns sharing and listening so that neither partner dominates the discussion. Once you've both had an opportunity to share, you'll need to come to an agreement on how you want to order your goals.
For example, you may decide to immediately begin saving each month towards a home down payment and a summer vacation. But you may decide to wait on saving for other purchases, like a new car or sofa, until you have more discretionary income at your disposal.
5. Build Your Joint Budget Using a Couples-Friendly Tool.
There are several budgeting websites and apps that are specifically designed to help couples manage their finances. Honeydue and Zeta are two popular examples, but there are many more to choose from.
The best couples budgeting apps will allow you to create both personal and shared budgets and will give you complete control over what bills you want to share. They also typically make it easy to message each other about specific transactions and split them in an instant.
6. Schedule Consistent Budget Dates.
Budgeting isn't a one-and-done activity. Your income, expenses, and goals will naturally fluctuate over time, so your budget will need to adjust periodically as well.
That's why it's so important to review your budget on a consistent basis. These regular check-ups can also help you to identify any "budget-buster" spending categories that may be keeping you from reaching your shared goals.
Many couples find that monthly budget check-ups work well. But those that are just getting started with creating joint budgets, may prefer to review them more frequently at the beginning, such as on a weekly basis. On the other hand, couples that have been budgeting together for a long time may eventually find that quarterly reviews are sufficient.
Rather than having budget "meetings" at the dining room table, consider scheduling money dates outside of the house. When you're in a neutral and relaxing environment, it's often easier to have constructive, judgment-free discussions about your financial goals, the progress you've made, and budget adjustments that could help you to reach them faster.
7. Consider Opening Joint Financial Accounts.
Joint bank accounts can make it a lot easier to manage your joint bills. For example, let's say that you and your partner share the rent on your apartment, the utilities, your internet and cell phone bill and you only have separate financial accounts. Here are the financial accounts that are used as the payment method for each bill:
- Rent: Your checking account
- Utilities: Partner's checking account
- Internet: Your credit card
- Cell phone bill: Partner's credit card
In this scenario, your partner would need to send you money every month for his or her half of the rent and internet bill. And you'd need to transfer money to your partner each month for your half of the utilities and cell phone bill.
This process is rather cumbersome. By opening joint accounts, you can eliminate all of this transferring back and forth. You simply transfer enough money into your joint bank account to cover your half of the monthly bills and you use that account as the payment method for each of them.
Depending on the level of trust that you have in your relationship, you could also add your partner as an authorized user on one of your credit cards or have them add you as an authorized user on one of theirs. Just know that it's ultimately the primary cardholder's responsibility to keep the account current. And in addition to missed or late payments, high credit utilization could negatively impact your FICO® Score, even if your partner does the majority of spending on the card.
The Bottom Line
There's no need for money fights to drive a wedge between you and your significant other. By implementing these budgeting tips for couples, you and your partner can avoid many of the most common money stresses and use financial synergy to achieve your shared goals.
Clint Proctor is a freelance writer and founder of WalletWiseGuy.com, where he writes about how students and millennials can win with money. His work has been featured in several major publications including Business Insider, U.S News and World Report, Yahoo Finance, and Forbes.