A happily-ever-after Hollywood storyline is often depicted as the ultimate relationship, but in real life, creating a long-lasting and thriving relationship takes work—and there are bumps along the way. With the many wonderful experiences, you’ll most likely also face a few tough situations.
One of these challenges is commonly centered around finances. When working with couples, finances and spending habits are at the top of the list of disagreements and conflicts. One partner is a spender, and the other is a saver. One is a generous giver, and the other is frugal. And sometimes, one partner is hypervigilant about their finances while the other hasn’t really paid attention at all. For a happy marriage to stay strong, we must build a bridge between these differences.
Estimated reading time: 6 minutes
The Challenges of Budgeting as a Couple
Budgeting your money can be tricky when you’re single, and it gets even more complicated when combining finances as a couple. Merging different perspectives and habits on managing money may cause some friction between you and your partner, but things will fall into place when you work together as a team.
Having honest—and sometimes difficult—conversations about spending habits, money values, and goals early on (even before you’re married) can help immensely. Ignoring or avoiding this topic is a recipe for discord and misunderstanding. Proactively communicating and getting clear on your joint financial goals can prevent conflict later on and also be a springboard for informed decision-making and greater unity as a couple.
3 Common Financial Obstacles
For couples seeking financial security, you need to be aware of the common pitfalls. These are three ways couples and families get into financial trouble.
- Income-Expense Ratio.
Be mindful that your joint income should be MORE than your monthly expenses. And there usually needs to be a cushion because we tend to underestimate how much we spend. Know your regular expenses. Are you covering them?
If one of you is a stay-at-home parent, this arrangement also needs to be considered. You may be saving money by avoiding the cost of childcare, but is it enough with only one income? Perhaps, a part-time side hustle is in order, at least in the short term.
- Too Much Debt.
Perhaps, one or both of you have a college loan and your income is barely covering expenses. Then, you add a credit card with low interest to enable you to get that much-needed washer and dryer. Then, you find that you're running out of money toward the end of the month and charging "just a little" to get you by. By the following month, you're only able to pay the minimum on the credit card. Before you know it, the interest goes up and is accumulating too quickly. Ouch!
- The Unexpected!
A car breaks down. One of you is laid off from work. A medical or dentist bill is much higher than anticipated. Unexpected expenses are a slippery slope for many couples, especially when just starting out. Don't be caught off guard. A good rule of thumb is to set aside six months of savings for the unexpected.
How to Budget as a Couple
Below are a few guiding principles and budgeting tips to help you set up your life together for financial success. These tips will allow you to work as a team more effectively to budget your money and navigate finances intentionally.
Define Your Values to Guide Your Decisions
Often, excessive or problematic spending stems from a lack of clarity around our values individually and/or as a couple. What is most important to you? What is going to guide you in making decisions that create a life you love?
Until you isolate what will make your lives meaningful together, making sound financial decisions will be much more challenging. It’s critical as a couple to determine what matters most to you. For some couples, a membership at a gym is a must for health, while for others, it’s a luxury. For some, owning their dream home on an acreage is a goal to save for and a motivator to cut expenses like a gym membership. For another couple, giving a generous portion to charities might be essential.
Each individual’s values are unique; thus, each couple’s values will also be unique. Think of values like a Venn diagram with two individual circles overlapping each other. You want to increase awareness and intentionality as a couple to make decisions that impact both of you (like finances) from the overlapped, shared space in values.
With a new awareness of your core values, design marital financial decisions around them. Financial ease will more quickly fall into place.
Related reading: “Create a Successful Marriage—Don’t Compromise!
Keep the Lines of Communication Open
When it comes to budgeting as a team, communication is a significant factor. Seek to provide a safe haven for effective communication. To create safety and success in these conversations, focus on the situation and results rather than directing the conversation about your partner’s behavior. Ask for what you’d like to see in the future rather than dwelling on mistakes. Remember, budgets change over time, and they are there to support your goals and values, not to control you.
Communication is expressing and sharing your thoughts, feelings, and ideas while advocating for yourself with your partner. Communication is also about listening to your partner’s feelings, needs, and values. When we are open, curious, and fully present to one another, we can resolve differences and reach agreements we’re both happy with.
Make a Commitment to Live Within (or Under) Your Means
Make a Commitment to Live Within (or Under) Your Means
One of the best ways to build financial security is to live within your income and avoid accumulating credit card debt. Pay off your credit cards every month faithfully. There’s nothing that can deflate a happy relationship quicker than money problems. Whether it’s a lavish wedding, an unexpected layoff, or a hidden, out-of-control spending spree by one partner, financial stress can place a major wedge between a couple and add enormous conflict.
Head avoidable problems off at the pass by planning for upcoming expenses, creating a buffer savings account, and living within your income.
The best way to live under your means is to track money in and money out. We've found You Need a Budget empowering to get a handle on earning power, expenses, and debt.
Related reading: “Are You a Minimalist? Lessons to Increase Self-Awareness.”
Track Expenses to Inform Spending Limits
There are many things you can do to ease stress around money and finances. One of these is setting reasonable limits for spending based on your values, goals, and income.
Before defining your budget, track your expenses for a month and find out what and where you’re currently spending. By taking the time to track expenditures, you’ll discover spending habits that don’t align with your values or adequately enhance the quality of your life. For example, you might find out that you’re spending hundreds on eating out at restaurants weekly when you’d rather have that money go toward savings or a down payment on a house. Awareness creates choices.
Once you look openly at your spending, you can then make intentional choices to decrease any incongruence between your current financial spending and your values-based financial goals as a couple.
Try to do this financial tracking from a space of nonjudgmental curiosity. Changing your relationship with money will change your relationship with each other! So don't allow yourself to get hijacked by anger or shame that would diminish your capacity as a couple to be intentional versus reactive in establishing any financial changes.
Next, decide together how much you want to spend in each area. From there, set a reasonable monthly limit. The monthly limit is a practical plan to live within or below your income so you can begin to save, have a buffer for unexpected expenses, and start to focus on your dreams and goals intentionally. Cash tucked away for a fun budget can also be invaluable to help create happy memories even when the money is otherwise tight. It can also make it easier to save along the way when you know it doesn’t mean sacrificing all your “fun money.”
Find ease and get relief by using a budgeting app. Don't wait until after the fact and find out you've overspent! On your financial journey as a couple, You Need a Budget (YNAB) can help you regain control of your finances. It is the ONLY app that allows you to plan in advance where you WANT your money to go according to your unique values, goals, and dreams. Try it!
Be Thrifty, Especially if Money Is Tight
Whether you’re just starting out, recovering from a loss of income from the pandemic, or entering a new relationship, you may benefit from being thrifty.
Try a little thrifty shopping. There are plenty of garage sales in the summer and ski swaps in the winter in our area. When you shop for clothes, begin at the sale racks before purchasing at full price. Or shop at consignment stores for used clothing, furniture, and household items and upcycle things you don’t use by offering them on consignment.
Thrifting can even be a fun activity for you and your spouse to do together.
Should You Have a Joint Bank Account with Your Spouse?
Every couple is different, so deciding whether or not to combine your finances can be a dynamic decision. There are a few pros and cons to sharing a bank account.
A joint bank account can strengthen your relationship and build a team by requiring you to have difficult conversations about money together. A shared account holds each of you accountable for better budgeting and communication while placing limits on spending habits. Tracking what you spend is extremely helpful and much easier with only one account versus multiple accounts. Multiple bank accounts can get disorganized and left unattended; overspending can be more challenging to spot. A joint account also helps you as a couple to stay on the same page.
Most importantly, sharing one account changes a couple’s common and counterproductive attitude from my money to our money.
Let’s look at a few cons that come with having a joint bank account. First, you might feel judged or restricted by your partner’s opinions of your spending choices, which can cause conflict depending on the power dynamic in your relationship. Sometimes, you can feel like you have less access to the money you are earning. Financial privacy is more difficult since your partner can easily check your purchases and how much you spend. This transparency between two people can be healthy, yet it asks for increased understanding and more explicit boundaries.
Some relationships may benefit from a shared bank account, while others might thrive with accounts separated. If it’s unclear whether joint or separate accounts best serve you, try finding a professional such as a financial advisor to help organize your finances and make wise decisions.
Plan for Big Purchases as a Couple
For major purchases, research and planning are key. And being on the same page, as a couple, before actively shopping is crucial to prevent frustration and wasted time and money!
It's essential to sit down and talk about financial details any time you have a larger goal in mind as a couple, such as buying a house, starting a family, or saving for future travel adventures. It’s also helpful to review obligations you currently both have and need to rectify, such as eliminating debt or repairing bad credit history. Whether your credit is currently impeccable or has room for repair, intentional tweaks could help you make better decisions.
Once these subjects have been discussed, you can start fresh and figure out the important things you want to start saving for.
If and when you decide to purchase a home, it is critical you again sit down as a couple and discuss your financial goals and ideal home together at this stage of your lives.
When buying a new home (or your first home), the above details are critical to getting your finances on the same page. Once serious about purchasing a house, you'll want to see what your buying power is. What's manageable given your income and other financial responsibilities, such as daycare or preschool costs for your child? Another thing to consider is how you will finance the home. For instance, you may qualify for an FHA loan, or if one of you is a veteran, you could take advantage of that benefit.
Communication is key to clearly defining what it is you want to buy—together.
As you discuss your home needs, start browsing neighborhoods to see what feels right to you. Brainstorm together. Break your home purchase down into three categories: “must haves,” “would-love-to-haves,” and “in a perfect world.”
First, define your “Must haves.” They are as fundamental as four walls, a roof, and two bedrooms. These are the nonnegotiables in a home that without them, the house simply won’t work for you.
Second, define your “I would love to have” category, which could include items such as a fenced yard for your dog, granite countertops, stainless steel appliances, and an additional bedroom. These amenities would help you enjoy the home more, but the property could still be a fit without them. Again, explicitly defining values can inform decision-making and help delineate between “must haves” and lesser priorities for you both.
Lastly, “in a perfect world” is your dream category. This dreaming category is as important to clearly define as your “must have” category because it allows you, as a couple, to identify your ideal home without an internal limitation of budget, even if it’s an in-the-distant-future purchase.
Now that you are clear on what you are trying to buy, find a great REALTOR® who will serve as your advocate and help you laser in on the neighborhoods that will fit your home-buying needs with your clearly defined goals.
When planning a home purchase, it is essential to be honest with each other about the current state of your finances. Be sure to get clear as a couple as to what is truly comfortable to spend in a mortgage payment each month. You may qualify for a larger loan amount than you’re comfortable fitting into your monthly budget. You may be comfortable with a bigger portion of your monthly income being applied to the mortgage than your partner.
Educate Yourself on Different Loan Options Available
When purchasing a home, explore all loan types available today with your banker of choice, especially if you are a first-time buyer, haven’t established credit, or your credit score has taken a hit in the pandemic.
Government-backed loans such as Rural Development (RD), Federal Housing Administration (FHA), and Veterans Affairs (VA) loans create opportunities for first-time homebuyers unable to save a traditional 20% down payment. If your credit score is a concern or past debt is holding you back, an FHA loan may be an excellent solution for you. FHA allows as little as 0% down payment. Government-backed loans allow lower credit scores to purchase, as low as 580 for FHA. And today, with a strong credit score (of at least 620), conventional loans, which are not backed by the government, are available with as little as 3% down. There are advantages and disadvantages to each loan type.
Be sure to find a trusted advisor in both a lender and REALTOR® who can help you sort through the information that may seem overwhelming. Utilize their expertise so you can make the best choice for you as a couple.
Cultivate a Healthy Relationship with Money—and Your Partner
It’s vital to nurture your relationship and keep your marriage healthy. Since finances are a large part of any committed relationship or marriage, be willing to be open and lean into your discomfort when having necessary money conversations. Seek to understand and honor your partner’s perspective, values, and desires. Stretch to make decisions together and discover resolutions where you both can be happy.
Working as a team will help you unify and create a life you love together.
TRY You Need a Budget to get control over your finances and help you change your relationship with money.Related reading: "Love Is a Choice—the Best Marriage Advice!"
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