Ground Rules for Budgeting as a Couple
Ensure Equal Access to Your Budgeting Tool
We like to think we marry people like ourselves but the reality is that most of the time we marry someone that is very different in a lot of ways. When it comes to money, a couple will often find out that one partner is very much a numbers person and the other will be a little more YOLO. The numbers spouse will love using their budgeting tool and keeping it up to date and the YOLO doesn’t want to look at the budget at all. Don’t fall for this trap! To be a successful money couple, each partner must be a participant in the budgeting process and an active participant in sticking to the budget. Each should have their budgeting app on their phone and each should participate.
Not all budgeting tools are created equal. Use a zero-based budget. A zero-based budgeting approach is the best solution to help newlywed couples gain control over their spending habits. This method requires every dollar earned or spent to be accounted for creating opportunities to reach your goals. Following a zero-based budget is important because it removes the unknowns and replaces them with knowns. When the unknowns are reduced the anxiety level reduces as well.
Use One Bank Account
Be sure to combine your bank accounts and your money. Budgeting for newlyweds is about joining your lives together and if you keep separate bank accounts, you are failing to combine your financial lives in many ways. Assign one account as your “operating” account and the other as a savings account if you like. But combine your money, direct deposits, and financial efforts into one operating account.
Make Decisions Together About Your Goals and Dreams
Once again, you free spirits need to join with your “nerd” spouses and discuss your goals and dreams together. The famous motivational speaker and author Zig Zigler once said, “If you aim at nothing, you’ll hit it every time”. When you have common, agreed-upon goals and dreams your everyday money decisions tend to wrap themselves around those goals and dreams. But without goals, you are “aiming at nothing”, and you’ll find yourself living a very inefficient financial life. Want to retire with dignity and leave a legacy for your children’s children? Discuss your goals and dreams and agree together on what you’ll pursue.
Don’t Hide Expenditures or Shelter Money From Your Spouse.
If you have agreed upon a budget and set your goals and dreams together it is expected that you’ll always keep all of your income and expenses in the open. If you don’t, this is called financial infidelity and leads to a very dangerous place. Don’t hide income or expenditures for your spouse.
How to Budget as a Couple
Write Down all of your Expected Income for the Month
Write Down What you Expect to Spend in Each Category for the Month
Writing it down makes it harder to ignore.
You may have tried in the past to write down how much you are going to spend in certain categories for a month, however, if the budget you are creating is only a loose collection of how much you plan to spend it misses a key element: You haven’t weighted it against your income and assigned every dollar of income a job. Further, the dollars of income that are not assigned to a job are likely to walk away, or at minimum, they’ll be directed toward the wrong target. Y
Subtract Your Expenses from Your Income
Give Extra Money a Job!
Every dollar gets a job.
You know that you have assigned every dollar a job when your income minus your expenses equals zero. Zero does not mean that you have no money left, it means that you have no money unassigned to a job. There is a big difference. It means that all of the money you earned is pointed toward a goal such as saving, investing, or paying down debt. When you have assigned a job to every dollar of income, you have forced yourself to put those dollars where you have pre-determined they should go. This is accountability.
The 3 Most Common Mistakes Couples Make with Money.
Not Budgeting
Failing to use a zero-based budget together is the most common and consequential money mistake that newlywed couples can make. Without a budget zero-based budget your dollars are at high risk of being lost to poor decisions and regret. A budget tells your money where to go instead of wondering where it went.
Not Communicating
Failing to communicate together is another significant and costly money mistake newlywed couples make. This leads to hiding expenditures and income which is not only counter-productive to healthy finances, it is a dangerous mistake to make for the marriage as well. Communicate with each other and keep your money in the open.
Not Setting Goals Together
The famous motivational speaker and author Zig Zigler once said, “If you aim at nothing, you’ll hit it every time”. When you have common, agreed-upon goals and dreams your everyday money decisions tend to wrap themselves around those goals and dreams. But without goals you are “aiming at nothing” and, you’ll find yourself living a very inefficient financial life. Want to retire with dignity and leave a legacy for your children’s children? Discuss your goals and dreams and agree together on what you’ll pursue.
Why is a Budgeting Important for Couples?
It forces accountability over your money and promotes transparency
It maximizes every dollar you spend and earn
A zero-based budget is important because it maximizes every dollar you spend and earn through advanced planning and disciplined execution. A zero-based budget accounts for all income and assigns it a job. When all income is assigned to a job, on purpose, it assures you that you are maximizing its potential.
Many people like to have a “buffer” in their budget for emergencies. They feel if they assign every dollar of income to an expense category they won’t have any money left for unexpected wants or needs. We encourage you to plan for emergencies by budgeting specifically for an emergency fund. A buffer is only needed when you don’t have full control. When you aim generically for a few leftover dollars at the end of the month as a buffer what you have really done is admit that you don’t have control over where every dollar is being spent and you need a buffer “just in case”. A zero-based budget forces those dollars to be assigned to a job and maximizes their value.
It creates better spending decisions and a clear way to focus on your priorities
Why a zero-based budget is important is, at its core, rooted in how you prioritize your money. A zero-based budget puts all the cards on the table and reveals your hand. There is nowhere to hide. As such the weaknesses in the decisions you make with your money are revealed. For instance, if you are following a zero-based budget faithfully you will soon see if you are overspending on groceries or another category. Once you have that knowledge you only have a couple of choices: Keep overspending or adjust your habits to meet your goals. A zero-based budget is important because it shines a light on your spending decisions and creates opportunities for you to make choices that align with your goals.
It helps remove anxiety around money
Following a zero-based budget is important because it removes the unknowns and replaces them with knowns. When the unknowns are reduced the anxiety level reduces as well. Most people experience anxiety around money because they don’t really know where their money is going or if they’ll have enough when they need it. What if I told you that you could know with almost certainty that when your car breaks down, you’ll have enough money to pay for the repairs in cash? Or that if your home’s roof springs a leak, you can handle the new roof without using credit? I bet your anxiety level would be reduced. A well-planned and executed zero-based budget allows you to know where your money is, where it is going, and how much you need to save to keep “Murphy’s law” from your front door.
A zero-based budget is important because it brings certainty out of the unknown. It brings clarity out of confusion. However, even the best-planned zero-based budget is no match for a spender who cannot control their impulses.
Final Thoughts on How to Budget as a Couple
Budgeting for newlyweds is an important first step toward building the future you want for your family. When you create together a zero-based budget each month that addresses your shared goals and dreams you will find that your everyday decisions begin to wrap themselves around your shared goals. Budgeting for newlyweds helps you keep all of your income and expenses in the open and promotes healthy communication within your new marriage.
