Budgeting? For Valentine’s Day? I get it, conversations about finances aren't exactly romantic. This holiday is all about love and togetherness, but what can bring you closer than having conversations about your future and goals? Budgeting can also be a touchy subject, especially when you and your partner have different views about spending and saving. Which makes this conversation perfect for Valentine’s Day, so grab your favorite candies and a cozy spot, and let’s talk budgets.
Before you dive into how you'll handle your bills and other expenses, take a moment to agree on how to combine your finances as a couple. This could mean merging all or part of your income.
For some couples, this "what's mine is yours" approach can work beautifully if you share the same saving, spending, and tracking habits. Other couples might prefer a "yours" and "theirs" method. For instance, one person might pay the mortgage, while the other covers utilities and other household expenses. Individual expenses, like car repairs and shopping, could also be handled separately. The advantage of this method is that you don't need to agree on a shared budgeting approach.
Whichever approach you choose, here are some tips for a united budget that will keep the love—and the finances—flowing smoothly.
- Calculate Your Combined Monthly Income
An alternative to splitting your bills 50/50 is to split your bills based on your respective incomes. This is especially useful if one person earns more or less than the other.
Here's how to calculate your monthly income. Start by dividing your annual salary by 12. Even if you expect to receive annual bonuses that increase your take-home pay, or your salary is commission-based, calculate the lowest number on your paycheck over the last year, then budget according to that number. (Calculating your income based on your highest earning month could mean that you have a month where you're spending more than you're bringing in.)
- List Your Shared Expenses
There isn't a “right” or “wrong” approach to budgeting as a couple. However, one method might work better than another. In any case, one important step is to identify your shared expenses. Some common examples include:
- Rent or mortgage
- Childcare
- Groceries
- Insurance
If dividing your expenses, determine who is responsible for each expense. You may consider dividing expenses by income, or you may decide to combine all your money and manage your expenses holistically.
- The Fun Part – Determine Your Shared Goals
Whether your shared goals are more practical, such as paying off debts or padding college funds for the kids, or you’re dreaming of a vacation, a second home or an early retirement, here's your chance to plan what you'll do with any leftover money after you've covered the essential expenses.
Although it can be exciting to discuss your shared goals, it's crucial that each person has equal input in this conversation. Remember, this is a shared dream and something you will both commit to on a short- and/or long-term basis.
- Get involved with your finance and make it a team approach
As I always tell my clients; when we’re able to handle the small things, we’re better equipped to handle the bigger things in the future. Try setting a specific time to talk with your partner and identify what you want to talk about beforehand. Meeting at regular intervals can also keep you on track with your financial goals and can give you the opportunity to discuss any potential issues. Valuable topics to cover during these meetings include whether you're overspending or can save more, or can reduce debt to minimize interest charges, for instance. It is also important to review account titling and beneficiaries.
Budgeting isn't the most exciting topic, but it can help create a solid foundation for your relationship.
- Consult with a Financial Planner
While budgeting as a couple can be a rewarding experience, sometimes it helps to get a professional opinion. Consulting with a financial planner can provide valuable insights and unique strategies tailored to your financial situation, can help you develop a comprehensive plan, track progress and suggest adjustments as your financial situation changes.
If you and your partner are looking for expert guidance to manage your money and achieve long-term financial goals, we're here to help. Contact us today to schedule a consultation and take the first step towards a financially secure future together.