Creating a budget with your spouse is one of those less-discussed issues of being married. Working it out is a significant part of learning to be married, or getting better at it.
Marriage is variously described as an equal partnership, a merger, or a union. No matter how you describe yours, you likely agree that communication is key to your happiness. You and your spouse will need to communicate on all major issues including lifestyle choices, parenting, sex, and, of course, money. In fact, money issues are among the major reasons marriages fail.
The Budget Solution
Money doesn’t have to be a contentious issue. Whether your marital status is “soon-to-be,” “newlywed,” or “been in the trenches for awhile,” the key to handling money is having a financial agenda or budget. Budgets can sound complex and difficult, but they don’t have to be. A budget is simply a best guess regarding the amount of income you and your spouse will receive over a set time period along with how you plan to use it.
Your first step is to sketch out a basic budget plan together. Then, once you and your spouse have a budget, following your plan is just a matter of checking in with each other on a regular basis. Ideally you will do this using free or inexpensive software to track your ongoing financial success in a way that is easy, accurate, and quick.
- Lack of communication about money is among the top reasons marriages fail.
- Creating a budget together will provide a framework for avoiding conflict about finances.
- Using software to track your money can increase your efficiency and make it easier to stay on top of spending.
- A once a week “money date” can foster continued communication and help you achieve your financial goals.
Step 1: Set S.M.A.R.T. Goals
Your short-term, medium-term, and long-term financial goals will have a huge impact on your overall budget. Short-term goals typically take one or two years to achieve and include things like creating a three-to-six-month emergency fund, paying off credit card debt, and saving for a special vacation. Medium-term goals include saving for a down payment on a house, paying cash for a new car, or paying off student loan debt. This can take up to 10 years. The most important long-term goal anyone can have is saving for retirement and that requires saving and investing for most of your working life, which can be up to 40 years.
When it comes to setting goals, many people rely on the S.M.A.R.T. acronym. The words have varied, but the ones often used for financial goal-setting are:
- Specific—State your goal in a few well-chosen words. “We want to own a condo in the Bahamas.”
- Measurable—How will you know you’ve achieved your goal? “How much will it cost?”
- Achievable—It must be something you can accomplish financially given your means. “Can we save that much given our current and predicted future income?”
- Realistic—Even if achievable, does it make sense in your situation? “What will we have to give up and is that OK?”
- Time-based—Your timeline will tell you whether this is a short, medium, or long-term goal. “How long will this take?”
Use S.M.A.R.T. to test and, if necessary, adjust your goals. If a condo in the Bahamas is out of reach or takes too long to achieve, how about a time share? Or a stateside condo? You may have to set some goals aside to be revisited later—say, after a big raise or promotion.
Divide your financial goals into short-, medium-, and long-range categories to make sure you are planning for your present and your future.
Step 2: Determine Your Net Income
Once your financial goals are set, take stock of your monthly income. Gross income is the amount you have before taxes and deductions. That isn’t helpful for creating a budget, although any amount that comes out for retirement, a pension, or Social Security does come into play later so be sure to note it in the money you use to budget. For purposes of creating a budget, use your net monthly income or take-home pay. This is the amount you receive before spending begins.
If you and your spouse are paid a salary or on an hourly basis, your net income is likely stable. If either of you have irregular income through seasonal work, self-employment, or sales commissions, you will need to revisit the income section on at least a monthly basis.
Step 3: Add Up Mandatory Expenses
Mandatory expenses consist of costs you must pay every month. Examples include housing, which could be in the form of a mortgage payment or rent, car payments, gasoline, parking, utilities, student or other loan payments, insurance, credit card payments, and food. For some people food becomes “what’s left over after all the bills are paid,” but you and your spouse should have a rough idea of the minimum amount you need to spend on groceries and include it as a mandatory expense. Subtract mandatory expenses from net income. If your combined monthly net income is $8,000 and your mandatory expenses total $4,000, for example, you have $4,000 to carry forward to Step 4.
Step 4: Calculate What You Need to Save
Refer to Steps 1 and 2 to determine how much you need to save to reach your financial goals (Step 1), as well as how much is covered by deductions for a 401(k), IRA, or pension (Step 2). Include all of this in Step 4 before moving on. Subtract the amount you need to save (for retirement and other goals) from the amount left over in Step 3 and that is the amount available for the next category—discretionary spending. Let's say the total amount you need to save each month is $1,600. Subtract that from the $4,000 left over in Step 3 and you have $2,400 for the next step.
Step 5: Divvy Up Discretionary Spending
Discretionary spending is just what it sounds like—spending on things you want but don’t need. You and your spouse will likely have your most interesting “discussions” about discretionary spending, so buckle up. Discretionary spending means paying for the things you do or enjoy together such as eating out, vacations, watching cable/streaming shows, or wearing matching outfits for this year’s ugly Christmas sweater party. It also includes how much you spend individually. This could include individual nights out with friends, sports (i.e., tennis for one of you, golf for the other), or any of several different types of activities that each of you do with others or by yourself. Beyond the basics, it could include clothes, electronics, and how fancy a car you drive.
List all potential discretionary spending and categorize it as “joint” or “individual” spending. Discretionary spending typically is its own mini budget, created monthly based on available discretionary funds. In the example above, you have $2,400 left over for discretionary spending. That will not likely be the case every month, which means you and your spouse will need to negotiate discretionary spending with each other monthly. This will often require sacrifices from both of you. If you both accept an equal amount of pain, conflict can be minimized. And despite the need for negotiation, marriage does tend to have a positive impact on your financial picture.
Step 6: Select Your Budgeting Software
Now comes the fun part. Armed with your basic budget, you’re going to look for budgeting software that meets your needs and that both of you feel comfortable using. While almost any budgeting software program or app will work, some have features that are specifically designed to be used by couples. Three are described here.
You Need A Budget (YNAB for short) is designed around the zero-based budgeting principle that requires you to “give every dollar a job.” It works best for people who are willing to be involved in their finances and change old habits in order to make the system work.
YNAB runs on Windows and Mac computers and has both iPhone and Android apps available, making it a true cross-platform system. The software connects to bank and credit card accounts but does not track investments. YNAB budgets can be shared among multiple users and the YNAB site even offers information on how to budget as a couple. Designed for budgeting beginners, the platform features tutorials, videos, and a weekly podcast. YNAB comes with a 34-day free trial after which it costs about $7 per month (or $84 for the whole year).
Honeydue is a budgeting app specifically designed for couples and includes a feature that lets you and your partner decide how much you want to share with each other. This allows for tracking of shared expenses as well as individual spending. The app is available for both iPhone and Android but has no web or computer version so everything must be done on a smartphone.
You and your partner can set monthly limits for each spending category, chat within the app, react to transactions, and ask each other about questionable spending (from a shared account). More than 10,000 U.S. banks support the app, and best of all, Honeydue is free.
Goodbudget, formerly known as EEBA, utilizes the familiar envelope budgeting system that requires you to divide monthly income into virtual “envelopes” for each spending category. When the money in an envelope is gone, that category is closed for the rest of the month. All budgets are synced between devices, and the web version, which can be viewed on any computer, makes this program (like YNAB) cross-platform as well.
The paid version of Goodbudget automatically adds transactions from multiple accounts. With the free version, everything must be entered manually. Graphs and reports of spending help reinforce the easy-to-understand envelope concept and Goodbudget’s Getting Started tutorial makes setup easy.
The free version of Goodbudget allows you to create up to 10 categories or envelopes on two devices with one bank account. The paid version, which runs $6 per month or $50 per year, allows unlimited categories and bank accounts on up to five devices.
Step 7: Schedule a Weekly Money Date
With software selected and up and running, the final step is to keep communication open and ongoing. Schedule a “Money Date” once a week to check in and re-evaluate your goals. Talking about finances regularly will keep you and your spouse on the same page and motivated to meet your goals. It doesn’t have to be a five-hour conversation, especially since your budgeting software will be doing most of the work. Discussing your budget over a glass of wine or while cooking dinner can be an enjoyable way to spend time together while keeping finances under control.
The Bottom Line
Setting up a budget, keeping track of it, and meeting once a week to review where you are can keep money conflicts to a minimum and help you, as a couple, meet the goals you set out for yourselves. What better way to start a new marriage on the best footing—or solidify a long-established union? (For related reading, see "How to Save for a Wedding")