Finance for Couples: How to Create a Joint Budget
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Marriage is all about partnership and unity, and that applies to your finances too. When you work together to lay out a joint budget that addresses bills, spending and savings, it could even make your relationship stronger.
Communication is Key
Communicating early and honestly about money tells you right off the bat if you and your partner are miles apart and need to meet in the middle. Eric Jorgensen, CFP with MainStreet Financial Planning, suggests comparing what each of you spent money on when you were single. “This will establish common ground and allow you to determine where there’s overlap,” he says. “It also starts the conversation about what expenses are non-negotiable, like a sports package for cable or a housekeeper.”
Address Premarital Debt
If you’re just starting your lives together, now’s the time to talk about how much debt you’re bringing into the relationship. Decide from the beginning how you’re going to pay it off as a couple. Will it be the responsibility of the one who incurred it? If so, your joint budget will have to allow for that — the income your spouse can contribute to the joint responsibilities will be less because he’ll be using some of his money to pay off those old debts.
Another option is to include premarital debts in your joint budget. Credit scores influence your ability to qualify for joint loans, so using community money to get rid of one partner’s debt ultimately could be advantageous for both of you.
Set Long-Term Goals
Once you've set the framework of income and expenses, it’s time to turn your discussion to dreams. Do you want a new house? Your partner thinks renting is just fine, but he’d really like a new sports car. That’s okay. Your dream list can include yours, mine and ours.
Now determine how much money you'll have left after accounting for income and monthly bills. Dedicate at least some of it to short-term savings in case of emergencies and to achieving long-term goals. If you think money’s too tight to manage savings, tweak your budget by cutting out expenses for those things you can live without, or by having one or both of you earn additional income. Or, consider a compromise: One of you might be able to take on a second part-time job while the other agrees to live without that top-tier cable package that only she watches.
Joint or Separate Accounts?
Writer Dave Barry suggests that it’s crucial to pool your incomes into one account, but this works best if you’re going to jointly address premarital debt so there’s one pot for everything. Otherwise, you can each keep separate accounts, as well as a joint account for marital bills and expenses.
Each of you should have your own spending money. “When you talk, share the things you like to do by yourself,” advises Jorgensen. “Many couples focus on everything they enjoy doing together and don't think about their individual hobbies. It's important to budget for those things, too.”
You don’t have to tackle all of this on your own. Quicken Starter Edition creates a joint budget for you after you work out your priorities. “Budgeting software allows my clients to track their spending and provides an unbiased view of where there money is going,” notes Jorgensen.