Making a budget by yourself is already a task that is mind numbing, tedious, and overall just hard to follow through on. We all make money to spend money, maybe invest it if we’re lucky. I mean if we didn’t want to spend money, what would be the point of trying to earn money at all?
Whether you like it or not, the world turns based on the almighty dollar. It has the ability to launch countries into prosperity, and bring among them epidemic crisis (think of the 08 recession). You need to be able to hold on to your money during the best of times to make sure that money is there to help you during the worst of times. And, whether you like to admit it or not, depending on your age you will go through multiple recessions over the remainder of your lifetime.
I know I’m in Canada, but here are some numbers from Investopedia on the United States. There have been 33 recessions since 1854, which means the United States has a “recession” every five years. Now, not all of them will hold the same level of severity, but you get my point. There will be a time in your life where you may lose your job, see the value of your home fall, or even your wage cut.
Now, combine all this and you are tasked with the absolutely necessity to build a budget. For a single person, it’s not really that hard.
However, what happens when you find that someone, have a joint bank account and have to make uniform decisions? Well, it can be easier or harder, depending on who you are with.
Budgeting as a couple in 2019
Individuals who have been budgeters seem to for some reason throw it all out the window when they meet someone, get married and decide to combine their funds. Personally, I am not one who even does this now, and I have been with my significant other for over 7 years. We hold separate finances, and simply talk among ourselves and decide who is paying what, to the point where it evens out.
But, if you’re going to start combining accounts, the first thing you need to do is figure out you and your significant others individual expenses. If one partners expenses far outweigh the other, it may be a good idea to see what that individual can reduce to get their spending closer to the others, so you can have a more uniform budget. That being said, this isn’t always something that can be done and it doesn’t really need to. It just makes the overall picture look a little clearer. If your spouse is spending $700 a month on golf, and you’re spending $250 dollars a month on the hobby you enjoy, whatever it may be, it may be time to have a chat and get that “fun” spending under control. After all, this is a budgeting article.
Once you’ve developed a clear picture of both partners individual spending habits (good or bad mind you) the next step would be to consider all combined expenses. These can be things such as a mortgage, a car payment on a vehicle both of you drive, or utility bills. Regardless if you have joint or separate bank accounts, these expenses, if both of you are using them, should be considered combined.
Total expenses compared to income
Now that you’ve got your individual expenses and combined expenses jotted down, simply take all of them and add them up. With this, you’ve got your combined spending per month. From this point, you just need to figure out how much your spending compared to your income. Now, there really isn’t a good or bad number here, because everyone has different goals. If you plan to save $100 a month for retirement and make $3000 after taxes a month, a budget of $2900 in monthly spending is right on par. However, for someone looking to put away $500 a month, you’d be way off.
I’m not going to dig into retirement goals and saving habits or suggestions in this piece, it’s not the point. The point of all of this is to simply get you on track to developing a budget. But, keep in mind that before you head to this final step, it is very important that you do develop an overall savings plans. There is no point to budgeting if you don’t have an end goal for your budget.
Figure out what you’re saving for, whether it be retirement, buying a home, paying for a wedding, and figure out what you need to save per month to hit that goal in X amount of years.
Balancing your budget
A term often spoken of by government officials, don’t fall into the same trap as them and spend more than you’re making. Once you’ve got your total expenses, your total incomes, and the savings goals you picked in the portion right above this paragraph, you’ll have a bigger picture of how much you need to cut down on spending. Or, even better, you’ll realize you’re actually way ahead of where you need to be, and will hit your target goal even sooner.
The easiest things to cut down on in terms of spending are always recreational expenses. Sports, movies, eating out. All of these add up quickly and are one of those expenses you can just simply stop (with some willpower and dedication that is.)
The expenses that may not come easy in terms of elimination are things like credit card debt or car loans. In situations like this, your best bet is to simply avoid saving to begin with and instead pay down these debts. Debts of this size typically carry enough interest to negate the effects of investing or saving money. So in reality, you’re losing. And we don’t want to be doing that.
Overall, it just takes time and patience
Coming up with a budget as a couple takes time, willpower and co operation from both parties. But in the end, it’s fairly easy to come up with a plan and stick to it. And if you do, you’ll be saving more, have more money available for that new house or rainy day, and generally feel more comfortable talking finances with your significant other. It’s so often a touchy subject that nobody wants to go near, but lets just say developing a budget with your spouse or partner can be a great way to break the ice.
Need a head start? Check out some of the blogs I followed to get me on track!