One of the hardest concepts to grasp as a new spouse is “not mine, ours.” For generations, adults have been trying to teach young children how to share, but lose sight of how to practice this concept themselves. This is especially prevalent with newlyweds trying to learn how to share money. Managing money is one of the top reasons for marital disagreements. If you are a newlywed or about to become one, fear not. There are other options available besides your parent’s traditional advice. Unlike how our parents and grandparents learned how to budget, we can now use technology to help do the dirty work for us.
The first step is to sit down and plan a budget with your spouse. The sooner you do this, the easier the transition will be. A husband and wife always come into a marriage with different expectations. In order to achieve financial peace, you must bring together your ideas and form a mutual agreement as to how the money will be managed in your household.
Planning a budget is always easier said than done. The key to creating a good budget is to be realistic. You must be honest with yourself about how much you spend. If money will be tight, you cannot cut expenses until you fully recognize where you are spending money. Luckily, we do not have to go through our old checkbooks anymore. Most online banking systems already have a “Spending Report” option. Depending on the bank, it will categorize your expenses based on where it was spent. Some systems will even allow you to customize your spending report. Use this tool to figure out major categories of where your money is going.
An easy way to figure out your budget is to use an Excel spreadsheet. Most people will do a monthly budget, but you can change the time period based on your situation. At the top of your spreadsheet, list your different sources of income and corresponding amounts. Make sure the income reflects after-tax amounts.
Next, list your major spending expenses along with the amount of money you typically spend in each area. Don’t forget to add in your savings goals if you can. Some expenses will be fixed each month; for example, rent or mortgage payments. Other expenses will vary month to month, such as food or entertainment. Always overestimate your variable expenses. If you spend less, that will mean you will have additional savings. However, if you underestimate it could cost you greatly in bank overdraft fees and an unhappy spouse.
Creating this budget together as a couple is essential to making it work. Your budget should show where 100% of the income is going (Income – Expenses = Zero!). By this I don’t mean that you should spend 100% of your income, but that you should have a plan for every cent.
Now here is where we can really deviate from our parent’s way of managing money. Most employers are now using direct deposit for payroll instead of issuing paper checks. Employees have the option of deciding where that money will go. Many people don’t realize that they can do direct deposits into multiple accounts and that they can customize a dollar or a percentage deposit amount. For example, employers can deposit $200 per paycheck into one account, $400 into another, and the remaining money into a third account.
My husband and I use this tool as an effective way to carry out our budget. We created five different bank accounts: 1) food and dates, 2) bills (utilities, rent, internet, phone, etc.), 3) savings, 4) my personal spending money, and 5) my husband’s personal spending money. With the help our budget, we determined how much each of us would contribute to the accounts. The direct deposits from our employers do all of the work for us. Neither of us have easy access to our budgeted savings so we are never tempted to use it unless in times of emergency.
We did not figure out this system until about six months into our marriage. The first six months were difficult because we both hated using our own income to pay the bills. We often debated about who would pick up the bill at a restaurant. It required a lot of monitoring and maintenance to keep up with our budget. With this new system, our mutual expenses are being covered by mutual accounts. It does not feel as much like “his money” and “her money”. We also know exactly how much each of us is getting in our personal accounts each month, but we don’t constantly scrutinize where it is being spent because we know it is within our agreed upon budget.
Technology can help new couples unify when it comes to finances. While it is easiest to establish a good pattern of money management early in the marriage, these tips can be used at any stage of life as long as both partners are willing to commit.