Budgeting for couples is a complex topic, as it can sometimes cause stress between you and the person you love. But in reality, when you have the conversation and start working through your finances methodically, you will see a huge improvement in how you control your money.
To help you, we’ve put together this seven-step guide to managing money as a couple, which takes you through everything you need to know about improving your finances.
As with most things, bringing your finances together begins with a simple chat with your partner.
Step 1: Talk About Your Financial Situation
Discussing your financial situation with your partner can be difficult, mainly if one of you earns more than the other. If you’re not prepared for the discussion, it can be too easy to fall out with one another.
Therefore, when it comes to budgeting for couples, the key is to start with an introductory conversation about your general financial situation. You don’t need to go into a lot of detail – just begin with a casual chat about your finances.
A good idea is to bridge the topic by mentioning some broad financial goals –save for a deposit, pay off debts, or even take a vacation.
You can then agree to start talking more specifically about your finances and look to move to step 2, as explained below.
Step 2: Create Realistic Goals Together
Goal setting is the foundation of any successful budget for couples, giving you something tangible to work towards. Simply wanting to earn or save more money without quantifying what that means isn’t a good starting point.
Instead, you should set SMART goals for you and your partner to work towards. Some broad examples that you might like to explore include the following:
· Saving X amount of money for a deposit on your first home together.
· Clearing off all of your individuals and combined debts.
· Saving X amount of money to pay for your wedding.
· Saving X amount of money to pay for your dream worldwide.
Whatever your financial goals are, it’s extremely important that you both contribute and agree to the objectives. If you’re not in agreement about what to save for, it will be challenging to retain motivation as you work towards your financial goals.
Step 3: Produce a Budget as a Couple
Fundamentally, producing a budget as a couple is the same as having a budget as an individual. Of course, the only difference is that there are two of you involved in the process! Using a budget template can help you get started, but here are the things you need to work out:
Identify your net income
Your first job is to identify your joint net income. Your net income is what you take home after taxes and other automatic deductions. It’s also called your take-home pay. Make a note of your combined annual net income and break it down into your joint monthly income, as this is a beneficial starting point for putting together your monthly budget.
Determine all of your expenses
Determining your joint expenses is a little more tricky, but with good communication, you shouldn’t have any issues. You will need to consider the following as your core joint expenses:
· Housing costs (rent or mortgage payments)
· Council tax
· Utility bills
· Car payments, fuel, and insurance
You will also need to budget for non-essential expenses like gym memberships, meals out, and various other costs associated with living your life. You need to be flexible here and willing to reduce some of your expenses if they consume too much of your budget.
At this stage, you will also need to decide how you and your partner will split the bills. Are you going 50/50? Or does it make more sense for one of you to pay more than the other, given your earnings?
Set expectations on how much you’ll save
With your income and expenditure taken care of, you now need to consider how much money you want to save as a couple. There’s no right or wrong saving target, but you need to consider your savings in accordance with your saving goals to make sure that you can realistically meet your targets.
As a minimum, aim for at least 20% of your earnings and decide how you will keep the money (in a cash savings account, stocks and shares ISA, etc.). This article will help you determine how much of your joint income to save each month.
Step 4: Discuss Your Individual Needs
Although you’re now a couple, you still need to think about budgeting for your individual needs. For instance, one of you might have a season ticket for your local football team, while the other might attend regular hair and beauty appointments.
You must make sure that you leave aside enough money to treat yourself and meet your individual needs, whether you create a joint account for this or keep a proportion of your money to yourself.
The last thing you want to do is restrict your partner, so make sure that you account for individual needs and agree on how much you can spend on yourselves each month.
Step 5: Decide if You Will Open a Joint Account
When budgeting as a couple, one of the biggest decisions is whether or not to open a joint account. Given how straightforward it is to set up a bank account today, we recommend doing this, as it will make life much easier when managing your monthly finances.
You and your partner can then channel a specific amount of money into the joint account each month to cover your essential bills, as introduced above. It also makes sense to keep your accounts active to maintain a hybrid approach to managing your finances.
To get started with a joint account, reach out to you or your partner’s current bank and enquire about opening a joint account – you will find that it’s typically a very straightforward process.
Step 6: Consider Budgeting Tools for Couples
If you decide against opening a joint bank account, there are other budgeting tools for couples that you can turn to. For instance, the HyperJar Joint Prepaid Card is a brilliant way for you and your partner to manage your joint finances and keep on track with your budget.
You can load a specific amount of money onto the card every month and track your joint spending directly from an app on your smartphone. It’s a smart, easy, and savvy way of tracking your monthly expenditure and will help you and your partner if you decide that you’re not ready for a joint bank account.
Step 7: Schedule a Monthly Budgeting Date
Finally, it’s important not to think of your budgeting as done and dusted after your first conversation. The reality is that budgets can be changed and adapted depending on your current income and expenditure.
Therefore, we recommend agreeing to a date for you and your partner to meet every month to review your couples budget and to take any actions to update your income and expenditure.
Set the date in each of your phones and receive a notification when the date comes around. You don’t need to spend hours chatting about your finances, however! A 15-minute chat over coffee is probably more than sufficient to ensure you’re on track every month.
Don’t let Budgeting as a Couple Cause you Stress
We get it – budgeting as a couple seems stressful, but it certainly doesn’t have to be. The whole point of bringing your finances together as a couple is to make your life that little bit easier for one another.
You will also find that if you’re open, honest, and enthusiastic, you and your partner will find ways of saving money that you can use to meet your financial objectives.
So, now is the perfect time to start the conversation with your partner and improve how you manage your finances. From splitting the bill on the date, to budgeting for house renovations, the HyperJar blog has so many fantastic articles to get you started with budgeting as a couple.