One goal that you definitely need to add to your couple’s goal list is to create a budget with your partner. Budgeting as a couple can be a tricky task, but it’s essential for ensuring financial stability and reaching shared financial goals. A good budget will help you plan your long-term financial goals together and at the same time makes sure you are on the same page when it comes to big expenses like buying a house, purchasing a car, planning a foreign trip, etc.
Good communication is key to any successful relationship. Whether it is your needs, desire, food, lifestyle, and of course money, you both should feel comfortable sharing and discussing. it can increase trust and strengthen the bond between you two.
If you already have created your own budget, it will be a lot easier to combine it with your partner. Here is how you can do it.
4 Steps to Create a Budget With Your Partner
Step 1: Calculate Your Combined Monthly Income
The first step is to calculate your combined net take-home income every month excluding taxes and other deductions. For this, consider all the income sources that you and your partner can rely on, such as-
- Monthly salary from your job
- Bonuses
- Income from dividend
- Income from your business
- Payment from clients if you are a freelancer or self-employed
- Passive income sources like rent from property, income from your blog or YouTube channel, etc.
Make a combined list of all the income sources and calculate how much you can bring to the household every month. Use the take-home amount that you get after deducting tax and other deductions. If your take-home income varies every month, use an average amount instead as your monthly income.
Step 2: Calculate Your Joint Monthly Household Expenses
Once you have your monthly income in place, it’s time to add up your expenses. List down all the expenses that you incur every month. That will include both fixed expenses and variable expenses.
Fixed expenses can include:
- House Rent
- Debt payments for your debt repayment plan
- Tuition fees
- Insurance premium
- Utility bills (cable, cell, electricity, water, etc.)
- Mortgage
- Gym memberships fees etc.
Variable expenses can include:
- Credit card bills
- Groceries
- Entertainment
- Travel costs
- Eating out
- Gas/transport costs
- Shopping
- Magazines/newspapers
- Spa/salon services etc.
Add up all your monthly expenses. Consider checking your bank account and credit card statements to make sure you considered all the expenses.
You can also group your expenses into categories like-
- Housing (can include rent, mortgage, and property tax)
- Personal care (Spa/salon services, laundry, Gym memberships, etc.)
- Debt repayment (Credit card bills, EMIs)
- Household supplies
- Transport costs
- Insurance
- Entertainment
- miscellaneous expenses etc.
Grouping your expenses into such categories will help you stay organised and help you track your spending pattern.
Step 3: Subtract Expenses from Income
It is the simplest yet the most important step. Subtract your monthly expenses from your monthly income. Ideally, you should get a positive number, that indicates you are saving something every month.
In case you fall short, i.e., your monthly expense is more than your monthly income, you need to revisit your expenses and look for areas where you can reduce them.
Step 4: Create Long term goals
It is important to set your long-term financial goals as a couple. Whether it is
- buying a new house
- buying a car
- going to your dream vacation destination
- child’s education
- planning retirement
It is good to set those goals that keep you motivated to stick to your budget and not overspend on unnecessary things. While your individual interest and priorities might differ, it is important to work together and support each other toward achieving these long-term goals. Plan your expenses in such a way that you can save something every month to fullfil your dreams together.
- Make a plan to pay off your debt strategically.
- Set your savings goal and stick to it
- Plan your retirement
Thumb Rules for a Successful Budget as a Couple:
- Communicate openly and honestly about your finances. This includes discussing your income, expenses, debts, and credit scores. Knowing where each person stands financially is crucial for creating a budget that works for both of you.
- Create the budget together. Determine your income and expenses and allocate your money accordingly. Be sure to include a category for savings and make sure you both are comfortable with the budget.
- Set shared financial goals. This could be saving for a down payment on a house, paying off credit card debt, or building an emergency fund. Having shared goals will help keep you both motivated and on track.
- Track your spending. Use a budgeting app or spreadsheet to keep track of your spending and ensure you are sticking to your budget.
- Be flexible with your budget. Life happens, and unexpected expenses will inevitably arise. Be prepared to make adjustments to your budget as needed.
- Be supportive of each other. Budgeting can be difficult, and it’s important to support each other through the process. If one person falls off the track, offer encouragement and help them get back on track.
- Budgeting should be simple and easy to follow. Don’t fall prey to using a thousand different apps or complicated spreadsheets for your budget. It could be as simple as using a pen and paper or just a basic excel spreadsheet.
- Review and adjust your budget regularly. Your income and expenses may change over time, so it’s essential to review and adjust your budget as needed.
- Stick to a plan you both agree on
- Last but not the least, get yourself a reward like a dinner date for sticking to your budget.
Remember, budgeting is a process and takes time and effort, but with open communication and commitment, it can be a successful tool for your financial future as a couple.
Key Takeaways:
- Budgeting as a couple can be a tricky task, but it’s essential for ensuring financial stability and reaching shared financial goals.
- 4 Steps to Create a Budget with Your Partner
- Step 1: Calculate Your Combined Monthly Income
- Step 2: Calculate Your Joint Monthly Household Expenses
- Step 3: Subtract Expenses from Income
- Step 4: Create Long term goals
- Communicate openly and honestly about your finances.
- Set shared financial goals that you both agree on.
- Use a budgeting app or spreadsheet to keep track of your spending and ensure you are sticking to your budget.
- Review and adjust your budget regularly.
- Your budgeting should be simple and easy to follow.
- Get yourself some reward for sticking to your budget.
