Forming and sticking to a budget is difficult enough, but when you add a significant other to the mix, it can quickly become difficult and complicated. It doesn’t have to be terrible for your bank account or your relationship, however.
Your significant other is not your roommate, so sharing bills and labeling your food in the refrigerator like you did when you shared an apartment with two other people isn’t going to work in this situation.
Money matters can get messy fast if you don’t talk through expectations before you start paying bills together. There are two ways you can handle expenses that tend to work well for unmarried couples:
If you and your partner bring home paychecks that are similar in size and frequency, it may work to simply split every bill in half. But then who pays for dinner out or drinks with friends? Whose job is it to notice that you are almost out of paper towels or milk and then go out and buy more?
You’ll have to work out details like these to avoid resentment when one of you inevitably ends up paying for more day-to-day little expenses than the other.
When one of you makes more money than the other, splitting expenses isn’t fair. A few years down the road, one of you will have a nice car and the other will be driving a heap of junk. Or, one of you will have a decent-sized savings account or a head start on retirement savings and the other will be barely scraping by.
So, if the total costs of living together (rent, groceries, shared utilities, etc.) equals $3,500 per month, you’ll split that amount according to your take-home pay. So, if your monthly paychecks add up to $3,000 and your partner brings home $4000 per month, your total household income is $7,000 per month. You bring home 43% of the total money that comes into the household. Your partner brings in $57% of the total money that comes into the household.
In this scenario, you would be responsible for 43% of the monthly bills; $1505. Your partner would pay 57% of the bills; $1995. Of course, you’d adjust when one of you gets a raise or changes jobs if that results in a permanent increase or decrease in monthly income.
If you don’t have plans to marry anytime soon, it’s best to keep savings in separate accounts. Both you and your partner should be actively paying down debt while contributing at least enough to your company’s 401(k) retirement plan to get the maximum matching funds, if available.
Maybe you have a shared goal that you need to save for. A big trip or a large purchase like new furniture could warrant joint savings. If you decide to contribute to a jointly-held account, make sure you work out a plan for regular deposits that are equitable.
Agree on a goal, set a timeline to get there, and figure out how much each partner will contribute and when they’ll make those contributions.
Whether you have shared savings goals or not, it’s important to contribute to and keep your individual savings separate. This is your emergency fund, and it will help you handle life’s inevitable unexpected expenses. It’s important to maintain your ability to care for yourself and having an emergency fund that you contribute to and keep apart from your regular spending account is crucial to your wellbeing.
Going into debt together may seem like a convenient way to easily make bigger purchases. However, there’s not really a good reason to take this type of financial risk. It’s better to get a family member to cosign for you if credit problems prevent you from getting a car loan or credit card.
If your significant other has credit problems, make sure you don’t sacrifice your credit rating and good financial standing by taking on more joint debt than you could hypothetically handle on your own.
If you’ve decided to get engaged and are planning a wedding event, you’ll need to come up with a budget. Weddings are notoriously expensive, and its easy to get caught up in the excitement of dreaming and planning.
The biggest problem with wedding expenses is a failure to agree on expectations. If one of you wants a huge event with hundreds of guests or a large destination wedding and the other prefers a more intimate and understated gathering, you’ll both have to make some major compromises.
You can start with general categories and an overall budget. This first-draft of your wedding budget will help you start talking about the details of your big day. Discuss your priorities carefully. If one of you wants a big reception with a traditional DJ, dancing late into the night, and a full bar, and the other wants the ceremony to be small and intimate, figure out how to do both things.
Your wedding belongs to you as a couple, so have fun talking about the possibilities.
If the most important thing about your wedding is the reception, give the bulk of your budget to that part of the event. If you care more about the photos than the dinner menu, dedicate a larger portion of your budget to hiring a great photographer and consider keeping dinner simple.
Just because you can take out a loan to pay for your wedding doesn’t mean you should. As a married couple, you’ll want to move forward with your plans together without the weight of a big debt holding you back.
Planning a wedding can get out of control quickly. There are thousands of ways to spend money. Just try to remember that it’s a happy event. If you need to throw a fit and elope, do so. However, throwing a fit because you want to spend $15,000 on a photographer and your partner thinks that’s too much is less romantic.
Your wedding is about getting married and then being married. Being married is more difficult if you start off deep in debt. If you have family that wants to help, be sure to have a frank talk with them about how involved they expect to be in the planning process. Does accepting their financial help mean they’ll make decisions about the wedding?
If you have strong feelings about certain aspects of your wedding and you feel like accepting money from family could undermine your control, proceed with caution.
If you are merging finances with your spouse for the first time, make sure you agree on a spending plan so you can pay the bills on time and save for the future.
There’s no “right way” to handle money as a married couple. If you are comfortable with separate accounts and want a joint account to pay household bills, that can be an excellent way to maintain some independence while ensuring that you meet necessary financial commitments. For some people, sharing finances with one checking and one savings account with a predetermined amount of spending money for each partner works well.
Some couples talk once a month in a pre-planned meeting about money, others share a spreadsheet online or use a joint budgeting app on their phones. The method is less important than having a practical way that you can comfortably communicate with each other about the state of your finances.
Money problems are a common cause of divorce, so take good care of this area of your marriage. If you need help navigating your way through money talks, consider working through your issues in counseling.
It may be tempting to allow one spouse to take over the money-management tasks. Communicating about financial matters can be stressful, and many couples choose to avoid the process. However, expecting one person to deal with the day-to-day minutia of paying bills and keeping track of income and expenses is unfair.
If you work out a budget together, you can put the regularly occurring bills on autopay from your joint account. Make decisions together about how much to save and where to keep that money. Here are some categories to consider:
Aim for three to six months-worth of living expenses. Keep this money in an easy-to-access account that is separate from your regular spending account. It’s OK to build this fund slowly but make it a priority.
Start by setting aside $1,000 for emergencies. That way, you don’t have to use expensive credit cards to finance an appliance repair or handle the deductible on your car insurance if you get into an accident.
If you and/or your spouse have a 401(k)-plan available through your employer with matching funds, contribute at least enough to get those free bonuses from your employer.
How much you contribute to your retirement accounts depends on many factors, including your current level of savings, how much time you have until retirement, and your tax situation. Work with your partner to decide how much money you’d like to have saved before you retire. There are many online calculators that will help you understand how much you’ll need to save each month.
There are certain expenses that will have an impact on your budget, but only require your attention once each year. Some families spend more money around winter holidays or enjoy a long vacation each year. To prevent those expenses from having a negative impact on your ability to pay your regular bills, it’s a good idea to set aside some money throughout the year in a separate savings account.
Decide well before the event how much money you are willing to spend. It’s easier to enjoy a holiday celebration or vacation if you aren’t at odds with your spouse about how much money it costs.
If you are expecting a child, it’s important to plan carefully for the expenses associated with raising kids. Becoming parents will throw your budget into a state of uncertainty. That’s normal and planning ahead will help alleviate some of the stress you may feel about providing for another person.
If one or both parents will take leave when the baby is born, figure out how you’ll handle living expenses. Ideally, you’ll have paid leave for a few weeks after the birth of your child. Not all couples have paid maternity and paternity leave through their employers, so build a safety net in the form of a savings account.
Make a practice budget to get an idea of how you’ll spend your projected income during the first few months after the baby arrives. Figure out how much it’ll cost to buy diapers, formula (if necessary), and pay for a nanny or daycare (if necessary). Add those expenses to your regular budget. Learn about the costs of adding a child to your health insurance plan, too.
If one parent will stay at home with the baby, talk about how you’ll handle living expenses. Many costs associated with having a baby are temporary, but they are also non-negotiable.
If both parents plan to return to work, figure out how to balance new responsibilities fairly. If having a two-income family is an important priority, it’s crucial to keep the work of caring for a child and running a household from falling into one parent’s lap. Allowing one parent to shoulder the burden at home even though both parents work is a recipe for burnout and failure.
Even if you are 100% sure both you and your partner will return to work when parental leave ends, it’s wise to have a contingency plan. It’s impossible to predict how bringing a baby home will change your perspective.
If you don’t already have a plan in place to save aggressively, put one together. It’s important to save as much money as possible while both you and your partner are working full-time.