The wedding and honeymoon were fun, but once the honeymoon is over, you have to learn how to budget with your spouse.
The Statistics are Grim
Money is the number one reason couples fight. When issues around money aren't resolved, they become the third leading cause of divorce after incompatibility and infidelity, responsible for 22% of marriage break-ups.
If you want to divorce-proof your marriage, learning how to budget with your spouse should be your priority.
Your Money Comingled
The first decision you and your spouse need to make is how to comingle your money. There are three choices; don't, all in, and yours mine ours.
Don't means not combining finances at all. Well, unless you and your spouse don't live in the same house, this is pretty difficult.
All in means the two of you pool all of your money together.
Yours mine ours means each spouse has their own bank account and they have a joint account.
Yours mine ours is the best method to avoid fights over money. Each person has their own money they can spend on whatever they like, and both are contributing to the household's shared expenses. If one spouse makes much more money than the other, the best way to fund the joint account is for each spouse to put in the same percentage of their income, not the same dollar amount.
If one spouse isn't working, this all becomes much more complicated. We can cover that in a separate article.
Discuss Your Goals
All couples have goals: to buy a home, start a business, have children, retire early, or travel abroad. All of those things require money. When you have shared goals, it's easier to be on the same page when it comes to spending.
If you both agree you're going to save up 20 percent for a down payment on a home, you can hold one another accountable for your spending.
Make a Plan
It's essential to have financial goals but just having them isn't enough. You and your spouse have to work together to create a plan that will enable you to reach your goals. Let's take the 20% down payment for a home as an example.
You have to figure out how much home you can afford (housing costs should be no more than 30% of your net income). You can use a mortgage calculator to get that number. Next, calculate 20% of that number to get the amount you need to save for a down payment.
Decide on a timeline, how soon do you want to buy a home? Now you can calculate how much money you need to save each year to reach your goal.
You want to buy a $200,000 house in five years. That means you have to save $40,000, $8,000 a year to reach your goal. That is a much more concrete goal than "We want to buy a house."
Actually Make a Budget
Everyone must have a budget; they're not just for broke people. A budget is not only the best tool to help you reach your financial goals, but it's one of the best tools to help you and your spouse avoid fights over money.
Mint is our favorite budgeting tool because it's easy to use and free. Sit down together and create a monthly budget. If you're not sure how to budget your income, a good rule of thumb is the 50/30/20 method of budgeting.
Fifty percent of your income goes to essential expenses like housing, transportation, groceries, and utilities. 30 percent goes to discretionary expenses, the fun stuff like dining out, clothes, and vacations. The remaining 20 percent is for debt repayment (if you have any debt) and savings goals like buying a home and retirement.
If you do have debt or you want to accelerate the pace at which you can reach your goals, we recommend flipping the 30 percent and 20 percent. Spend 20 percent of your income on discretionary expenses and 30 percent on paying off your debts or saving for your goals.
And Stick To the Budget
Once you and your spouse have agreed on a budget, stick to it. Creating a budget doesn't magically prevent you from spending money. If you've never had a budget before, not going over can take some practice. That's okay; you'll get the hang of it.
If one or both of you are having trouble sticking to the budget, sit down together and decide how you can fix it. One way to address overspending is to use cash rather than credit or debit cards.
Spending cash feels more "real" than swiping that plastic card, and cash is finite. Once you spend it, there isn't anymore. When you're using a debit or credit card, there's nothing to stop you spending other than spending all of the money in your checking account or going over your credit limit.
If one of you consistently overspends in a certain category, at the beginning of each week take out the amount of money you've budgeted for that category. Once that cash is gone, it's gone. You can't spend any more in that area for the week.
You're in this Together
There are going to be times when you and your spouse fight over money even if you're on the same page. No one's views about money or anything else are going to be in perfect lockstep 100 percent of the time.
That's okay; the two of you don't have to agree on everything. It's important to make conversations about money an ongoing thing. Sit down once a month and go over your budget together. See where you did well and where you messed up. See how well you're progressing towards reaching your goals.
When you don't regularly check in and discuss things, tensions can build and finally explode into a major fight. Talk about money early and often. Because you're in this marriage thing together.