Managing your finances as a couple can be difficult due to its sensitive nature. In many cultures, money is considered taboo and should not mess with “relationships” because everyone has a different relationship with money and a different way of managing it.
Imagine you and your partner have been married for a few years and have decided it’s time to start a family. You’re both working hard to save for a down payment on a house, but you notice that your savings account has been slowly dwindling since you started trying to save. You sit down with your partner to discuss the situation and realize that you both have different ideas about how much money you should be spending each month. You want to continue saving as much as possible, but your partner would like to start spending a little more money each month to enjoy life a bit. How can you come to an agreement that benefits both of you financially?
Why it’s important to manage your finances together
I know a lot of couples who let one person manage the finances of the family. The other person takes a hands-off approach. While I am not here to judge anyone’s decision, I am a firm believer that achieving harmony with money is equally as important as harmony in the relationship. Admit or not, money and finances play too big a role in our lives and can adversely affect the course of a relationship.
If done well, managing your finances together will help:
– increase transparency and communication within the relationship
– strengthen trust and mutual respect
– improve problem-solving skills
While it is not an easy feat, it’s totally doable , as long as both of you are open-minded to talk about it and align on a framework, or approach to use. Both of you will navigate these waters with less stress.
One of the main challenges that couples face when it comes to finances is communication. Often, one partner may want to save more money than the other, or one partner may want to spend more money than the other. This can lead to tension and arguments. Another challenge is that many couples are not taught how to manage their finances together effectively. This can lead to a lot of trial and error, which can be frustrating.
It can be tough to manage your finances successfully as a couple. Juggling different ideas about money, working towards common goals, and trying not to argue can be difficult. But it’s worth it!
In this post, I’d share some tips and steps to manage your finances successfully as a couple and avoid some of the most common pitfalls
Step 1- Discuss your overall shared goals and long term goals
When you’re trying to figure out how to manage your finances as a couple, it’s important to start by discussing your overall shared goals. What are your long-term financial goals? Do you want to purchase a home? Start a family? Save for retirement?
What are the numbers in your saving account/ investment account that you want to achieve in a few years?
How much are you comfortable spending per month?
Once you know what your shared goals are, you can start working on a plan to achieve them.
If you’re not sure what your shared goals are, start by brainstorming.
Sit down with a pen and paper, or open up a blank document on your computer, and start jotting down any and all ideas. Don’t worry about whether or not they’re realistic at this point, just get everything out on paper.
Once you have a list of goals, you can start to figure out which ones are the most important to you and your partner.
Step 2-Be mentally prepared to have disagreement and compromise
It is almost inevitable for couples to disagree once in a while as to what to spend their money on. One might want to save for something big such as a house, children or retirement, while the other person wants to spend money on things that bring immediate gratification such as traveling, nights out or new clothing.
When this occurs, it is important for both people to try and compromise. Compromise is key. You may not always agree on everything, but as long as you can find a way to compromise, you’ll be fine.
This way, both partners have a say in how the money is spent. You can each contribute your own ideas, and then work together to create a budget that works for both of you.
Another way to compromise is to share in the responsibility for paying bills. If one partner tends to handle the finances, try switching things up occasionally so that both partners have a chance to do it. This can help avoid any resentment that might build up over time.
Step 3- Create a shared budget
A shared budget is a great way for couples to manage their finances together. It can help you figure out where your money is going, and it can also help you make sure that you’re both on the same page when it comes to spending.
There are a few things you’ll need to do in order to create a successful shared budget. First, you’ll need to sit down and figure out how much money you both have coming in and going out. This includes your income, your partner’s income, bills, groceries, entertainment, and anything else that requires money.
Have a plan to update the budget and track the expense, preferably every week. You can take turns or have one person fully dedicated to this task. Either way is fine, as long as it works for both of you.
With this spreadsheet you can see exactly how much you both spent, earn and save and invest by month, by quarter and by year, how far you are along in the wealth-building journey.
Once you have a good idea of your overall financial situation, you can start creating a budget. You’ll need to figure out what your shared goals are and how much money you’ll need to save in order to achieve them. Once you have a plan, you can start allocating money towards different expenses.
One important thing to remember is that a budget is not set in stone. It’s always a good idea to be flexible and to adjust it as needed. If something comes up and you need to spend more money on one thing, you can adjust your budget accordingly.
Step 4- Cutting the highest interest credit card (if any) or debt
Credit card debt can be a big problem for couples. It can be hard to get ahead when you’re constantly paying off credit card bills. One way to get rid of credit card debt is to cut all your cards except one. This way, you’ll be less likely to use them and you’ll be able to focus on paying off your debt.
Another way to get rid of credit card debt is to transfer your balance to a card with a lower interest rate. This can help you save money on interest and pay off your debt faster.
If you’re struggling to get rid of credit card debt, there are a few things you can do to make it easier. First, try to make more than the minimum payment each month. This will help you pay off your debt faster. Second, try to get a lower interest rate by negotiating with your credit card company. Finally, consider consolidating your debt with a personal loan. This can help you get a lower interest rate and simplify your monthly payments.
No matter what method you choose, getting rid of credit card debt is a great way to improve your financial situation as a couple.
Step 5- Create a shared saving bank account to save for long term goal
A shared savings bank account is a great way for couples to save for their long-term goals. This account can be used to save for anything you want, from a new car to a down payment on a house.
The best part about a shared savings account is that both partners can contribute to it. This means that you can save money faster and reach your goals sooner.
There are a few things you’ll need to do in order to set up a shared savings account. First, you’ll need to open a bank account together. Then, you’ll need to decide on a goal and how much money you want to save. Finally, you’ll need to start making regular deposits into the account.
Once you’ve reached your goal, you can use the money for anything you want. However, it’s a good idea to keep the account open in case you need to save for another goal in the future.
Step 6- Create a checklist to go through before making any high ticket purchase
Making high-ticket purchases can be a big responsibility. If you’re not careful, you can easily rack up a lot of debt. That’s why it’s important to create a checklist before making any big purchase.
Every couple has a different definition of a high ticket item, for some, it could be from $700+, for others it could be $2,000. The numbers do not matter. What matters is you both agree that some agreement should be reached before hitting the BUY button.
How much can we afford to spend?
The first thing you’ll want to do is figure out how much money you can afford to spend. This includes your income and your current expenses. Once you have a good idea of how much money you have to work with, you can start looking at different options.
What is the long-term cost of the purchase?
Next, you’ll want to consider the long-term costs of the purchase. This includes things like maintenance, repairs, and insurance. It’s important to think about all these costs before making a decision.
Can we find a better deal by looking harder or waiting for a while?
Finally, you’ll want to make sure that you’re getting the best deal possible. Compare prices, read reviews, and ask for referrals. If you take your time and do your research, you’re more likely to find a good deal on a high-ticket purchase.
Would this item really add value to our lives, and how?
When considering a high-ticket purchase, it’s important to ask yourself whether or not the item would really add value to your life. In many cases, the answer is no.
For example, if you’re considering buying a new car, ask yourself how often you would use it. If you only drive to work and back, you probably don’t need a new car. A used car would be just as good and a lot cheaper.
Another example is if you’re considering buying a new piece of furniture. Think about how often you would use it and whether or not you really need it. In most cases, you can probably get by without it.
Step 7- Set a weekly date or biweekly date to review your finance together
If you want to have a successful financial relationship, it’s important to set aside time each week or biweekly to review your finances. This will help you stay on track and make sure that both partners are aware of what’s going on.
There are a few things you’ll need to review each week. First, you’ll need to be very open-minded and not fall into the critical mode when discussing finance with your partner. Second, you’ll each need to list out all of your expenses for the week and where the money went. Finally, you should also talk about your long-term goals and how you plan on achieving them.
By setting aside time each week to review your finances, you’ll be able to stay on track and work towards your financial goals.
A happy and healthy relationship is built on trust, communication, and compromise. When it comes to finances, couples need to work together in order to maintain a good balance between spending and saving. By following the tips provided in this article, you can create a system that works for both of you while helping to get rid of any debt you may have.
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