Marriage is an important step in anyone's life and brings many challenges with it. One of those challenges is the management of your finances as a couple. The money decisions that you make now as a couple can have a lasting impact on your financial future together. Careful planning of your finances can ensure that together, you achieve financial success.
Budgeting your money
In general
When you were single, you managed your finances in a way that was comfortable for you and that you understood--no one had to approve or disapprove of your financial decisions. Now that you are married, however, both you and your spouse have to agree on a system for budgeting your money and paying your bills.
Discuss financial situations
You and your spouse must discuss your respective financial situations and expectations and take stock of your individual assets (what you own) and liabilities (what you owe).
Revealing your financial situation is an important step when budgeting as a couple. If either of you has a financial problem, it is best to identify it now and begin solving it together.
This is the time to address questions such as what do each of you earn, and what additional sources of income do you have? What do you own?
Will both of you work now that you are married?
Who will hold title to property acquired before and after the wedding?
In addition, be sure to disclose all of your financial commitments.
If you pay child support, let your partner know the amounts.
If you have to repay student loans, discuss that as well.
Discuss financial goals
After you discuss your financial situations, you should discuss your financial goals. You can start by each making a list of your short- and long-term financial goals.
Short-term goals are those that can take anywhere from three to five years (e.g., saving for a down payment on a home or a new car).
Long-term goals are those that take more than five years to achieve (e.g., saving for a child's college education or retirement).
When you have each determined your individual financial goals, you should review your goals together to achieve common objectives. You can then focus your energy on those common objectives and strive to attain those goals (short- and long-term) together.
Decide on the type of bank account(s) you will keep
Decide whether you and your spouse will have separate bank accounts or a joint account.
Advantages to consolidating your checking funds into one account include easier record-keeping, reduced maintenance fees, less paperwork when you apply for a loan, and simplified money management.
If you do choose to keep separate accounts, consider opening a joint checking account for household expenses.
When sharing a checking account, be sure to keep track of how much money is in the account at all times since both of you will be writing a check or using social medial and apple pay that draw from the same account. Begin with your sources of income--list salaries and wages, alimony and child support, interest, and any other form of income that you and your spouse may have.
List your expenses. It may be helpful to review several months' worth of entries in each of your checkbooks to be sure that you include everything.
Put all the expenses that are paid monthly into one category, and put all other expenses (every other month, quarterly, semiannually, annually) into another
Prepare an annual budget
The first step in developing a financial future together as a couple is to prepare an annual budget. The budget will be a detailed listing of all your income and expenses over the period of a year. You may want to designate one spouse to be in charge of managing the budget, or you can take turns keeping records and paying bills. Make sure that you develop a record-keeping system that both you and your spouse understand. Also, keep your records in a joint filing system.
Estimate your expenses for each category. How much money do you spend on these items monthly and on an annual basis? Try to come up with a realistic amount for what you think you will spend in a year's time. Add another category to the irregular expenses list and call it Contingencies. This can be a catchall category for expenses that you might not anticipate or budget for. The amount to budget for contingencies should be about 5 percent of your total budget.
Add your sources of cash and uses of cash on an annual basis. Hopefully, you get a positive number, meaning that you are spending less than you are earning. If not, review your expense list to determine where you can cut your spending. Consider using computer spreadsheets or programs like Quicken for assistance.
Some common expenses are:
Savings Tax Payments
Major purchases Utilities
Rent or mortgage payments Medical expenses
Insurance Car payments
Student loan payments Gifts
Car repairs Credit card payment
Groceries Automobile gas
Clothing Alimony/child support
Pet care Personal care/grooming
Household items Child Day care
Entertainment/dining out
Create a cash flow system
After you have developed a budget, you should create a system for managing your monthly inflow and outflow of cash. It is a good idea for both you and your spouse to become involved in this process--at least at first--so that both of you have a clear understanding of the costs of running the family and household.
Cash flow systems like the one described below are simple and painless to operate. Once they are established, you will find that making financial decisions becomes much easier because you have done your homework.
Separate your regular monthly expenses from irregular expenses (every other month, quarterly, semiannually, annually) by using a different bank account for each. Otherwise, you may be tempted to use money that has been earmarked for something else. You should limit the number of checking accounts that you have in order to avoid confusion.
Each time you get paid, deposit some money into an account for irregular expenses. The amount of money you deposit should be equal to the total amount needed for the irregular expenses, divided by the number of paychecks you each receive annually. In so doing, you will have the money for the outlay when it arises. The rest of your pay should go into your checking account, to be used for regular monthly expenses and savings.
One variation to this system of cash flow management is to establish one or two additional bank accounts for one or both of you for personal spending money. Allocate the budgeted amount for personal expenses (e.g., lunches, haircuts, gifts) to this account. This way, you are free to spend the money in this account in any way you like without having to worry about meeting regular monthly expenses. However, all of these bank accounts may have fees.
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