Posted by Eric @ High Five Dad | Oct 13, 2017 | Family Finance | 6 |
For a lot of couples, money can be a touchy subject. If you thought money was stressful when you were single, you had no idea until you are in a relationship! This is particularly true when the relationship begins to get more serious. Let me be honest, there’s not a single “right” approach to managing money as a couple. However, there are better ways…
Communicate
The single most important thing you can do to effectively manage money as a couple is to be as open and honest about your finances. Share with your partner details of your income, the credit card debt for that brand new TV you just HAD to have… student loans (Damn you Sallie Mae!), etc. Lay all your financial cards on the table. Letting your partner know about your finances can create an open line of communication and ensure that there are no unwanted surprises in the future. As a couple you need to be clear with each other on how you feel that money and how it should be handled. In the end, these conversations strengthen the overall relationship and avoid misunderstandings later on.
Know Your Expenses
We spend HOW much on groceries??? Are you serious??!?
Those may not be the exact words that I used, but in reality that is what I was thinking. As a single guy living on cereal and mac and cheese my grocery budget was not a problem. It ranged in the neighborhood of 200-250. Somehow when you become a couple this expense EXPLODES! I was shocked to realize how much money we were spending on food alone. Not having a firm understanding about this expense can create frustrations when it comes to creating a monthly budget and trying to stick to a budget.
My recommendations to better understand your expenses is:
- Pull your bank statements as a couple for the last 60 days to get a realistic picture of expenses.
- Categorize similar expenses into categories. This simplifies budgeting.
Create a Money Vision
As a couple create a money vision. A money vision is an aspirational description of what financially you would like to achieve or accomplish in the mid-term or long-term. The intended purpose is to serve as a clear guide for choosing a current and future course of action. In other words, this money vision will provide you and your partner a clear focus on what you are trying to accomplish with your money.
Creating a clear vision for your finances and life is critical to achieving that level of success. During this strategy discuss with your partner goals and expectations that you would like to achieve. Most likely you may not agree with each other at first…
That’s okay!
Use this time to talk and create a compromise. Building a money vision together may be tough. She may want to retire in the city and you may want to a brand new boat. But it is better to create the vision NOW rather than push it off until later. This will get both of you on the same page financially which will assist when tough decisions come up.
Too many people fear being locked into this vision… DON’T BE! It is your money vision. As a couple revisit your vision often to ensure that you’re on track to making it a reality and identifying if it’s still the reality that you want.
Create a Plan
If I said it once, I will say it again…. BUDGET!
I absolutely believe that a budget can be the difference maker when it comes to finding financial success.
No a budget CANT make you more money… BUT it can identify money leaks and overspending! Both of which can creep up and create a financial emergency.
As a couple you created a vision for your money. If you stop there, then it will never happen. I know someone out there is thinking:
Well I know a guy who was terrible with money but got a crazy amount of inheritance and he is doing just fine…
That may be true. But why would you put your financial vision in the hands of dumb luck??? I am serious. As a couple, you have dreamed a vision for your life and for your finances. Now the hard part starts. Building backwards.
If you want to have 3 million dollars in savings before you retire at 55 work backwards.
55 Years Old: 3 million
Current Age: 35
That gives you 20 years to accumulate 3 million or 150,000 per year. Now I am not going to get into compound interest and the role that it could play but you get the picture.
As a couple plan out a rough draft on how to make your visions a reality. Work backwards. Create yearly goals and THEN create your ongoing monthly budget. By having pre-defined yearly goals, it will help identify where extra money should go.
Eric I am TOO broke to budget…
Nonsense! It’s going to suck and take a LOT of GRIT but it’s possible!
Whether you use a debt snowball or avalanche, a budget is key.
If you are struggling here, make your goals tangible instead of abstract. As a couple find a common purpose that you are working towards. Any extra funds will go towards this purpose.
Build a sound foundation
A financial house built on a weak foundation is bound to collapse on itself. Any time people ask about financially advice I keep it simple. I apologize if you were hoping for some flashy new investment method… that’s just not me but I do have sweet gifs…
First and foremost as a couple build a mini emergency fund. This is a layer of protection between you and the world. It allows life to happen without crushing you financially.
Does everyone NEED an emergency fund?
I think EVERYONE needs at least a mini-emergency fund. This will allow you to pay for flat tires, broken windows, unforeseen medical bills, etc.
Next… DEBT. Pay off your debt!
I know people talk about good debt and bad debt… But for me I think it’s all bad. I would much rather have zero debt and use that money to max out various retirement accounts or spend time traveling with my family.
Wait what?!? Traveling ? Doesn’t that cost money???
Absolutely it does! Here is thing about money. There are opportunity costs for everything. If your money is going to paying off loans, interest, debt, etc, then that is money that CANT be used elsewhere. I would much rather find some better uses for it.
Lastly, move closer to your money vision. You and your partner spent time creating your financial future, start getting closer to it. As you remove debt from the equation, you will realize how much faster it is to get to your goal.
In Closing
Let me be honest. I am not a financial guru. I am just a dad who likes to plan and think strategically about finances. Managing money as a couple is difficult because you are GOING to have to COMPROMISE!
My financial vision was not the same as my wife’s vision. That’s ok! We spent time communicating about what we both want, the non-negotiables and built a financial vision so much better than the one I could create on my own.
Celebrate each and every achieved goal, even the seemingly small ones. It really does help build momentum. The infographic belowmay be ahelpful guide through the process.Don’t forget to pin this post to your favorite Pinterest board!
