How To Budget as a Couple

For couples, getting together to budget and manage your money isn't just good for your bank account, but also your relationship. According to statistics, financial disagreements can even predict divorce.

If you're in a solid financial situation, you might think you don't need to create a budget with your partner. But going through the budgeting process can help you prepare for future uncertainty and help you tackle challenging times together. It can even be fun.

Find out how budgeting as a couple can help enhance your relationship, decrease arguments, help you manage money and accomplish shared goals.

1. Discuss Your Financial Values

If you're hoping to budget as a couple, diving right into a discussion with your partner about spreadsheets, budgets and paying debts is a sure recipe for stress.

Instead, start with a broader conversation about your financial hopes and interests. What type of lifestyle do you want? Do you want to buy a house? Understanding your individual and shared values can help you set goals and a budget you can both buy into.

From your conversations, you may find that you have different money styles. For example, one of you might be a spender, while the other might be a saver. In situations like this, you might consider setting individual goals in addition to your shared goals or set up separate "spending accounts" for each person to use as they'd like.

2. Choose Financial Goals as a Couple — Starting With an Emergency Fund

Even if you and your partner have different money styles and goals, you can still find common ground and motivation if you set a few shared goals as a couple. These goals can bring you together for collaboration and can help you get excited about your budget and stick to it for the long run.

Where do you start when you're setting financial goals as a couple? My advice is the same as it is for individuals: Set an emergency savings goal first. This is your rainy-day cushion if you get laid off from a job, get a surprise medical bill or have an emergency home repair.

You can still have individual goals, too. For example, I might want to save money for a new car, but my boyfriend might want to save money for a trip home to visit his family. In this case, having individual savings and spending accounts for personal expenses might make sense for you.

Map Out Short-Term, Medium-Term and Long-Term Goals

Your financial plan might involve just one goal, or it could have several. To best manage your money, map out whether your goals are short-term, medium-term or long-term. It may be easiest to start with one short-term goal, so you can enjoy the reward of reaching your goals sooner.

Examples of Long-Term Goals (Longer Than Five Years)

• Kids' college education.
• Retirement savings.
• Homeownership, including a down payment.
• Major home remodeling.

Estimate how much you'll need, then divide that amount by how many months you think you'll need to save.

Example: Imagine you and your partner want to go on a two-week vacation together next year. You estimate the trip will cost $5,000 total. Divide the total amount you need to save by 12 for the number of months in a year to determine that you need to save $417 per month.

Of course, you could also save $2,500 separately. But working on a joint goal — perhaps even in a joint savings account — can provide encouragement and accountability.

3. Add Up Your Combined Income

Now that you know what you want to save for, you need to understand how much money you have to work with to reach your shared goals. 

Add up each person's net income (the amount after income tax withholding, also known as take-home pay) from all sources, including wages, salary, freelance and side-gig income. This is the total amount of money you have for essential and discretionary spending and savings, individually and as a couple.

4. Track Your Expenses

Make a detailed list of your expenses — yours, theirs and shared — all in one place. You might need to track your expenses for a month or two to get a clear idea of where you spend your money.

List everything you pay for, including automatic bill payments, digital subscriptions, online purchases and payments in stores. Be sure to include periodic expenses — those that don't occur monthly — like annual dues, insurance payments and even haircuts and holiday gifts.

You can track expenses with a notebook and pencil, use a spreadsheet or choose from various online tools. BECU members can use Money Manager, for example. The best tool is the one that works for you.

5. Categorize Your Spending

After tracking your spending for a couple of months, review your expenses with your partner. Group similar purchases into categories, like housing (mortgage or rent), groceries, transportation and entertainment.

Some expenses are clearly essential, like paying for housing and utilities. Others might not rise to the level of "essential," but they may be important to one or both of you. Try not to pass judgement on how important expenses are at this point, especially if something is more important to you than it is to the other person. For example, the premium cable package might be the only way you can watch your favorite sports, but your partner might not be into sports. The point of this part of budgeting as a couple is just to get everything out in the open so you can see where your money is going. Prioritizing expenses comes next.

6. Compare Income to Expenses

Now that you have totaled up your monthly expenses, subtract that number from your net monthly income. If, after adding everything up, you have money to spare, then creating a budget as a couple will be pretty easy. But if, like a lot of people, your income is less than your expenses, the next steps are likely going to be more challenging because you'll have to figure out where to cut back.

7. Prioritize Expenses and Cut Back as Needed

Try to keep an open mind and look at everything you spend money on. Go line by line. Respect what the other person wants even if it's not what you want.

This is a good time to think about whether you want all your expenses to be shared or if there are some things you want to cover individually. There are a number of methods you can use as a couple to split bills, such as splitting everything 50-50 or basing your share of expenses on your percentage of household income.

This is also when you can figure out how much you need in a joint account and how much you can afford to have in your own individual account. Cover the essentials first, then decide how to manage the fun stuff.

Don't forget about less-frequent, upcoming expenses, such as insurance and taxes. If you know you'll need to come up with $1,400 for auto insurance or property taxes in a year, make sure ahead of time that you're saving enough every month.

8. Choose a Budget Method That Works for You

Remember, a budget is a projection of how you'll spend and save money each month. There are many different budgeting methods available. If you choose a method and find that it doesn't work well for both of you, you can always try a different one.

80/20 Rule

If you're new to budgeting as a couple, this strategy might be good for you. For your joint income, you can spend 80% on needs and wants and commit 20% to savings. This 20% could go toward emergency funds, college savings, retirement savings or debt reduction. Be sure to prioritize your emergency savings first.

If you're currently spending 90% or even 100% on your joint needs and wants, try to cut back in a category, so you can put 20% toward your savings goals.

The 60% Solution

This budget approach can be great for couples because it commits you to a slightly higher savings amount than the 80/20 Rule, and it leaves room for you and your partner to spend on things that are fun for both of you. Here's how the 60% Solution is divided:

The Balanced Approach

This could be a good option if you and your partner are trying to pay off debt. You'll have to be a little more specific than the two previous methods about identifying which expenses are essential (needs versus wants), and you'll need to agree on your debt reduction method while still committing to saving if you can, even if it's a small amount. Here's how you'd divide up your budget with the Balanced Approach:

Other Budget Options

You can be as general or as detailed as you want in your budgeting, based on your financial situation and how much time and effort you want to put into it.

If you like to get into the details and you have aggressive savings goals, you might like something like zero-based budgeting, where every dollar is accounted for and given a purpose.

Caution: If you're detail-oriented, be careful not to let your budgeting habits become a source of frustration for your partner, especially if you have different money styles. Help each other stay on track but give each other space to spend money on what matters to each of you.

9. Check In: Make Sure You're on the Same Page

Communication and understanding will be key in the budgeting process. Consider scheduling date nights focused on a financial check-in, perhaps once a month. As you become a pro at budgeting, you can move to quarterly reviews.

Pour yourselves your drink of choice, make a later dinner reservation or cue up your favorite movie. Having your financial check-ins bookended by a fun date night activity makes them feel less tedious and more enjoyable.

However you choose to check-in, I recommend scheduling a financial review once or twice a month and first touching on lighter topics like financial goals before diving into the nitty-gritty of things like debt.

These reviews can include reviewing your monthly income, savings accounts, financial goals and budgeting aspirations. How close are you to your budget? Have your financial goals changed? In time, budget night could become a fun aspect of your relationship you look forward to.

Tip: For relationship-building exercises, write down financial conversation starters or questions to prompt money memories and put them in a bowl or dish. Pull one out to ask your partner during your review dates. A few ideas:

• What was your family's attitude toward money?
• Did you have an allowance?
• Did your parents save for their retirement? Why or why not?
• Were there any money stress points when you were growing up?
• If you won $1 million, what would you do? $10 million?
• What did you want to buy for yourself when you were a child?

10. Track Your Progress

Once a year, do a holistic review of your expenses and spending — as if you're just starting out with your budget — to make sure the numbers are still working for you.

It's Never Too Early or Too Late To Start

Whether you're a new couple or you've been together for years, budgeting with your partner can help you reach your financial goals and deepen your relationship. Keep the lines of communication open and give each other time and space to learn and grow.

Resources

• BECU's seminars and webinars
• BECU Envelopes
• Budgeting Tools
• Financial Health Check
  
  

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