Guide to Budgeting for Couples

1. Discuss Your Money Management Style

Because different people have different approaches to managing their finances, having an honest conversation about money is the first step to creating a budget you can live with and stick to. If you have similar money management styles, this part will be easy. However, if one of you is a super saver and the other spends like there's no tomorrow, you'll have to work harder to get to a place where you can both feel comfortable.

2. Choose Your Financial Goals Together

There's no shortage of goals you and your partner may want to achieve. Common ones include:

• Building an emergency fund
• Saving for a wedding
• Saving for a down payment on a house
• Planning for the birth of a child
• Saving for retirement
• Saving for vacation
• Paying down debt
• Saving for a vacation property
• Saving for a child's education

Unless you have unlimited resources, you probably won't be able to save for everything at once. As you achieve shorter-term goals like building an emergency fund or saving for a wedding, you can use the money you were setting aside for those goals to save for others.

3. Calculate Your Income and Expenses

You can't create your budget until you know how much money is coming in and going out every month. Start by adding up each partner's take-home income. Include after-tax salaries from full- or part-time jobs, side hustles, seasonal work, rental income and anything else considered income. That's how much you have to spend and save each month.

Next, add up all your expenses. Start with essentials such as rent or mortgage payments, utilities, transportation, groceries and child care. Then add discretionary spending like hobbies and entertainment. Don't forget to include semi-regular expenses that don't occur every month (insurance and taxes, for example) in your calculation.

If your income exceeds your expenses, you're ready to move on to the next step. If not, you need to decide together what expenses to trim.

4. Create Your Budget

There are several budget plans to choose from, and the first step in creating a budget is deciding which method to use. If the one you start with isn't a good fit, you can always try a different one. Here are several options to consider.

• 50/30/20 budgeting rule: Couples who use this method designate 50% of their take-home pay to essentials, 30% to discretionary items and 20% to pay down debt and save. Depending on your income, spending habits and financial goals, you may decide to adjust these allocations.
• Envelope method: With this method, you divide spending into categories and designate a specific dollar amount to each category (such as groceries, entertainment and utilities) every month. When you spend all the money in a particular envelope, the goal is to avoid spending in that category for the rest of the month. If you must make another purchase, you can borrow money from a different envelope. However, you'll need to reduce your spending in that category to compensate for the shortage.
• Zero-based budgeting: This strategy requires you to assign every dollar you bring home to a specific expense or savings goal so that every dollar is accounted for at the end of the month.
• Pay yourself first: Couples who use this budgeting method prioritize saving by transferring money to savings and investment accounts first. After that, you pay for essentials like housing and transportation. Then, you use what's left for fun.
• No-budget budget: This system offers couples more flexibility than other budgeting methods. After covering debt payments and living expenses and setting aside money for savings and investments, you use what's left over however you want. You don't have to track where your money goes with this type of budget.

5. Decide How You'll Split Expenses

Now that your budget is set up, you must decide who will pay for what. Here are a few common ways couples split expenses.

• Share everything. In this scenario, couples combine all of their financial resources and cover expenses from a single pool of money.
• Split everything 50-50. Some couples may have each person cover half of every bill, but this strategy can be challenging if one partner significantly outearns the other.
• Pay a percentage. Couples who use this strategy contribute a percentage of their earnings to pay the bills based on their income. For example, one partner may pay 35% of each bill, and the other may pay 65%.
• Divide the bills. You could also select which bills each partner is responsible for. For example, one person may pay the rent while the other covers the utility bills.

There's no one right way to divvy up expenses, but both of you need to be comfortable with the method you choose.

6. Track Your Spending and Saving

Deciding how much to spend is only part of the process. The only way to know for sure where your money is going and if you're sticking to your budget is to track your spending and saving. Setting up automatic transfers and bill pay makes it easy to keep your savings goals on track and avoid late or missed payments that can negatively affect your credit scores. You can check your credit score from Experian for free to see how the way you manage money affects your score.

Determine the best places for your savings depending on long-term goals such as retirement and shorter-term goals like saving for a vacation or car down payment.

7. Review Your Progress Regularly

Choose a time to meet with your partner to review your finances on a regular basis. This allows you to course-correct when things don't go as planned, or you're consistently overspending in certain areas. Because your expenses and financial goals will likely evolve over time, you'll probably need to adjust your budget as your lives change. Getting in the habit of talking about money will make it easier to adapt to the changes you experience.

Frequently Asked Questions

The Bottom Line

Talking about your budget may not be as exciting as planning your dream vacation, but getting a handle on your finances can help you turn your dreams into a reality. Creating a realistic budget, tracking your spending and saving and adjusting your plans when life throws you a curveball can set you up for long-term financial success. Plus, having a plan that both partners agree on helps reduce stress and eliminate surprises.