At some point, many of us join forces with another individual and form a couple that forms the nucleus of a new family. At this point, we learn to push the ‘me’ to the backburner and start thinking in terms of ‘us.’
In a modern relationship, one of the aspects that should not be overlooked when we start thinking about ‘us’ is the aspect of money, or budgeting. How to ensure that we can live within our means and improve our financial position over time. This becomes especially important when the earning is individual but most of the spending needs to be done together.
It might not be a natural topic of discussion at any stage but it is important that it is done. Money is the one common denominator that impacts each and every part of our life. If the two partners do not know what to expect, it can lead to surprises, popping out at every step, many of them unpleasant. You don’t want that to happen.
Budgeting essentials for couples
Identify and calculate your income
If there is no earning there cannot be any spending. Hence, in a way, this should be the start of the budgeting process; getting a realistic projection of earnings, individually as well as together, which will be a simple sum. Make sure all sources are identified and also the projections are realistic.
Discuss your life goals
While the focus is on financials, money is the path to achieving many of our goals. Want to buy a car, need money for it. Want to travel overseas, need money. Want to send your children to a private college, need money once again. And it goes on…weddings, gifts, loans, emergencies will all have a role to play in it. A discussion of what you want out of life, what you want to achieve, acquire, will enable you to convert it to money and bring it back within the budgeting process.
Being realistic is advised, else it will become a hypothetical exercise and collapse at the first hurdle. However, you should be aware that there are many variables in life that one cannot control. As we know, “the best laid plans of mice and men often go awry.” A plan will also help us handle the curve balls better.
Add up your expenses
While the life goals will get converted to expenses, there are many other regular expenses that you incur that are, well, there. Paying an electricity bill, or even living in an electrified home, is not anyone’s life goal today, it is there. It is taken for granted. But the bill for electricity needs to be paid. The car needs fuel. We need to eat. Listing them down will help us understand what we are spending or will be spending in future. You might also want to identify the individual expenses and the joint expenses so that a balancing act, if needed, can be performed.
Match expenses with income
This is where the rubber meets the road.
If income exceeds expenses, celebrate. It is a great starting point. You can now do even more than what you may have wished for.
However, the more common situation is where expenses are higher than income. How does one handle that? And that is what makes this the challenging part of the process. But hopefully, your goals are aligned and intentions honourable. You want to do what can be done to make it the best outcome for both and together.
The answer usually lies in reviewing the expenses side of the budget. Identify wasteful expenses, set up limits for expenses that have a tendency of creeping up. The good thing is that now you know what you are spending and earning. That visibility will enable you to act for good, rather than living in hope and finding out too late.
Sharing the bill
This could be another contentious part of the process, especially when both earn different amounts. With ‘common good’ as the goal of the process, this can also be worked through.
There are many ways of doing it; assign responsibility for specific items to an individual, or creating a joint account through which everything gets funded being the two most common.
Contrary to popular perceptions about money discussions, some say that talking about money can be an intimate discussion and lead to an improvement in the health of the relationship as we start being open about it.