Feb 12, 2024
Budgeting as a Couple: Your Guide to Sharing Finances
When you share a home, values, goals, and responsibilities with a spouse or partner, chances are you’re also sharing finances to some degree. While building a life with your significant other can feel exciting, it can also generate a fair amount of stress and conflict where money is involved. According to a recent survey, 58% of millennials argue with their partners at least occasionally about money, and a whopping 64% of couples admit to feeling incompatible when it comes to financial planning.
So what’s the solution? Open communication and collaborating on a budget that reflects your household’s unique needs. When you share financial values and agree on a money management plan, you can reduce conflict, ensure you’re prepared for emergencies, and meet your joint financial goals. Read on for budgeting tips to help you and your partner make budgeting as a couple productive and stress-free, no matter how much of your finances overlap.
Here’s what we’ll cover:
- Aligning your money mindset
- Splitting finances as a couple
- Setting shared financial goals
- Build a budget as a couple
- Using joint accounts
- Keeping the conversation going
Get aligned on your money mindset
Before you even address the practicalities of budgeting as a couple, take time to get on the same page financially. You may find that you have wildly different approaches to spending, saving, debt, and budgeting. Having a big-picture conversation about how each of you approaches money will help you find common ground. Open, honest communication is the first step in aligning your money mindset with your partner’s. Start by getting aligned on these critical subjects:
- Spending habits: What do your spending habits look like? What are your attitudes about impulse spending, price shopping, etc.?
- Tracking spending: How closely do you prefer to plan and track spending and household expenses? Do you count every penny or take a more casual approach?
- Expenses: What counts as an essential expense in your monthly budget? What do you consider a discretionary expense? What do you see as individual versus shared expenses?
- Financial independence: How much do you value maintaining separate finances and bank accounts versus sharing finances and starting joint accounts?
- Debt: How do you feel about using credit cards and taking on debt? What kind of debt is acceptable or unacceptable?
- Financial goals: How important are saving and investing to each of you? Do you have specific saving and investing goals? How do your individual goals align with your shared financial goals?
- Investing and risk: Are you comfortable with investing? What level of risk are you comfortable with when investing?
Yours, mine, ours: how to split your finances as a couple
Your financial life will inevitably overlap with your partner’s, but precisely how entwined you are, and how you go about mingling your money, is up to the two of you. Joint finances don’t have to be all or nothing; you can decide how much of your income and expenses it makes sense to pool together. Take an intentional, values-driven approach to determining which expenses you combine and which you keep separate.
Determine how to pool your income
Every couple is different, so the way you choose to combine your income will depend on your lifestyle and financial situation. You may decide to put all of your income into one joint bank account, or you might prefer to keep some income separate for each individual while pooling the rest to create a joint household budget. Combining all of your income can simplify your finances, but it may also make it harder to untangle them in the event of a breakup. Putting all your money into one pot might also pose complications if you have very different incomes. A hybrid approach can foster a sense of financial independence and unity at the same time. It’s all about striking the balance that works for you.
Keep in mind that you don’t have to stick to one approach forever. As your lives evolve, you might need to adjust how you split finances as a couple. For instance, couples who keep most of their income separate might later decide to put everything into one joint account if they have children or care for an aging relative in order to simplify the move from budgeting as a couple to budgeting for a larger family.
Decide how to divvy up expenses
How you choose to divide your expenses depends on your current financial situation and your shared values. The right method is the one that feels fair and agreeable to you and your partner. Consider these common approaches:
- The 50/50 split: Each person contributes half the cost of every shared expense. This simple and straightforward option works well if your incomes are similar and if you’re able to have a regular budgeting session to work out what you owe.
- The income-based percentage: Each person pays for a percent of expenses based on their comparative income. For example, if you make 20% more than your partner, you cover 20% more of your shared expenses than they do. This approach can be helpful if one person makes a lot more money than the other.
- The category split: Each person is responsible for specific categories of expenses. Maybe you cover utilities and streaming services while your partner covers the car payment and gym memberships. This approach is less concerned with splitting things evenly and more focused on sharing the chore of paying bills.
Again, how you divide your budget as a couple may very well change over time. Say you and your partner decide on a 50/50 split because you make similar incomes working full time, but a few years from now you go back to school and work part-time. You and your partner might decide that an income-based percentage makes more sense at that time.
Discuss your debt situation
Debt can be an uncomfortable topic when budgeting as a couple. But avoiding it will just kick the discomfort down the road; eventually debt will impact your joint finances, so address it upfront.
If you or your partner have existing debt, you’ll need to decide whether the payments will be absorbed into your shared budget or if the partner holding the debt bears the burden of paying it off themselves. Legally, marriage does not make you liable for your spouse’s debt. Individuals remain responsible for any debt in their name, including personal loans, student loans, and credit card debt, regardless of marital status.
However, spouses are jointly liable for any debts incurred together during a marriage. Even if you’re not legally married, you’re both accountable for any debts you take on together, such as a joint credit card or if you co-sign for your partner’s loan. And, while each individual retains their separate credit score, sharing a joint account that carries debt impacts you both.
Set shared financial goals
What do you want your future to look like? Shared financial goals like homeownership, retirement, an emergency fund, home renovations, education, vacation, or growing your money through investing can help motivate you to stick to your shared budget and plan for your future. By mapping out your financial goals together, you can build a budget that allows you to work in tandem toward the things that matter to you both.
Building up an emergency fund is a great way to ensure that you and your partner have a safety net in the event of a job loss, unexpected home repair, or other large, unanticipated expense. The added layer of security can allow you to navigate life’s curveballs without stretching your budget or sacrificing your savings goals. And when you know you can cover an emergency, you’ll be equipped to deal with the problem with less chance of conflict spurred by financial stress.
Setting shared financial goals can be one of the most fun parts of budgeting as a couple. This is your chance to envision your future, talk about your dreams, and make a plan for achieving them. You may also have individual goals you want to pursue, so you’ll want to decide whether you’ll make those part of your shared budget or keep them separate.
Decide what shared goals you want to work toward, how much you’ll each contribute, and the timeline for each goal. The amount you choose to save each month depends on how quickly you hope to reach your goals. A short-term plan like funding a vacation will take less time and discipline to reach than a mid-term goal like moving to a new state or a long-term aspiration like paying off your mortgage.
If you’re looking to grow your money over time, investing might be an important part of your overall financial plan. A popular guideline suggests that couples reserve around 15% of their combined income for investing, but that’s not a hard and fast rule. Your investing goals, and the amount you choose to invest, should align with your shared values and budget.
It’s common for couples to find themselves with very different attitudes toward investing and levels of risk tolerance. It’s okay to start small, favoring the comfort level of the most risk-averse person, and expand your investing strategy over time. Some couples prefer to maintain individual accounts for investing so each person can pursue the strategy they’re most confident with.
Often when you’re combining finances, you’re also planning to grow old together. Planning for retirement is a long-term commitment that involves multiple considerations. You and your partner will want to go over how much you each have in retirement savings already, as well as when you hope to retire, what financial comfort would look like for you after retirement, and the lifestyle you hope to have after you stop working.
If you’re married, you’ll also want to consider how that affects your retirement saving options. For instance, if either of you has a Roth IRA, bear in mind that married couples filing joint tax returns are subject to some specific Roth IRA income limitations. And if one spouse doesn’t earn any income, the other person can open a spousal IRA and contribute to it on their spouse’s behalf.
Build your joint budget as a couple
You’ve laid the groundwork for success, and now it’s time to get hands-on and actually make a budget together. While the steps for building a budget as a couple are similar to those when budgeting as an individual, you’ll have a few additional things to consider when two people are involved. Your budget is the key to avoiding financial conflict as you move through life together, and the next four steps will help get you where you need to go.
Calculate your shared income
First, figure out each of your net incomes, or the amount of money you actually bring home monthly after taxes and deductions. Be sure to include any money you take in beyond your salary, such as income from a side gig. Based on how much of your money you’ve decided to pool, calculate your total shared income each month.
Determine your shared expenses
Next, determine which expenses you’ll share with your partner and how much money you’ll need to budget for each. Refer back to how you’ve decided to divvy up your expenses, as a 50/50 split will look quite a bit different than a category split or an income-based percentage split. You might find it helpful to categorize spending categories based on whether they’re household expenses that are needed to support you both versus individual expenses that are really just for one person.
At this stage of budgeting as a couple, you may run into differences about how to handle discretionary expenses, like what counts as a need versus a want or how much you’re willing to spend on things like entertainment. With open communication and empathy, you can work to find creative solutions that work for you. For instance, you may choose to share certain expenses, like dining out or streaming services, while keeping individual hobbies and activities separate. Some couples who pool all of their income include a line item of “fun money” for each person to use for individual expenses as they like.
Balance your income vs. expenses
Now that you understand how much money is coming in, it’s time to see just how much money is going out. Add up how much you spend on each monthly expense. Note fixed expenses like rent or mortgage payments and leave a little flexibility for variable expenses like utilities.
When you make a budget for living together, you might find that the costs for certain things are very different than when you lived separately. For instance, the heating bill for two people in an apartment will likely be lower than the combined total of what each person was paying in their own apartments. If you’re just moving in together, you might need to do some calculated guesswork at first and adjust as you go.
Now compare your shared income to your shared expenses. If your income is lower than your planned expenses, adjust your budget accordingly. That could mean tightening your belts on certain things, or it may be that one or both of you need to contribute more of your income to your shared budget. If you’re keeping some of your money separate, this is a good time to make sure each of you has enough individual income to cover your individual expenses too. After all, even if you’re not merging 100% of your finances, the financial wellbeing of each individual is a core component of budgeting as a couple.
Choose a budgeting method
Budgeting as a couple isn’t a one-size-fits-all deal. There are many budgeting strategies out there, so choose one that works best with your lifestyle and your financial priorities. Whether you most value flexibility, precision, or simplicity, select a method that makes sense to both of you, and feel free to test out different methods until you find the one most suited to you as a team.
- 50/30/20 rule: This simple method makes money management easier and ensures you sock away some savings. Each month, 50% of your combined monthly income goes to essential living expenses, 30% goes to non-essential wants, and the remaining 20% goes to saving and investing. You can adjust the percentages a bit to fit your particular circumstances, but the 50/30/20 rule can be useful in determining how much of your income you should save.
- Zero-based budget: This method gives you tight control over every single dollar. Each month, you’ll assign all of your income to a specific budget category to ensure you’re left with zero at the end of the month. Whatever money you don’t allocate for essential expenses will be distributed among discretionary expenses and savings goals. You might find this approach useful if you have very little wiggle room in your budget or you’re laser focused on cutting down discretionary spending so you can save more.
- Envelope method: Perhaps the simplest budgeting strategy, the envelope method relies on a cash-based system and a “when it’s gone, it’s gone” mindset. Group your shared expenses into categories, then grab some envelopes and label each one with a category. When you get paid, put a predetermined amount of cash in each envelope, and spend as needed from each category. But when the cash is gone, you’re done spending until your next paychecks come. If you don’t want to rely on cash, your bank account may offer budgeting tools that allow you to create digital “envelopes” that work the same way.
Track your spending
When two or more people are involved, tracking your spending can be more complicated. If you decide to maintain both individual and joint accounts, take care to spend from the right account when making purchases. And if either of you use credit cards, be sure you’re tracking that spending when you buy things that are part of your shared budget.
Communication is the key to ensuring that no expenditures are missed and that your money will always be available when you need it. Consider using a shared spreadsheet to record daily, weekly, and monthly spending or a budgeting app so you and your partner can keep track of spending in real time.
Consider joint accounts
For a lot of couples, opening joint accounts makes sense. It simplifies the process of pooling your money, paying your shared expenses, and tracking your spending. You may choose to have some shared accounts while maintaining some separate bank accounts, or you may decide to combine everything. Feel free to do what works best according to your specific needs.
- Checking accounts: As authorized users, you and your partner can access your joint checking account to pay for everyday expenses as well as deposit, withdraw, and transfer funds. It works just like an individual checking account, except both you and your partner are both responsible for any fees, payments, or charges incurred.
- Savings accounts: Just like joint checking accounts joint savings accounts give both authorized users the ability to deposit, withdraw, and transfer money. You might decide to open a joint account to store savings for your shared goals. That makes it easier to keep your pooled funds in one spot and track your progress together.
- Credit cards: Sharing a credit card can make it simpler to track your spending and stay on top of joint debt. While you and your partner will retain your separate credit scores when you open a joint account, each of your scores may be negatively impacted if you rack up too much debt or are late on payments. Remember that you’re liable for any debt incurred under your name, and that includes debt on a joint credit card.
Keep the conversation going
As you and your partner move through life, your approach to shared personal finances will inevitably change. Having kids, changing careers, going back to school, dealing with medical issues… you never know what life will throw at you. The shifting circumstances of life will change the way you budget as a couple, and that’s okay. As long as you work together on your finances as a team, you can keep the lines of communication open.
Schedule regular budget date nights
Budgeting may not sound romantic, but it can be if you turn it into a date night. Set up a weekly or bi-weekly evening to check-in with your partner about your finances. This is the time to check on your spending for the month, grapple with any unexpected expenses that come up, and make adjustments to your budget as needed. Give yourself little rewards when you’ve reached your monthly goals, or turn it into a game when you need to reduce your spending. When you treat budgeting as a couple like a chance to deepen your bond, it’s easier and more enjoyable to stick to your money management plans.
Periodically review your financial goals
Your overall financial picture will change over the years. An annual check-in with a thorough financial checklist can be a beneficial way to make sure you’re still aligned on your priorities and are pursuing the best strategies for your goals.
Take this time to discuss what’s changed about your financial picture, from salary changes and stock market conditions to having children or paying off student loan debt. Review your budget, savings goals, investing strategy, and retirement planning to check your progress and make any needed adjustments. This is also a great opportunity to revisit the planning and dreaming you did when you first started budgeting as a couple to remind yourself of why sharing your personal finances matters to you in the first place.
Budgeting as a couple, budgeting for your shared life
Anyone with shared finances can benefit from building a household budget. Open communication, collaborative planning, and shared financial goals are the foundation. With a solid budget and ongoing commitment to keeping up with it, you’ll have all the tools you need to manage your shared financial life for the long haul.
The principles of budgeting as a couple aren’t just for two cohabitating or married people, either. Whether you’re co-parenting, sharing a life with someone long-distance, or any in committed relationship, you can adjust these budgeting guidelines to fit your circumstances and build a shared foundation of financial wellness.
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