Finances And Marriage: How To Draw Up A New Budget

A good marriage requires good planning for finances. Read on to find out how to draw up a new budget for marital bliss.

The wife goes shopping and buys a new dress that she needs for a special occasion, only to learn that her husband had earmarked that same $100.00 for some new tools for his workshop. An argument ensues.

The husband proudly brings home a new widescreen TV that he bought on a whim, and finds out that his wife was just laid off from her job. Another argument follows.

Sound familiar? It should. Money is a leading cause of marital disagreements. But money doesn't have to be the root of all your marital woes. By following the seven easy steps below, couples can draw up a budget that will get the bills paid and still be flexible enough to cover each spouse's occasional purchasing whims.

1. Calculate your monthly net income. Include take-home pay for each spouse, along with any additional income (average monthly self-employment income, child support, tips, interest/dividends, and so on).

2. Determine a practical credit card strategy. Agree on what kinds of expenses, if any, will be charged to one or more joint credit cards, and set monthly charging limits. Many couples avoid joint credit cards, because charges and payments to joint credit cards will affect both spouses' credit ratings. Also, many couples find it more convenient to maintain separate, individual credit card accounts for use in charging personal purchases. On the other hand, some couples feel that they want to share everything, including their credit. Choose an approach with which both spouses will be comfortable.

3. Add up your shared monthly expenses. Include rent/mortgage, utilities, car payments, car maintenance, insurance, average monthly payments on joint credit cards, medical co-payments, average monthly grocery expenses, average monthly taxes on tips or self-employment income, and so on. Your total monthly expenses should be less than your monthly net income. If it isn't, then you will need to determine how you can trim your monthly expenses to make ends meet, or explore ways to earn additional income through a second job, freelance work, or other legal means.



4. Allocate a reasonable amount of pocket cash per month. Calculate a reasonable monthly allowance for each spouse. This should cover each spouse's individual needs, within reason. Include lunch money, coffee and snack money, salon or barber expenses, transportation fares, gasoline money, payments to individual credit cards, and a practical amount for miscellaneous purchases, like that new dress or power tool. Ensure that your monthly allowances, combined with your shared monthly expenses (as calculated in step 3, above), total less than your monthly net income. Otherwise, you will have to trim your allowances, or find other ways to reduce your expenses or increase your income.

5. Decide what to do with any "leftover" money each month. By the time you get to this step, hopefully you and your spouse will have agreed on your list of shared monthly expenses and allowances. And hopefully those plans still leave you with a surplus of cash each month. Discuss your options and determine the best ways to allocate that leftover money to meet your short-term and long-term goals. For example, you may want to put a set amount each month into a savings account or other investment, put some into a vacation account or an emergency fund, contribute to your Individual Retirement Accounts (IRAs) or annuities, or start saving for a down-payment on a home.

6. Agree on who will manage the bills, and how. In some households, one spouse handles the bills. In other households, the couple divides up the bills in a mutually agreeable way, and each spouse takes responsibility for handling his or her share of the bills. In other families, payment is handled on a bill-by-bill basis. Only you and your spouse can determine the strategy that will work best for you, but you'll surely argue less if you agree on a plan upfront. If one spouse is better organized than the other, or better at math, the couple might decide that he or she would do a better job at keeping the bills under control. Or, if both spouses want to participate in paying the bills, you could spend an evening or two each month doing the job together. Also determine which checking account(s) will be used for each bill. Many couples keep separate personal accounts in addition to one or more joint accounts and this may be an important factor in situations in which, for example, a couple divides up the bills according to each spouse's proportional income. Be sure to set up a system to ensure that each account will contain enough money each month to cover the bills that will be paid from that account.

7. Put all of the above in writing, signed by both spouses. This will seal the deal and prevent arguments over what you had agreed to.

By agreeing upfront as to how every dollar will be spent, there will be little room left for financial disputes, as long as both spouses stick with the budget.

On a final note, you should reevaluate your budget from time to time, as you determine what's working and where it falls short. Adjust the budget as needed whenever your income level changes (for example, after a pay raise) or when there's a change to your monthly expenses (for example, after a final car payment is made, or if you add a new premium channel to your monthly cable subscription).

Now the only thing left to do is to think of fun new ways to spend all the time that you would have spent fighting over money!

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