Financial tensions are predictive of divorce rates, according to a study by Jeffrey Dew at Utah State University . If you want to ensure your “I do” doesn’t turn into “I don’t,” creating a workable and agreeable budget is important. If you didn’t have conversations about spending and saving principles prior to getting married, sit down and have that conversation now. Doing so will help you develop a budget that you both can live with. Budgets are comprised of income and five key spending points; household expenses, transportation, living expenses, debts and savings. The percentages are estimates and will vary based on your income and expenses.
It is easiest to begin your budget by knowing how much income you having coming in on a regular basis. Consider all sources, including wages, dividends, tips, gifts and trust funds. Note your sporadic income such as freelance writing, music gigs and spot jobs. While those figures can fluctuate greatly, averaging sporadic income from the prior year and dividing it by 12 will give you a rough estimate. Once you’ve honed in on your income, it’s time to examine where those funds go.
Household expenses consist of rent or mortgage payments, insurance, taxes, repairs, home improvements and utility payments (including water, gas, electric, trash removal/pickup, telephone). These expenses should make up no more than 30 - 35 percent of your income, with only 20 - 25 percent going towards your rent or mortgage payment.
Transportation is comprised of vehicle payments, insurance, repairs, maintenance, gas, public transportation and parking. This category should be no more than 20 percent of your income.
Living expenses are the easiest place to overspend and not account for all expenditures. This category consists of health care costs outside of premiums deducted from your wages, income taxes, entertainment expenses, personal items, clothing, items and activities for children, donations and tithing, vacation and recreation. When considering this category, think about the obscure spending such as dry cleaning, salon and barber expenses, dining out (including your morning stop at Starbucks), poker nights, drinks out with friends, dance lessons, bowling, movies, books and magazines, and art exhibits or theatrical shows. This category should only be 20 percent of your income.
Debts are all other payments made including student loans, personal loans, credit cards and overdraft protection on bank accounts. Debts should be no more than 15 percent of your total income.
Savings is the smallest area of a budget, but the most important. Saving for unexpected expenses makes the difference between a budget working or not for most couples. Included in this 10 - 15 percent are savings and retirement accounts, emergency savings, and investments.
With all of your income and expenses noted, begin comparing your costs in each category with your current income. Are you staying within the standard guidelines for each category? Is one area well above the standard percentages? Do you have many luxury expenses that aren’t needed?
Allow yourselves plenty of time to discuss areas of your budget that might need some fine-tuning down the road. Above all else, stay calm and honest about your financial goals as a family to ensure budgeting success.
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