What’s more fun than doing a household budget with your significant other? Spending your entire summer vacation with the in-laws? Don’t answer. It doesn’t have to be that painful. Think of budget planning as two sleuths joining forces to solve a mystery -- the baffling case of why you always run out of money before the end of the month.
Couples often avoid the subject of household budgeting because it leads to conflict. One of them wants to save for the future. One prefers to spend now and worry about the future later. Budgeting helps a couple manage their money more efficiently -- they spend only what they can afford, preventing them from getting too far in debt or not having cash available for serious unforeseen expenses such as medical bills. Knowing that your financial situation is improving each month can help both of you sleep better at night.
It’s fun to dream about the future -- the things you want to acquire together such as a new, larger house, or the adventures you want to have, like a dream vacation to Europe. Planning your finances in the short run helps you work toward these long-range goals. Map out your life in 5-year increments, and set major goals for each block of time. If you’re 25 now, envision your life when you turn 30. Make sure you set long-range goals that are reasonable and attainable. An oceanfront house on Maui may not be doable. A vacation on Maui might be.
Review your current spending patterns. Be prepared for some surprises. Since spending can vary from month to month, keep track of your expenditures for a three-month stretch and compute an average. Be sure to write down everything you buy. If you take $100 cash from the ATM for small expenditures like coffee and a doughnut on the way to work, make sure you include how you spend that $100 in the grand total. Show the results by category, such as food, auto expenses, insurance and rent or mortgage payments. Go through each line item with your partner and look for areas where spending could be cut. Now forecast your expenditures month-by-month for the next 12 months, and project your income for each month as well. If income exceeds projected expenses for each month, you now have a workable budget in place.
Monitoring Progress and Rewarding Yourselves
The budget is of little value if you just stick it in an out-of-the-way drawer in the hope you’ll forget where you put it. You need to review your actual expenditures each month versus what you had forecast. If you’re new to budgeting, you may find you forgot some expense categories. Home repair and maintenance are difficult to budget. Don’t blame yourself. Your air conditioner doesn’t announce that it has decided to break down in 60 days. Allow for this by having a category in the budget called “contingencies.” As you improve your forecasting accuracy, be sure to reward yourself for staying on track with your spending. Splurge a little. Upgrade the restaurant you typically go out to on Friday night to one that doesn’t use paper towels for napkins.
- "Get a Financial Life: Personal Finance In Your Twenties and Thirties"; Beth Kobliner; 2009
- still life with calculator image by Astroid from Fotolia.com