Nothing can disrupt postnuptial bliss quicker than disagreements over where the money goes. It's no secret that financial discord is still the number one reason for divorce in the United States, says Bruce McClary of Clearpoint Credit Counseling Solutions. When helping newlyweds create a viable family budget, "One determining factor is that we go right down to the basics – food, shelter and transportation necessary to provide income," he says. However, a budget isn't simply a tool that keeps you living within your means; it's a joint strategy to help you save for the future and keep you safely in the black, should your finances take a sudden tumble.
Talk about money sooner rather than later. The right time to discuss how to handle the family budget isn't after you exchange vows — "It's long before marriage is even in the picture," says McClary. "You really want to get a sense of how each person manages money." Problems can arise soon after a marriage when it comes to light that one member of a couple is a saver and the other is a spender.
Collaborate — don't delegate. Both spouses should plan how to budget their money together. McClary describes one spouse taking on the family budget solo as a recipe for disaster. "One person in the couple may actually be making financial decisions without communication with the other," he says.
Separate your wants from your needs. You may perceive the cost of a weekly manicure or maintaining your vintage Mustang as essential, but your spouse may disagree. Making a budget begins with the basics — such as shelter, food, medical expenses and maintaining the vehicle that gets you to work and back. Decide between the two of you what you can live without, should your joint budget not accommodate the type of discretionary spending to which you've become accustomed.
Plan for the future. Most young wedded couples McClary counsels plan to eventually purchase their own home together. Perhaps you and your spouse place more emphasis on building a nest egg for your retirement or going on an overseas trip for a special wedding anniversary. Factor in how your personal goals fit into the picture — maybe you've always wanted to complete your postgraduate studies or start your own business. "Once you start thinking about your goals as a couple, you can start thinking jointly or individually," McClary says.
Put It on Paper
Add up your income. For younger couples, this may be as simple as adding up the numbers on your respective paychecks. More mature couples may include retirement income and social security received, as well as interest made on investments. Don't factor in irregular income, such as cash gifts from parents, income tax refunds or holiday bonuses; stick to what you know is coming in.
Tally up your fixed expenses. These expenses generally remain static from one month to the next. They includes money you spend on rent or mortgage payments, car or student loans, car and health insurance, cell phone and Internet service, homeowners' association fees, child support and spousal maintenance. Add in the money that goes into your savings account or retirement fund. Also factor in the cost of electricity, water and gas — although these can vary from one month to the next, you can easily turn these into fixed expense items by looking at your past several bills and using a rough average.
Write down your variable expenses. These are items that you have a lot of control over, such as the cost of groceries, dry cleaning, dining out, movie tickets, gym memberships and personal expenses such as money spent on hair cuts, clothing and cosmetics. Payments for unsecured debt — namely credit cards, gas cards and store cards — fall in this category.
Do the math. Add your fixed and variable expenses together and see if this total is easily accommodated by the joint income you have coming in. Of tantamount importance is that your family budget factor in a way to save for the future. If it doesn't, or if your fixed and variable expenses exceed your income, take your budget to the chopping block and trim down the fat.
Cut and Save
Take a second look. There's always a way to trim down excess spending, McClary says. When counseling newly married couples, he notes that frivolous expenses such as eating out have a sneaky way of sliding into couples' "gotta-have-it" category. "The entertainment expenses sometimes get out of hand," he says. He points out that having more than one cell phone carrier can drain to your budget. Cancel one service and go on a family plan. Clip coupons and use them at the grocery store. Strive to reduce spending by 10 percent in other variable spending categories, such as clothing, cosmetics, gas costs, gifts and entertainment.
Put a kibosh on charging. If credit card debt is blowing your family budget, the time to stop charging is now. Avoid pushing your plastic at restaurants and movie theaters; pay with plain old paperbacks. A good rule of thumb is that if you can't afford to pay for all of your charges by the end of the month, they should not be made. Finally, keep balances low, low, low — around 10 percent of your available credit. Not only will this do wonders for your budget, you and your spouse can improve your respective credit ratings.
Save for a rainy day — and a brighter future. According to McClary, married couples should have enough money saved to sustain their usual expenses for three to six months should one spouse become unemployed or unable to work because of health problems. Start out by putting 5 percent of your net income aside each month, and factor this into your budget. As your financial standing improves, graduate to 10 percent of your net income, with an eye toward 20.
- If neither you nor your spouse is budget-savvy, help is available. Contact the National Foundation for Credit Counseling, a nonprofit organization dedicated to helping you make ends meet, at 1-800-388-2227 to find a member organization near you.
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