5 Ways to Improve Your Financial Relationship with Your Spouse
Living as Partners not Individuals
With the divorce rate above 50% and a large percentage of a couples' fights due to money, it's extremely important to change how we look at marriage and finances. It's evident to me that many people work extremely hard but have no real idea where their money goes or exactly where they're at financially. Even worse, more and more married couples have lost the concept of working together for a common purpose. The following five ideas will help bring you and your spouse closer together and help build a strong financial foundation for your future together.
1. Order Your Credit Reports & Review Them Together
How can you plan for your future if you don’t really know where you are right now? This one is an easy one to start but can take some effort to complete if there are any errors on your credit report. After you order your reports, look at them together. Keep your cool and explain what each item is. This was really difficult for me. When we did this, I had debt but my wife didn't. I felt ashamed about being in debt, and dissecting it at this level was like putting salt in the wound. However, once we were done it felt as though a weight had been lifted. It felt great to have someone else on my side and to know that I wasn’t alone.
It’s important that you fix any discrepancies that you find. This can take some time but it's well worth it. Also, order and review all three. There could be items showing up on only one of the reports, which you may or may not catch if you don't order all three. Your credit report can affect the interest rate you get for big ticket items like a house or car, but did you know it can also affect your home and car insurance premiums?
Here's the link to the website: www.annualcreditreport.com
2. Establish and then Maintain a Budget
Knowing exactly what you spend and where you spend it is a powerful tool. You may be surprised by where your money is going. A successful budget takes into account your income each month minus your typical expenses. When you initially set up a budget, write down exactly what you earn in a typical month, source by source. If you work for tips or have an inconsistent level of earnings from one month to the next, plan conservatively. Use the lowest level you could possibly see yourself making in a month.
Next, write down your expenses. Some expenses are easy because they won't change each month - rent or mortgage, cable, phone, etc. Some, like gas and water, change slightly so a reasonable estimate can be used. Others will need you to use your best judgement and then update them once your first month of tracking is complete.
In an age of debit cards, keeping track of every dollar can be difficult at first, but rest assured it can be done. Through online banking or simply by reviewing your paper bank statement every month, you should be able to account for every dollar. Once you have your budget in place for a month, review the results. Are there areas where you spent more than you wanted? Were you able to save as much as you budgeted or were you able to pay down your credit cards as much as planned? The key to success here is your commitment to maintaining the budget. Budgets are not and should not be set in stone. Make adjustments as expenses change or income fluctuates. A good budget will help limit surprises and should allow you to start cutting out some needless spending so that you can start putting some money aside.
3. Set Joint Financial Goals
Now that you have your budget, you know how much you spend and how much you can save monthly so let’s look at where you want to be.
- Do you have credit card debt or loans that you’d like to pay down?
- Have you started saving for emergencies? Every financial guru has their own opinion on how much you need to set aside in an emergency fund, from six months to nine months or more. I believe in taking steps until you’re at a level you’re comfortable with, beginning with having one month’s expenses set aside.
- Are any life-changing events on the horizon? Children, moving, going back to school, etc, can all have a huge financial impact. The earlier you talk with each other about these possibilities, the earlier you can start factoring those changes into your financial plan or at least budgeting for the “what if.”
- Are there any large purchases needed in the near future?
After answering the above questions, consider how best to get to where you want to be. Growing your emergency fund to nine months’ worth of expenses would be nice, but you have to decide if it would make better sense to start paying off your credit card debt more quickly instead. I personally believe that credit card expenses must be paid down at the same time that an emergency fund is being established.
4. Act as a Partnership Rather than Individuals
Something I was amazed to find out was just how many couples treat the finances in their marriage as if they are roommates rather than a married couple. For instance, a friend of mine recently went to a casino and lost a couple hundred dollars. I could tell his wife was pretty upset because they were supposed to be saving to redo their bathroom. When I asked her why he didn’t talk to her about it first, her answer was that he got his check and that was his money. Wait, What?? When two people get married they become partners in life, which includes the financial side of life as well. A married couple needs to figure out a balance between what's ours and what's mine but the vast majority of income should be ours, not mine.
My wife and I have a system where we each get the same amount of “play” money with every paycheck, regardless of how much each of us actually makes. We each get paid every two weeks so it works out perfectly. It’s a set amount, for explanation's sake let's say $100. My $100 is my money to do with as I see fit; hers is the same. It’s not much but allows us to buy gifts for each other or splurge on something for ourselves. Plus she can’t complain if I buy something off the wall because that’s my play money. If we want something more expensive, we have to do just like every teenager has had to do and save our play money until we have enough. The nice thing about it being a set amount is that it can also be budgeted for, so there aren’t any surprises. I'm not saying this is a perfect solution, but it has been perfect for us.
5. Celebrate Small Successes
You’re in this together, for better or worse, so celebrate when you reach an important milestone. It can be something as simple as congratulating each other when you’re able to put extra money in savings one month because you didn’t spend as much eating out. Or it can be something more extensive like dinner at a nice restaurant once you reach your preferred level in your emergency fund. My wife and I actually celebrated with champaign when we were able to pay off the final credit card bill. Don’t hesitate to reward yourselves.
Budgeting - a way of life
Do you have a budget in place that you reference at least monthly?
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