It can be a common assumption that most couples merge their finances.

While that might have been true in the past, it simply is not the case anymore.

A recent study from Zeta (a tech company designing apps to help couples budget together) found that over a third of couples (39%) keep their finances in separate accounts. Another 39% fully merged finances. The rest of folks (22%) developed a shared system (“yours/mine/ours”), with separate accounts and one shared one for common expenses.

• Of the 39% who were fully merged or “all in,” 80% were married and 16% were living together

• Of the 22% who chose a “yours/mine/ours approach,” 54% were married and 35% were living together

• Of the 39% who keep separate finances, 30% were married and 46% were living together

Disagreement over finances is frequently cited as one of the top reasons for relationship dissolution. But why?

Why is it that we have so much difficulty getting something as ‘objective’ as a budget right in our relationships?

That’s probably because a budget is anything but ‘objective’… a budget reflects your values and virtues that you hold. And even in the most compatible of relationships, you are bound to have differing values over some things.

So when was the last time that you sat down and did you annual budget plan with your partner? A year ago? Five years ago? Never done one?

No worries!

Here are some steps to help you set up your annual budget for your shared expenses. Before reading the steps, go ahead and download this Financial Therapy Texas Annual Budget Excel spreadsheet. This will serve as your guide for planning. Make any modifications to the sections that you need for your relationship.

1. Hopes & Dreams Conversation. So many people hate budgeting because it feels like a restrictive punishment. That is not how you want to start this conversation. Instead, take some time to imagine and dream about what you would want from your life together. Schedule a day and time where you both can be relaxed and free from other commitments (i.e. childcare is arranged or babies are in bed). This conversation goes beyond just “Let’s make lots of money” to the particulars — both long term and short term. Go crazy with this part! Let your imagination fly and say those secret hopes out loud*

• “I want to start a small business”

• “I hope we can send our kids to private school”

• “I want to pay off X debt.”

• “I want us to own a home in X number of years”

• “Let’s plan a big vacation every year!”

• “I want to max out our retirement funds.”

• “I would love to buy a beach house/vacation home.”

*Avoid planning out HOW you would make these dreams happen at this stage. This is just time for you to get to know your partner (and yourself) better. Sometimes it has been years since couples have spoken like this (or frankly this type of conversation might have never happened at all). Saying these Hopes & Dreams out loud is a way to get excited about potentials together. It motivates the Planning Budget stage with new life as you are making these changes towards something rather than just restricting yourself because that is what “adults do”.

2. Joint Expenses Budget. Now that you have taken the time to dream with your partner, you can sit down together and fill out the Annual Budget Spreadsheet for the joint expenses of the household. This lays out all of the joint monthly expenses and gives a great overview of where the flow of money goes in the household. A few points with this step:

• Be honest on this draft. If you spend $600 a month on groceries, don’t put $300. If you want to cut back on or increase any category, you can modify this after tracking spending for a month and seeing what the data says. This is the planing budget draft so you can see where money is being spent and modify later.

• On the Income line items, put down how much each person will be contributing to the joint expenses monthly in each month. Below are listed two options that couples commonly do here. Do what makes most sense for your relationship.

  • Some people do this as an income percentage basis (i.e. each partner contributes based upon what percentage of income they are bringing in). Example: Person A makes $100K a year, person B makes $50K a year, so Person A pays 66% of shared expenses and Person B pays 33% of shared expenses.

  • Others do a set half and half split regardless of income.

3. Tracking. Follow your budget for a month. Then go back together and see if you put the appropriate number for each category. Did you only spend $500 on groceries and you budgeted $900? Did you spend $400 electricity and only budgeted $200? You can use apps (such as www.Mint.com or www.TrueBill.com) to help with tracking. Or you can do it old school with an excel sheet. Whatever way works for you, just go back and check to see if you need to make any adjustments to your budget. There are also couples budgeting apps that you can use (www.Honeydue.com or www.AskZeta.com), although I must admit that those are a bit more complicated. Generally I find it easier to use Mint or Truebill with the joint banking account.

4. Tracking, Again. Use your tracking method to make sure you are staying on point. In the beginning, it is a good idea to do this at least once a week as you are getting a hold of the spending adjustments. Then once you have got it down, you can go to monthly review of spending.

• Do NOT use the tracking as a weapon. If someone is having trouble sticking to the financial plan, let that be an opportunity to discuss the plan again and make adjustments. You want this to bring you closer to your hopes, not drive you apart. You can hold someone accountable without crucifying them.

• Use the data. If our budget is in the red (i.e. we are spending too much), where can we cut back? If our budget is in the black (i.e. we have some left over at the end of the year), how do we want to be intentional with that spending? Planning these things together will not only help to meet your budget goals, but it can make you feel closer as a couple while you are working towards those dreams from step 1.

I know that this is a a lot of information and it is process. But the fruits of attempting this are wonderful! If you need help setting up this system (or would like to design your own customized one), give me a call. Couples Financial Therapy can be wonderful for helping discuss these issues. If I am not a good fit, I will help them find someone who is.

DrZepeda@FinancialTherapyTexas.com

Phone: 713-291-9553