Budgeting as a Couple or Family

As far as the mechanics of it go, budgeting for two or more people isn’t that different from budgeting for one. The basic ingredients—income, expenses, and savings—still work the same way, though there are some important differences that we’ll consider as well. So, what do you need to worry about when budgeting as a couple? In a word: communication.

Yes, it’s cliché, but it also happens to be true! Having a clear financial arrangement with your partner can help you avoid much larger issues.

For example, A 2011 study found that financial disagreements were one of the top reasons couples got into heated arguments. Another study found that financial disagreements were strong predictors of divorce—even if the couple wasn’t necessarily under any financial strain! That finding is borne out by the TD Bank 2021 Love and Money survey, which found that 85% of current couples talked about money at least monthly, while only 51% of divorced couples did.

So, why budget together? Not only can it help you get into a better financial situation, meet your goals, and improve your general money management, but it can improve your relationship!

Step 1: Communicate!

Now that you know the “why” of communication, it’s time to address the “how”. Every couple will have their own approach to handling this topic, but there are a few general things you can do to improve your financial communication.

Have a “getting to know you financially” date. The idea here is just to establish a level of comfort with talking about money and to get acquainted with your partner’s financial style, not to set out any nitty-gritty details. A few points you may want to talk about could be:
- Your financial strengths and weaknesses—are you good at saving and investing, but not good at tracking expenses, for example?
- How comfortable are you with money? Is it an intimidating topic or something you enjoy?
- What has shaped the way you handle/feel about money? Has your background in family, culture, religion, etc. affected the way you operate financially?
- How much control do you like having about your finances? Are you comfortable with someone else managing them, or do you want to be involved in everything?
- What is something you want to improve about your financial habits/skills?
Be honest! Yes, it can be embarrassing to talk about some of your financial issues, but it’s better than having them surface on their own a few years down the road.
Be kind. If your partner is being honest with you, they’re taking a risk, and they need to feel safe sharing about money problems in the future. It will literally pay to be nice!
Schedule financial conversations: Even if you don’t have a budget, taking a bit of time every week or month to check in with your partner about money can be extremely helpful! Scheduling them helps ensure you don’t put off discussing issues too long and helps ensure that one partner isn’t suddenly springing a financial conversation on the other.

Step 2: Set Goals

How to Create Goals

The basic steps for setting goals as a couple are essentially identical to those you’d go through on your own:

Come up with a specific goal and a reason for the goal.
Settle on a timeframe. Classify the goal as short-term (less than one year), medium-term (one to ten years), or long-term (more than ten years).
Estimate the amount of the goal. How much will it cost? If you’re saving for a long-term goal, you may have to do some extra calculations to account for returns on investments/savings.
Estimate the monthly cost of the goal. If you divide the amount by the number of months it will take to reach the goal, how much will you have to save each month?

How to Set Goals Together

As long as you and your partner sit down and use the above steps to work out a few goals, there’s really no wrong way to do it! One strategy that may be effective, though, is to first create separate lists of goals, both personal and those you envision having as a couple, and then come together to discuss both your lists. This way, you’ll have a better idea of where each partner stands and what kinds of discussions and compromises you may need to have. Ideally, you’ll come away with a set of joint and individual goals and an understanding of how you can work towards them together.

Step 3: Decide on Your Finance-sharing Level

One of the most complex parts of a financial relationship can be how integrated your money is. Is it all viewed as equally owned in joint accounts, completely separate aside from splitting bills, or a hybrid of the two?

Fully Shared

In a relationship with full sharing, all income belongs equally to both partners and it doesn’t matter who pays for what. You probably have joint accounts and/or accounts that both partners can access. This approach is good for long-term couples who treat all income as jointly owned and are willing to take the time to set up their accounts as shared.

Pros:

Makes unified financial planning simpler
Takes a lot of accounting out of the relationship—no splitting bills!
Sharing accounts can make you a smarter spender!

Cons

More difficult to disentangle if you separate
Can lead to conflict if there’s an income/spending imbalance

Partial:

Partial sharing has a lot of flexibility. You can have shared accounts, separate accounts, or both! You can pay some bills from a common fund and split others from your personal accounts. You can both contribute the same amount or contribute based on income. There are a lot of possibilities!

That’s why partial sharing can work for both long and short-term couples—it can be adjusted as needs, trust, and the relationship evolve. It does require clearly delineated expectations, though: it’s important to know what’s shared, what’s separate, and how contributions work.

Pros:

Flexible
Can start small and increase sharing over time
Allows partners to reach solutions they feel are fair

Cons:

Requires accounting and planning
Can lead to conflict over how expenses should be shared

Separate

Separating your finances completely means that neither of you has any access to the other’s money, though you may still split bills proportionally based on income. It’s a fairly clear system, but will probably involve a lot of bill-splitting!

This can make a lot of sense for couples that are unsure whether they’ll be together long-term, but can also be useful even for long-term couples if one or both partners have money issues, complex finances, or other imbalances that could negatively affect their partner or the relationship.

Pros:

No set-up required!
Avoids conflict about how to manage common money
Makes it easy to separate finances if you split up

Cons:

Makes budgeting and planning for goals harder
Requires a lot of bill-splitting
Makes budgeting and planning for goals harder
Requires a lot of bill-splitting

Step 4: Figure Out Income

If you’re not fully sharing your finances, you’ll have to consider where both partners put their income. A common setup is to have one or more shared accounts where each partner regularly contributes money that can be used for shared expenses and savings, plus whatever separate accounts each partner wants to maintain.

More importantly, though, how much of their income will each partner contribute to shared accounts and split expenses? There are two main strategies for this:

Absolute 50/50 split: You decide how much you’ll need in the account every month, then both partners contribute 50% of that amount.
Proportional split: If there’s a difference in partner incomes, you each agree to contribute a percentage of the amount needed. If Partner A makes $60,000 a year and Partner B makes $40,000, they might agree to split everything 60/40.

Step 5: Figure Out Spending

Figuring out your budget’s expense as a couple is just like doing it solo, except with—you guessed it—more communication!

Go over your past expenses and figure out what you should expect in the future
Divide your expenses into categories according to the budget system you plan to use—“needs, wants, savings” for 50/30/20, envelope categories for the envelope system, etc. (more on systems below!)
Plan out what you want to spend on each category in the future

Couples have a few more things to consider, however:

Individual Spending Limits

For couples that share a lot of their money, one partner spending too much without the other’s consent can be a pretty major issue. That’s where setting limits comes in handy! There are two popular ways to handle this, though you can also come up with your own.

Set a purchase limit, meaning that neither partner can spend more than, say $200, without consulting the other first.
Build individual spending into the budget. If you have $1500 of discretionary spending as a couple, you could divide it into $500 per partner, plus $500 for things you both want.

If your finances are completely or mostly separate, either partner should theoretically be able to spend at their own discretion, though you may choose to set limits anyway as a means of spending control.

Choosing a System

There are a lot of budgeting systems out there, and you’re free to mix, match, and modify as you need. There are a few things you should consider when choosing, though:

Why do we need a budget? Is it to control spending? Meet goals? Get out of debt? Just save more?
How much time do we have for budgeting? Can you handle the time commitment of a detailed budgeting system?
Do you use mostly cash or card/digital payments?
Would you be able to keep up with a lot of spending tracking and regular maintenance?

Depending on your answers to those questions, you’ll probably find that one of these budgeting systems more or less fits you—though you may want to tweak it as necessary.

50-30-20: 50% needs, 30% Wants, 20% Savings. This budget is very customizable and great for managing spending and meeting goals, but can require some time spent on planning and tracking.
Envelope: Putting money into real or virtual envelopes and then using them as your spending limits for the month is simple, can cut down on tracking time, and is great at controlling spending, but isn’t very flexible and works best with cash.
Zero-based: Planning out where every dollar of income will go is a great way to get on top of your finances, get out of debt, and control spending—if you have the time and energy to stick with it!
Reverse: All you do is save a certain amount every month and spend whatever you want of the rest! It’s not great at limiting your spending, but it is certainly the easiest option!

Step 6: Save Together

You’ve already established your joint and individual savings goals; now you have to consider the logistics. How much do you need to save towards your goals, where will the money go, and how can you stay on track?

How Much Do You Need to Save?

When you wrote out your goals, you should have taken note of how much they’re going to cost you, both in total and per month. If you’re saving for everything with fully shared finances, you only need to total up these numbers to get your targets. If you have a different arrangement, with some common goals and some separate ones, or with proportional contributions to common goals, you’ll have to work out what each person contributes based on your previous decisions.

Where Will the Money Go?

If you’ve accumulated any savings on your own, you might be familiar with retirement accounts, savings accounts, investments, et cetera. Couples and families can save using the same instruments, though they may be shared. One of the most important differences, though, is that you’ll want to make sure access to these accounts is set up correctly. This can be done by making it a joint account or by adding someone as a signatory or beneficiary. This helps ensure that in case of unforeseen circumstances, both partners would be equally able to access things like emergency funds, retirement savings, health savings, etc.

How Can You Stay on Track?

Here’s an area where partners can actually have an advantage! By saving together with someone else, even if it’s for separate goals, you have someone else who can monitor your progress and help you stick to your plan. You can keep the other person accountable, create rewards for certain milestones, find opportunities for saving, et cetera.

Next Steps

Your finances will change much faster as a couple or family than they might on your own, as you have multiple people to consider. You may have children going through different stages of life, a partner going through a career change, health issues, et cetera. All that can really mess with your budget, which is why it’s important to talk about finances frequently and have regular meetings to incorporate changes. If your budget no longer reflects your family’s actual situation, it will cease to be useful, and you’ll probably give up.

You don’t have to constantly watch spreadsheets and pinch pennies, though—letting money rule your every move also isn’t ideal! Ultimately, you have more important things to worry about, like the people in your life that you value and the things you want to accomplish. That’s why the Finmatex app was created—to give people freedom to not to spend that much time on finances. It’s available on Android and iOS, and we offer a 1-week free trial so you can use it to the fullest.