The Benefits of Joint Budgeting: How to Combine Your Incomes And Expenses to Create a Shared Budget?
28.04.23, 16:15, Msk
Not many couples talk about having a budget. This is one of the least discussed topics, but it’s really important to talk about creating a budget in your partnership or family. Lack of communication about finances is among the main reasons relationships fail and turn to loans with smaller amounts, for instance, 1000 credit card, as the variant for a way out. Besides, making a joint budget will help you avoid conflict about money and learn more about each other. In this article, we are going to discuss how you can combine your income and expenses to make a shared budget, as well as the pros and cons of this option.
Content |
Reasons Why People Fight About Money
Whether you choose to have separate checking and savings accounts or joint ones, different people make different financial decisions. It can become rather complicated, and avoid fights when it comes to budgeting. The data from Consumer Expenditure Survey Anthology shows that married couples are more likely than singles to be homeowners. Singles tend to spend much more per capita than married couples do on housing, groceries, and education. On the other hand, married couples tend to spend more on health care.
It’s important to compromise and find suitable ways of managing your income and expenses. Here are the top reasons for couples to fight about money:
1. Different Financial Habits
Both partners may have different money habits. Some of us are spenders, while others are savers. Some prefer to pay the bills as they get them, while others tend to leave them until the due date.
One partner may give a portion of his or her income away, while another one prefers to save a percentage of his or her income for retirement. You need to sit down and talk about money matters the same way you discuss the dishes and grocery shopping.
2. Savers vs. Spenders
Savers prefer to save as much as they can and always think about their long-term financial goals. Spenders prefer to go out more frequently or spend some funds on entertainment without feeling guilty.
Even if you are too different from your partner or spouse, you may complement each other, provided that you discuss these things. Remember that there isn’t a single right or wrong option.
3. Different Monetary Notions
Partners or spouses may also have different ideas and attitudes toward finances. One person may spend several hundred dollars on an online order, while the other one will try to stretch the last $10 for as long as possible.
One partner may suggest having a credit debt is a good option for purchasing what you want quickly, while the other person will consider it evil.
Joint vs. Separate Accounts
You may either hold your checking and savings accounts jointly or separately. Having a joint account means both people have access to their money, while keeping your accounts separate means only one person is the owner of the account. Both of these options have benefits and downsides.
- Separate accounts help each individual in a couple establish their personal credit score. It is easier to keep a record of your spending. In case of a divorce, neither partner would need to worry that the other might withdraw all the money from a joint account. On the other hand, a drawback of having a separate account is that it requires more time, paperwork, and service charges.
- Joint accounts are more suitable for couples who feel a greater sense of sharing and want to have a feeling of their mutual money. On the other hand, the partners may experience issues if one of them dies, gets a divorce, or just spends the money irresponsibly. Besides, it can be more challenging to keep a record of a joint account.
The Do’s and Don’ts of Having Joint Budgeting
There is no set strategy for how you need to combine your finances with your spouse. Speaking of budgeting, people may have different views about spending and saving. According to Statista, consumers kept spending their money despite inflation in the third quarter of 2022.
Services spending increased at a yearly rate of 2.8 percent, as American consumers spent more on accommodation and groceries, transportation, and health care.
Here are some do’s and don’ts on how to navigate joint budgeting in a relationship.
Do’s of Joint Budgeting
Be Honest about Your Concerns
The key to success, both financially and in a relationship, is to be honest. Try to address your concerns in advance and talk to your partner. Being transparent and open about money matters is really significant so that the second person understands how you feel and what compromise you might find. Ask different questions, even if they seem hard. What will happen if we break up? How much do you earn?
Choose Accounts You Want to Combine
You don’t have to make all your accounts joint. It’s acceptable to discuss which checking or savings accounts you wish to combine. Others can remain separate for your convenience. Each couple should decide which strategy works best for them. Don’t rush to make all the accounts joint if you feel uncomfortable or insecure.
Make a Debt Payoff Plan
Some people worry about debt repayment. You may work out a suitable strategy for getting out of debt. Discuss the questions related to existing credit card debt or loans you are having. What are the interest rates? How much do you need to pay each month? It can be easier to tackle smaller debts first.
Don’ts of Joint Budgeting
Combine All Accounts At Once
Write down a list of accounts you are ready to combine. Make sure you understand the reason why you want to have joint accounts. Even if you feel prepared to do that, don’t combine all accounts straight away. Leave certain accounts separate to see how it goes and how you deal with joint budgeting with your partner.
Forget to Do Your Part
You shouldn’t spend shared funds on your personal expenses. Try your best not to lose track of your spending habits, as you are now both responsible for mutual finances. If you start spending shared money on personal costs, it may look like you are taking advantage of your spouse.
The Bottom Line
Summing up, joint budgeting means you share some or all of your bank accounts with your partner. You may have some joint accounts or share all of them. Some bank accounts may remain separate if you feel comfortable that way. Consider the benefits of having shared budgeting but keep in mind the mentioned do’s and don’ts to avoid conflict.