Living in a single income household means good money management is essential. The basics of money management are having a budget and sticking to it. Many couples fight over money and priorities and money-values can differ. Having a budget helps align and bring a couple together over how to manage their money.
Getting started: where is your money going now? I do this exercise annually. We pay for nearly everything either by EFT POS, credit card or bank transfer. To see where our money goes I just need to download the transactions from Internet banking, total them by who the money was paid to (I use pivot tables in excel to make this super fast) and then assign each one a category. These categories match those in my budget, which means I can see how well we did at sticking to it and where price rises (or poor self control) are hitting us. Categories include: income, expenses like utilities, mortgage, rates, eating out, groceries, school fees, donations, insurance, hobbies, etc etc.
Think about it - how and why do you spend? If you don't have a budget yet this exercise will help you see where you are spending your money. It means you cannot ignore the areas that are your spending weaknesses and are likely to be able to make a much more realistic assessment of your spending behaviour and a budget you can live with. Often once we realise how much we spend on a particular 'weakness' (eg magazines, coffee, bought lunches) it helps us determine how important that thing is vs what else we could be doing with all that money, as those little 'treats' can really add up. Often we tell ourselves we 'deserve it'.... but perhaps once you know the total you are spending on those items you'll think of something you deserve more, like a family holidays, which will give you lasting joy through happy memories and relationship building. Thinking about an expense as how much you spend in total over a year helps bring it into perspective. $10 might not seem much to have the groceries delivered weekly, but how does $520 sound.... of course everyone has different priorities and time constraints, so that is just one example.
Setting the budget
Start with income. How much will you earn. Try not to count uncertain income like bonuses. This is obviously harder if you are self employed or on commission. Next, do a first draft based on your past spending. Does it add up or are you going to spend more than you earn? Are you allowing for saving, contingencies, pocket money and gifts (see below)? It has to be realistic or it won't work. Pare down as needed. Add in inflation or price increases for things like electricity and insurance. Often you'll hear about those on the news.
Pocket money for grown ups. One way to reduce disagreements about money is to each have some own pocket money. This could even be paid into a separate 'personal' bank account or debit card. That way if she chooses to spend all hers on golf do-dats or he on shoes there can be no disagreements as it is their 'own' money. It is also good when buying gifts for the other.
Contingency funds. It is wise to set aside an amount of money that can cover an unplanned necessary purchase such as replacing a dead fridge or washing machine. Also set money aside for car repairs and tyres.
Savings goals: saving interest, holidays, home maintenance, retirement. If there is spare money, or money redirected from spending that is not really benefiting you, then use it for something you will really benefit from.
Pay off your mortgage faster and save interest. There are many mortgage calculators that can show you how many years you can cut off your mortgage by paying extra off each month.
Save for a holiday. Open an account and transfer money in each month knowing you have a holiday to look forward to.
Save for home maintenance jobs like painting, re-roofing etc. protect your investment.
Save for retirement. Link to Retirement Planning Calculator.
Taking control of your money and getting financially organized will reduce the stress in your life and give you a better quality of life. It is just a matter of getting started!
Helpful resources:
My husband and I found that Buck Pound's book "Dollars and Sense" got us on track as a newly committed couple who had to learn to manage money together. Here is a link to Buck's Blog: http://buckpound.blogspot.co.nz/
Anita Bell's books, eg. "Your Mortgage and How to Pay it off in Five Years"
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