Budgeting for Newlyweds: Your Comprehensive Guide to Financial Partnership

Updated: Oct 2

Introduction: Budgeting for Newlyweds

Starting a new life together is an exciting journey filled with new experiences, adventures, and challenges. One of the most essential steps for newlyweds is establishing a solid financial foundation. My wife and I established financial groundwork early in our relationship and it has helped us avoid conflict around finances. It has also set up our finances for success overall, we established mutual goals, remained focused upon those goals, and as a result are in sound financial position now and for the future.

A strong budget can be the cornerstone of a happy and stress-free married life. In this guide, we'll explore the importance of budgeting for newlyweds and how to set yourselves up for a prosperous future.

Budgeting isn't just about tracking expenses and saving money. It's about understanding your combined financial aspirations, setting goals, and working together towards achieving them. By being proactive and informed, you can avoid common financial pitfalls and make the most of your combined income.

Understanding Your Combined Financial Picture

One of the first things to do as a newly married couple is to sit down and have an open conversation about your individual financial situations. This includes discussing your individual and combined:

Assets: Everything you own, such as savings, investments, and property.
Liabilities: All your debts, including student loans, credit card balances, and mortgages.
Income sources: This might include salaries, freelance work, or any other income stream.

I also suggest having a similar conversation every year or two. If you aren't sharing accounts, then these things may change over time. If you are sharing accounts it is good to touch base on the health of your finances, this exercise will do just that.

Discussing Financial Goals and Aspirations

Once you have a clear understanding of your current financial status, it's time to discuss your goals. These might include:

Buying a home in the next few years.
Traveling to a dream destination.
Starting a family.
Investing in further education or business opportunities, such as courses from platforms like Skillshare or Udemy.

By setting both short-term and long-term goals, you can create a roadmap for your financial journey together. It's crucial to ensure both partners are on the same page and are working towards common objectives.

Importance of Transparency in Finances

Transparency is the bedrock of trust in any relationship, especially when it comes to finances. Here are some steps to ensure financial transparency:

Open Joint Accounts: Consider using tools like Empower (Personal Capital) to manage and track your joint expenses.
Regularly Review Finances: Set aside time each month to review your budget, track expenses, and discuss any financial challenges or opportunities. We meet every Saturday morning for about 15 minutes to make sure we are on the same page.
Be Honest about Debt: It's essential to be upfront about any debts and work together on a repayment strategy.
Have a system for Big Purchases: Our system involves purchases over $100, we come together and discuss what we want/need to buy and why. Then, as a team, we determine if the spend is appropriate or not and work on a path forward.

Creating Your First Joint Budget

Embarking on the journey of marital bliss also involves combining your financial lives. Crafting a joint budget can help you navigate your shared financial responsibilities and aspirations. It is also important to understand who will be contributing what to ensure that bills are paid.

My wife and I made it easy, we combined all of our finances and any bills were paid from our, new, shared account. This made reviewing expenses simple and easy. We knew where money was coming from, our jobs, and we knew where money was going since we could view it every day in our bank accounts. We also signed up for a shared credit card for emergencies. Again, this was shared (which works for us but not everyone) and it made purchase reviews simple and effective. Accountability was built into our regular spending reviews.

Here's how to go about it:

Assessing Your Income and Expenses

The first step in any budgeting process is to get a clear picture of your financial inflow and outflow.

Income: Begin by listing down all sources of income. This includes salaries, freelance work, rental income, dividends, or any other revenue streams. Combine your individual incomes to get a total monthly or annual figure.

Expenses: Track all monthly expenses, from rent and groceries to entertainment and travel. You can use traditional methods like keeping receipts or leverage modern tools for convenience. A platform like Empower (Personal Capital) can be particularly helpful for tracking and managing personal finances. Or, if you are into Excel/Sheets, I recommend Tiller Money

Boosting Your Income through Continuous Learning and Career Development

A crucial aspect of financial growth is continually investing in oneself. By acquiring new skills and knowledge, you can open doors to higher-paying job opportunities or side hustles.

Platforms like Rosetta Stone, Skillshare, Udemy, and Varsity Tutors offer a vast range of courses, from technical skills to creative arts. Investing time in these can potentially lead to significant returns in the form of increased income.

Setting Financial Goals

Short-term vs. Long-term: Whether it's saving for a vacation next year or planning for retirement, setting clear and distinct short-term and long-term financial goals can guide your budgeting decisions.

An emergency fund is a must-have. Life is unpredictable, and having savings set aside for unforeseen circumstances can provide peace of mind. It's recommended to have at least three to six months' worth of expenses saved up. For insights into your spending habits and recommendations on saving, consider using eggstack for personal finance evaluation.

Allocating Money for Savings and Investments

Understanding the basic principles of saving is essential. Allocate a portion of your income every month to savings before you start spending. Over time, these savings can be invested to grow your wealth.

If you're looking to diversify your investments, real estate is a promising avenue. Platforms like Akru, Groundfloor Finance, and Yieldstreet offer opportunities even for those new to real estate investing.

Managing Expenses: Shopping for Insurance

Insurance is a necessary expense, but that doesn't mean you shouldn't shop around for the best deals. By comparing rates and coverage, you can potentially save a significant amount annually.

Life Insurance: Protecting your loved ones in case of unforeseen events is crucial. Consider Fabric or Haven Life.
Various Insurance: Whether it's auto, home, or health, compare rates from companies like Allstate, Geico, and Insurify to ensure you're getting the best value for your money.

Planning for the Future

As newlyweds, it's essential not only to focus on the present but also to plan for the future. This involves taking steps today to ensure a comfortable and secure tomorrow.

Estate Planning

Estate planning isn't just for the elderly or the ultra-wealthy. Every couple, regardless of age or financial status, should consider setting up their estate plans.

Why is it important? Estate planning ensures that your assets are distributed according to your wishes after your demise. It can also help reduce the burden of taxes on your heirs and ensure that your loved ones are taken care of.

For those unfamiliar with estate planning, it might seem daunting, but platforms like Trust&Will can simplify the process. They provide guidance and services tailored to your unique needs, ensuring that your estate is structured effectively and in line with your wishes.

Retirement Planning

Retirement might seem far away, especially for newlyweds. However, the earlier you start planning, the more comfortable and enjoyable your retirement years will be.

By beginning to save early, you benefit from the power of compound interest, meaning your savings grow exponentially over time. Establishing a retirement fund, whether it's a 401(k), IRA, or other investment vehicles, ensures that you have a nest egg waiting for you when you decide to hang up your boots.

Conclusion

The journey of marriage is filled with joy, challenges, and countless memories. Central to this journey is the financial partnership you forge with your spouse. As we've explored, budgeting for newlyweds is more than just tracking pennies; it's about setting goals, planning for the future, and ensuring that you both are on the same financial page.

By being proactive, seeking knowledge, and using the right tools and services, you can lay the foundation for a prosperous and stress-free future together. Remember, financial planning is a continuous process, one that evolves with time and changing circumstances. Stay informed, stay engaged, and here's to a bright financial future for both of you!