This is the first post in our Marriage and Money series. We will discuss a variety of insurance, tax, and estate planning topics that are especially important to consider if you are about to get married or were recently married. However, I want to start by emphasizing the importance of budgeting.
Why is budgeting important?
Budgeting is important, because it sets a clear plan for allocating your resources and prioritizing your spending. When two people are becoming one through marriage, it is especially important that they are on the same page regarding how their shared resources will be spent.
If a family does not have control of their spending, many other financial planning and investment strategies become much less effective. I have seen this many times – a family or individual will have a lot of resources, but squander them due to lack of budgeting and controlling expenses. Large incomes can be easily spent if there are not clear priorities.
The goal is not to spend as little as possible and become a miser, rather, it is to be clear about what is important to you and your spouse and ensuring that your money aligns with what is important to you. Especially for a couple, I am against simply having a philosophy of spending as little as possible – it is important to have a written plan and to track spending.
Having a clear picture of your household spending will make planning ahead for various life events infinitely easier. For example, significant events (buying a house, moving to one income, having kids) will be much easier if you know how the change will fit into your cash flow.
If you have cash flow problems and there are constant disagreements about day-to-day spending decisions, I do not believe you will be consoled by the fact that your investments have been optimized or your taxes minimized. You need the foundation of communication and self-control.
Start budgeting or expense tracking!
Budgeting vs. expense tracking
I typically use the term “budgeting” as a general term for both budgeting and expense tracking. However, more precisely, budgeting is more proactive with expenses tallied throughout the month as they are occurring and expense tracking just looks at past spending retroactively.
If you have issues with overspending or are in a tight financial situation, I recommend budgeting (recording expenses as they occur), so you have a real-time view of how much you have left in your budget categories. However, I think expenses tracking is also okay, especially if you have a good pulse on your spending.
In either case, you should have a written plan for your family’s spending. Here is an example of a monthly budget for Joe and Jill:
There are different software programs that can help with either true budgeting or expense tracking. I know people who like using EveryDollar for budgeting. When I help clients with expense tracking, I like using Tiller.
If you have any specific budgeting questions, please let me know. I hope to discuss budgeting/tracking in more depth in a separate series.
If you have any comments, questions, or ideas for future posts, please let me know
I hope you found this post helpful and educational. If you have any comments, questions, or ideas for future posts, please let me know. You can reach me directly via email at crawford@ulmerfinancial.com.
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