Want to know what our first fun activity as a married couple was (aside from the honeymoon, of course)?
Making a budget.
Yep, we’re that nerdy accounting couple. But seriously, y’all, I’m so surprised at how many of my friends either don’t have a budget or don’t know how to make a budget. It’s easy and so, so important, especially for newlyweds. Getting on the same page financially was crucial in helping us avoid constantly fighting over money (which, as “everyone” likes to say, is the top cause of divorce).
Our budget is simple and flexible, because, thankfully, we both have well-paying jobs and don’t have a lot of debt (with the exception of my student loans, thank you out-of-state tuition). Therefore, our budgeting process went a little like this –
- How much money we do we have in our checking, savings, investment, and retirement accounts? How much money do we owe (total debt)?
- How much money do we make each month (after taxes, but before 401(k), health, and public transportation deductions)?
- What do we need to pay for every month (i.e. rent, utilities, food, student loan payment, car insurance, health insurance, transportation costs, cell phone bills).
- How much can we save for retirement? How much can we save for big purchases? Because we no longer receive a tax deduction for contributions to our IRA accounts (yay, marriage tax penalty), our goal was to contribute as much as possible to our 401(k) accounts (IRS limit is $17,500 per person for 2014). We also wanted to set enough money aside to be able to afford a two week vacation to London and Paris at the end of the year.
- Lastly, we allocated a certain amount of money to other expenses (i.e. entertainment, date nights, eating out, gym membership, clothes, other non-necessities). Dividing up our disposable income between saving and spending meant we could work on our long-term financial goals (having enough for retirement) without feeling like paupers.
Overall, we tried to prioritize non-necessities that were more important to us, and focus on our goal of saving for our London/Paris trip. I’d rather be able to pay for a gym membership than buy Starbucks every day. I’d rather be able to eat at one nice restaurant a month than a medium-quality restaurant each week. I’d rather spend less on new clothes and save more towards London and Paris. That’s not to say that I never bought Starbucks, only that I made sure I really wanted that latte before I ordered it.
Everything in moderation, my friends.
So how has that budget worked out for us so far? Well, we’ll both come close to maxing out contributions to our 401(k) accounts, we have 6 months’ of living expenses in liquid savings in case of an emergency, and we were able to afford our trip to London and Paris, which we took a month ago. But most importantly, after 9 months of marriage, we have yet to have a fight about money, which leaves us plenty of time to fight about other things, like whose turn it is to unload the dishwasher 🙂
One last note…I’m certainly not an expert in marriage or personal finance, so this is not meant to be interpreted as explicit advice. This budget process worked for us, but that’s not to say that it will work for everyone.
Do you have a budget? What are your tips for staying on track? Or are you more of a “spender”?