Budgeting with your partner
Budgeting when there's someone else in the picture
I now live with my partner and we own a flat together. Gone are the days of flat sharing! Gone too are the days of me managing my money exclusively alone. My partner and I now have a joint bank account.
One of the things that has become increasingly obvious over the past couple of months is that it is much harder to manage your finances when there are two of you. It's difficult enough to keep track of your own spending let alone someone elses! Furthermore, unless you're like us, and are interested (or obsessed!) with personal finance you might not be with someone who shares your passion for budgeting, saving and spreadsheets. This can lead to real difficulties in terms of budgeting and household finances. However, I've got a few solutions.
This solution will require each partner in the relationship to have their own bank account in which their income is paid each month. Also, a joint household account is required.
Firstly, it's critical that each partner within the relationship is aware of what the other earns. The key figure that both should be aware of is what is the physical cash payment that enters their bank account at the end of each month. It's only by knowing what both of you earns net of taxes that we can start to properly plan our finances. You'd be amazed at the amount of couples that doesn't know what the other earns, saves or invests. If you're going to prosper as a couple then you're going to need to be open with each other.
This financial honesty policy runs not only for your income but also for your expenses. How much does each of you need per month. Maybe one of you has some credit card debt. Maybe one of you needs more petrol each month. Maybe one of you tends to shop more or eat out more. You get the picture. Each of you needs to make an estimate as to what they actually need in terms of day to day living. This shouldn't include housing/ accomodation, household bills, household food and shopping, holidays, big ticket household item purchase, car expenses (not petrol) or savings.
Important point: the amount needed by each partner does not need to be equal. If you have a problem with this then get over it. You're supposed to be in a relationship.
Dishing out the cash
Once you've figure out how much cash each of your needs for your day to day spending you should each set up standing orders to pay the remaining balance into your joint bank account. From this joint account is where you will track and pay all other households expenses such as rent or a mortgage and bills etc. You will also coordinate your savings, your holiday fund, your car repairs and maintenance fund and invest from this account.
Why does this budgeting strategy work?
This budgeting strategy works because you, who are reading this post are probably more interested in personal finance. This strategy allows you not to worry about what your partner might be spending. They can track or not track their spending however they like as they're paying a set amount into the joint account.
As the responsible party you will have to manage the central account and your own personal account. It's also up to you to check in with your partner to make sure that they're not overspending - the last thing you want is for them to go overbudget because they underestimated their spending patterns - just check in with them once in a while to make sure they have enough cash!