Say ‘I do’ to budgeting: How to manage money as a couple

Putting together a budget as a couple might not top your list of romantic date nights — but it ought to. Not only will being on the same page about your finances reduce money worries, but you’ll also be more likely to reach your milestones.

If you’re not sure where to start, read on. We’ll walk you through defining and setting your financial goals, and the nuts and bolts of building a budget, so you can tackle your money matters as a team. What could be more romantic than that?

Financial planning can be complicated, even more so when you’re budgeting for two. Your financial picture — income and expenses, debt, spending habits and goals — likely differs from your partner’s. The trick is building a budget that works for both of you. That’s where candid money conversations come in.

Budgeting involves estimating your income and expenses over a period of time. This allows you to organize your financial priorities while gaining transparency about how you spend your money and what your cash flow is. A budget is a great tool for seeing where you might cut back or redirect spending.

But before we dig into your budget as a couple in detail, let’s talk about communication.

Open and honest communication is a necessity in most areas of any relationship and it’s no different when it comes to money. Talking about money can trigger anxiety for some people. If that’s the case for either you or your partner, it can help to focus on the positives.

Sit down with your significant other and think about how you want to structure your finances as a couple. Some people choose to keep their finances entirely separate with individual accounts, others opt to also open a joint bank account, which can help pay off expenses. There’s no one right way to manage your accounts and you should choose the option that works best for the two of you. Your Scotia advisor can help you explore all the options that could work best for you. 

If you do have completely separate financial accounts, you still want to make sure your partner has an accurate picture of your finances. Why? Because aspects like your income, debt load and even your credit score could impact them, particularly if you’re married, so make time to discuss where you stand financially and how that impacts your current and future goals.

Figuring out your financial goals doesn’t have to be stressful. Think of it as a time to brainstorm about the life you’re building together. By identifying your dreams, you can work together to help make them come true.

As a rule, a short-term goal is one you intend to reach within the next year. For young couples, immediate financial milestones might include building an emergency fund, saving for a wedding or paying down debt.

Be realistic about your financial situation when you set a goal and make sure it’s one you can achieve. Failing to meet a goal can be discouraging, and you want to take advantage of positive momentum. Also, consider how your goals might complement each other. For example, saving toward an emergency fund is a shared goal that will help you both by bringing you some breathing room to your household finances.

It’s important to not put off long-term goals. Having a detailed retirement plan, for example, may feel like a big, unwieldy project. But it’s key to identify specific goals and add them to your budget and financial plan, even if they seem far off in the future.

This is also a great opportunity to learn more about each other as you talk about what you want your life to look like long term – where do you want to live, what type of retirement do you want (is travel a priority?) and do you want to eventually leave money behind for loved ones in your will.

Some long-term goals for couples include saving for a down payment for a house with the help of a First Home Savings Account (FHSA), paying off student debt and contributing to a registered retirement savings plan (RRSP) or a spousal RRSP. If you have children, you might also look into opening a registered education savings plan (RESP) for their future schooling.

Once you and your partner have talked about money and set short- and long-term goals, it’s time to make your budget. Having a monthly budget will keep you both accountable and provide a framework to help avoid conflicts about finances in your relationship.

With that in mind, don’t be afraid to revisit your budget as circumstances change or arise. Events like the birth of a child, a raise at work or the full repayment of a student loan affect your budget. What works in your budget today may be out of date in a year or two.

The first step in creating a budget is to map out the income and expenses for both you and your partner. Any spreadsheet program will work for this because you can save and revise it as needed.

There are lots of ways to set up your spreadsheet but, at a minimum, you should have one column for income and one for expenses. You and your partner can choose whether to combine your numbers or keep them separate.

List all sources of income for both you and your spouse. Be sure to include:

• Salary
• Freelance/consulting income
• Rental income
• Pension

Note that income is money that comes in on a routine basis, not assets. Assets are things you own that have value, such as property, investments and vehicles. You can record assets in a different column or on a separate spreadsheet. Tracking them will give you a clear idea about your overall financial picture.

To create a budget, you’ll need a realistic picture of what you spend in an average month. That way, you can see how much you can save or invest, and where to cut, if need be.

Record each type of expense on its own line. Expenses might include:

• Rent or mortgage payments
• Student loans
• Credit card debt
• Utilities
• Cell phones
• Insurance
• Car payments
• Gas or public transit
• Groceries and household
• Meals out and entertainment
• Clothing
• Gym memberships
• Medical or dental
• House cleaning
• Salon or barbershop
• Pet food and care
• Savings
• Discretionary funds

As you can see from this list, you can — and should — include discretionary funds in your budget. This refers to the money you have on hand for non-essential spending throughout the month. A budget without any discretionary money is tough to stick to, so make sure you both allow yourselves the occasional treat.

As you write down your expenses, you may notice they fall into different categories. One partner, for example, might have a student loan to pay off — an individual expense. But a mortgage or rent might be a shared expense. How you handle individual and shared expenses will depend on how you agree to split expenses as a couple.

Some couples split everything 50-50. This method works well for people who have similar salaries and debt loads. In this case, all expenses are shared expenses. Others negotiate different ratios or split some expenses and share others.

Whatever you decide to do, make sure to organize expenses for your situation. For example, if you share some expenses but handle others individually, you could have three columns: shared, partner one and partner two.

Remember, not everything needs to be equal. If one person makes substantially more than the other, it’s unlikely both will be able to contribute the same amount. Your job is to build a household budget that works for you as a couple, and that takes honest communication. Get ahead of these money issues with a chat about financial priorities.

Now that you’ve worked together to create a budget, you’re one step closer to managing your money as a team.

When you subtract your expenses from your income, whatever’s left is money you can use to invest or save without overspending. You can decide with your partner whether to pool surplus money, use it separately or do a combination of the two. For instance, if you have $500 left and your partner has $800, you might opt to both put $300 toward your down payment and then spend the rest however you choose.

Your budget is also useful for managing your money more effectively. For instance, if you notice that you’re spending a lot on take-away food, you could find more to invest or save by eating in more or packing a lunch from home.

Like anything else, budgeting gets easier with practice. Luckily, there are great tools to help you stay on track. The Scotia Smart Money by Advice+ tool on the Scotiabank mobile app¹ puts your finances in the palm of your hand. You can set up your individual budget through Scotia Smart Money. You can categorize and track your expenses, set spending limits and access on-the-fly money information, from cash flow to credit reports. 

Relationships are about learning to work together as a team. When you prioritize money matters with your partner, you can look forward to meeting your personal and joint financial goals — now and in the future.