Talk About Your Finances, Improve Your Relationship
Making your financial relationship meet in the middle.
Marriage is not always rainbows and butterflies and neither is dealing with your finances. The following are a few ideas to help keep your financial relationship on track.
It’s time to dust off the skeletons in your financial closet. Being up front and honest about your current financial state with your partner is vital. Informing your partner about any bad credit, debt or loans you may have is important information your partner may need to know; from now on those numbers are part of his life, too. Your individual financial successes or troubles are not shared and it may be best to bring up your financial history and current state now rather than later.
Being truthful with your partner about purchases you make that maybe you shouldn’t have made may be helpful when managing your money together. Say you decided to purchase a 72 inch flat screen TV to watch the game on without your partner knowing. Being straightforward about your purchase may be a better idea than hiding your brand new television. Remember, like interest, bad decisions compound. Don’t add lies to mistaken spending. Staying open and honest with one another may benefit your new financial relationship with one another.
Develop a Budget
Reaching financial harmony is always easier said than done. A great place to start is by creating a monthly budget. Here are some ideas you may want to consider when building your budget.
Start with you and your partner’s combined monthly incomes; once this is established, take a look at your combined debts and the costs of living essentials. Combined debts may include money owed for things like car payments, credit cards, mortgages and student loans. Living essentials are items you need to function and, no, this does not include a Venti Iced Triple Shot Mocha! Instead, they’re things like your groceries and your electrical and phone bills.
Also, your budget should include savings. Think about creating a section that includes money you and your partner want to put away, whether that is for your child’s education or retirement. Lastly, create a “wants” category; this may include items such as a new pair of shoes or a fancy new espresso machine.
The more detailed you make your monthly budget, the better you and your partner will understand where your money is going, and the changes you may need to make to your spending to reach your financial goals. For more information on budgeting, read Creating a Budget in 4 Simple Steps.
Set Financial Goals
Financial goals should be SMART goals. That is, they should be Specific, Measurable, Achievable, Realistic, and Time-bound. It’s not enough to say, “We’ll save money,”–that’s a goal without a direct destination, and without a clear path to get there. Instead, set goals like, “Together, we’ll save $300 per month for the next two years and put that money towards an anniversary trip to the Bahamas.” Make short and long term goals, focusing on what you can accomplish in 2 years, 5 years, 10 years, and beyond. Potential topics for goals include debt reduction and saving for retirement. No matter what financial milestones are important to you and your partner, SMART goals will help you achieve them.
Rank your goals of most to least important, and remember to consider the costs of compounding. Paying off your credit card bills now may result in significant savings over time. Keeping that in mind will help you to prioritize it over buying the new “it” product. Remember, reaching your goals does take time and effort. And finally, remember, goals do change and it’s okay.
Saving for Life’s Bumpy Road
Sometimes life can throw you a curve ball that you did not plan for whether it be job loss, car issues or home repairs. Saving for the unexpected may be a great way to help you stay stable while going through a tough time. The Credit Union offers Rainy Day Savings accounts to help you develop a kind of financial security net that may benefit you in life’s unexpected emergencies. A general rule of thumb for Rainy Day Savings™ accounts is you and your partner may want to have enough funds in your account to last you and your family through 3 - 6 months of living expenses. Building your Rainy Day Savings will take some time but, it is a great idea. One tactic to help grow your account may be to have some of your funds deducted from your paycheck and automatically placed into your Rainy Day account. This way you will not have to worry about depositing every month, and it will be done routinely whenever you are paid.
Budgeting, saving, and goal setting can be tough, but remember, you don’t have to do it alone – BCU’s here to help! That’s why we have Pilot™, a free budgeting and planning tool that helps you set budgets, track your spending, and work towards your financial goals.