Sooner or later any couple faces the following questions: is it worth combining income and expenses, who will manage the budget, and how to do it? To the first two questions, only the couple itself can find the answer in the process of discussion. As for the ways of organizing a joint budget, there are a few hints.
Conventionally, you can distinguish three models of joint budgeting: separate, common, and mixed. The boundaries between them are quite blurred, but there are nevertheless fundamental differences. What are they and how to simplify “joint accounting”? In this article, we will talk about it.
This type of budget assumes that the couple has no common financial relationship. All expenses are individual, income is untouchable. No one in the couple claims the earnings of the other, and common spending is either shared equally or perceived as a gift or element of courtship. This is usually the way financial relationships are structured for couples who do not yet live together or who have recently moved in together and have started living together. Also, this type of budget will be useful when the man has his own loans, as well as the woman. In this case, read Best Credit Cards for Single Moms.
Pros: everyone is financially responsible only for himself, no one is financially dependent on anyone else.
Cons: the more joint household (and this is almost inevitable in the development of a relationship), the more difficult it is to remember all the expenses and divide them equally. There can be disagreements in matters of common spending. Usually, such a model over time flows smoothly into a mixed budget. In addition, this type of budget will hardly suit a couple with a large difference in income.
Useful tools: Spending that is planned to be shared is better done with a bank card so that you can easily retrieve the history of purchases with online banking or SMS alerts.
A blended budget is always an arrangement between partners. Couples who switch to this model have shared finances and personal finances. Common funds each can spend only on previously agreed upon items and nowhere else, and no one claims each other’s personal funds. This budgeting principle is most often practiced by couples who have a joint household and in which both partners have income. Usually one of the partners is more immersed in the details of expense planning and income accounting – he or she takes on the role of the chief accountant.
Pros: with the right approach – predictable and transparent shared spending. Each can spend personal funds as they want and not report details to the partner. Both spouses maintain financial independence.
Cons: With this type of budget, it’s important to conduct regular audits of income and expenses – to update the data at least every six months. In addition, one partner must take care of paying the bills and planning the budget.
Useful tools: a common bank account with two cards is a substitute for the “Soviet nightstand”, everyone can take money from there and at the same time monitor each other’s spending and the balance of the common funds in your personal online banking account. This is handy for controlling expenses. There are apps that two people can run at the same time – both partners can install one on their phones to keep track of their joint spending.
All money earned is a family budget. Switching to a shared budget means that the couple no longer divides income and spending into “mine” and “yours.” The pot is now shared and responsibility is shared. It doesn’t matter who earns how much or who spends how much. This kind of budget is usually appropriate for families who have lived together for a long time, or for couples who have recently had children, or for families where one partner earns significantly more than the other.
Pros: A shared budget often brings a family together, where they save, spend, and optimize their budget together. In families where one spouse earns much less or has no income, such a budget will help equalize their rights – both partners have equal access to shared money and the right to spend it.
Disadvantages: With this budget, spontaneous purchases can cause disagreements, which means that you need to agree on all expenses – from large to small like cosmetics or a new game for the console. There can be difficulties with gifts and surprises for each other.
Useful tools: a joint account, a financial plan, and financial risk protection, including insurance, all make it easier to keep a joint budget and protect it.
How do you choose a shared budget model?
A joint budget is built on mutual trust, agreements, convenience, and sound planning. Choose a scheme you are comfortable with and discuss it with your partner, taking financial tools that can come in handy. For example, a joint account with two cards, applications for recording expenses and income that both partners can keep at once, options for savings – have a common “family bank” or two personal piggy banks for everyone. Try and experiment, but always remember: it is important to know your monthly obligatory expenses, keep records of income and expenses and at least once in six months update the list of obligatory expenses.