Moving in with your partner is an exciting step in your future together, but it can also have it’s challenges, like figuring out your finances. Whether you’re renting or buying together, this is an essential piece of the puzzle that may take some work to figure out. While that might deter you from having the conversation, it’s essential and will make things run much more smoothly in the long run. To take a bit of the pressure off your shoulders, here’s a quick guide for how to set up a household budget while living with your partner.
Step #1: Determine Who’s More Financially Literate
There’s no shame if you don’t know how to fill out a check or how interest rates affect your credit balance, but financial literacy is increasingly important as your assets and shared obligations grow. Neither of you has to be a financial expert, but if one of you has a better understanding of financial terms and processes, it might make sense for them to take the lead on the financial aspects of running your household.
Once you’ve designated who’s going to be the main one handling the finances, you can get started on your household budget.
Step #2: Figure Out Your Total Income
If both of your work, figure out your combined income. This should include all sources of income:
- Your hourly pay from your 9-to-5 (including any overtime earned)
- Tips
- Dividends you receive from investments
- Bonuses
- Unemployment benefits
- Side gig earnings
Once you have all of the incoming money added up, you need to lay out all of your expenses.
Step 3: Total Your Expenses
If you’re going to combine your expenses, you also need to combine your expenses to figure out how much money will be going out each month. Expenses typically include utilities, rent, car payments, student loans, and other obligations you have to pay every month.
Subtract your monthly expenses from your monthly income, the amount remaining will give you your household discretionary spending. However, you also want to keep in mind annual expenses, like paying your roadside assistance membership or registering for classes, so they don’t sneak up on you and derail your budget.
Step 4: Budget Your Spending
You know how much your bills are, but how do you figure out how much you’re spending on other things like entertainment, personal items, and decorating your new place? That’s where your budget will be put into action. Once you know how much discretionary income you have, you need to decide together how much you’re allotted to spend, whether that’s as a couple or individually.
Step 5: Planning Big Purchases & Savings
This is another area where things can get a little rocky, but if you’re open to making some compromises in order to agree upon mutual goals for your household, this can be a positive to a more financially stable future. When it comes to the big picture of your finances, you’ll need to have a more in-depth conversation about your goals if you haven’t already. Is going on vacation something you want to do more of in the future? Are you saving up for a down payment? What kind of additional retirement planning do you need to be doing?
Planning to meet these needs and goals together will make sure you’re on the right track. You can make a plan to both save a certain portion of your paycheck each month or hit certain savings goals by the end of the year.
Figure Out What Works for Your Relationship
For some couples, having one person primarily responsible for financial responsibilities is helpful. However, you and your partner might prefer to both share those responsibilities, especially if both of you are fairly fiscally responsible. Of course these recommendations are adaptable to your lifestyle and preferences but making sure you figure out the main aspects of your budget together will help you avoid a lot of the financial pitfalls couples make while living together. By cutting down on the potential for financial disagreements or instability, you can focus more on the fun parts of living together, like creating a space you both love, quiet nights in, and hosting family and friends.
