How to Manage Your Money | Control Spending
Learn How to Manage Your Money Effectively
This is one topic that can stir up a hornet’s nest big time-and quickly. How to manage your money after marriage “has no one size fits all” solution. You can ask this question to a dozen couples and get that many different opinions. This topic is also responsible for many divorces so please read this with a broad and unbiased mind. (You can flame me in the comments below)
A married couple needs to be able to communicate with each other on how to manage your money, and in a way that each respects the others views. You won’t always agree, and that’s okay, just don’t be disagreeable.
Try to establish common financial goals that you both agree on such as buying a home and saving for retirement, as examples.
Following through with the proper methods to achieve those goals is important. [bctt tweet=”It’s a good idea to discuss how to manage your money even before the marriage takes place.” username=”HBSMoneyTips”] Some spouses have a difficult time talking about money depending on how they were raised. Usually if that spouse’s parents weren’t open in discussing money, some of that stays with them later in life.
In that first how to manage your money meeting, review salaries, deductions, and especially saving for retirement. Medical insurance is another extremely important issue. If one has attractive medical coverage with their employer, it might be better to cover both spouses on that policy.
In addition to the salaries and expenses, be sure to show any and all debt that each have. Student loans, especially, can take a big bite out of income. Hopefully, both spouses are in agreement that making a budget should be a priority.
It’s a good idea to get a handle on all income and expenses and especially any debt coming into the marriage. Getting debt repaid needs to be a priority as well. Another important item for the budget is setting up an emergency fund that will cover at least six months of your expenses.
The purpose of the budget is to see where your money is going and to be able to control spending. This should be a joint effort and each spouse needs to see where the money goes. There are different opinions on how to manage your money – let both contribute from their salary or have the one who is most capable handle bill paying with a joint account. There is no one way that is right for everyone. Whatever works for you is your best way.
When you’re making a budget, you need to setup short term and long term goals. This could be saving for a home purchase, a new vehicle, or even when to have children, if in fact you plan to. Remember also, if planning for children, there will probably be loss of one income for a certain period. You need to have a good handle on how to manage your money effectively.
Once you have your budget setup, it’s a good idea to review it with your spouse at the end of each month initially. Both spouses should know where the money goes and the status of all debt. We recommend purchasing a good budgeting software program that will help in making a budget and give suggestions on how to manage your money. A program that emphasizes debt reduction and how to make every dollar work for you will be a tremendous help. The reports that it will prepare for you are helpful as well.
No matter how young you are, plan and begin to save for retirement. If your employer provides a plan, take advantage of it. If not, start your own as early as possible. The longer your retirement account has to grow, the more you will accumulate with compound interest.
If any spouse changes jobs, don’t be tempted to cash in your retirement account. Take it along with you or roll it over into an IRA. Don’t blow it by paying the 10% penalty and income taxes as well.
As far as your credit report, each spouse will have their own, so work together to improve your credit reports. A good credit report can result in a lower rate of interest when you need to borrow for a new home, and that will save you money.
This suggestion may sound off the wall as we discuss how to manage your money. However, if at all possible, work towards living on just one spouse’s income. It may take a while to get there, but think of the benefits. You could be placing one income in savings for future purchases, or perhaps even being to retire earlier.
I know a family that has been doing that and being able to purchase items for cash prevents a lot of stress. As we mentioned before, there is no one way on how to manage your money that works for everyone. It may take some trial and error, but if each spouse gives it 100%, you can achieve it. When you find what works best for you, go with it.