The biggest issue that can derail family finances is if you and your partner don’t see eye to eye on essential issues like budgeting and saving. This can lead to arguments over money that never get resolved.
But if you take the time to sit down and discuss your priorities and pet peeves, you could come to a mutual understanding.
The key to marital bliss
There is no one right way to handle money. In most cases, sensible money management is the key to marital bliss. That’s why the best investment you can make is in communication with your partner.
Research suggests that there is a strong correlation between comingling finances and marital happiness. Couples with joint bank accounts argue less about money and are more comfortable with managing their household finances, according to CNBC.
Perhaps this is because both parties are aware of how much money is coming in and going out every month. This leads to less unpleasant surprises and can help you discover minor financial issues before they turn into costly problems.
It all starts with changing your behavior
So, what can you do if many of your arguments focus on money? According to the AICPA’s National CPA Financial Literacy Commission[MU1] , if you want to improve your financial relationship, you should follow the tips below:
- Have the money talk about where you stand financially
- Review financial documents and do the math to get a numerical estimate of where you stand
- Take action and come up with a financial strategy that works for both of you
- Set short and long-term priorities
- Keep track of your finances and progress
The first step
As you may have noticed, the first item on this list is to manage your money with a written budget. In fact, most experts will tell you that this is critical to keeping the peace with family finances.
A budget is not only a way to cut costs. It can also help you negotiate a strategy on how you want to spend and save your money. You and your partner should track your spending for at least a month, then sit down and divide it into categories.
Don’t rely on your memory to track spending since numbers can be easily forgotten. Your tracking will be more accurate if both of you download one of the many expense-tracking apps available for use on smartphones.
Remember that when you track your spending, it’s important to include every single expense—no matter how small or random.
Categorize your expenses
The next thing you need to do is divide up spending into categories such as housing, transportation, food, entertainment and so on.
Once you’re done, you can begin a dialogue about how you will spend your money in the future. For example, when you see how much your family is spending on entertainment, you could decide to cut that in half and put part of it toward savings.
Of course, it’s critical that both of you agree on whichever strategy you choose. If you’re challenged with debt, you should also consider how you will pay it off and which debt relief program best suits your needs.
Putting a family budget together requires good negotiating skills. You and your partner might disagree on how much you should spend on big expenses like a vacation. You will need to reach a reasonable compromise to satisfy both parties.
The critical thing
The critical component to having a budget is for both people to buy into it. If one of you agrees to something just for the sake of getting the conversation over with, your budget is bound to fail.
You both must be open and honest about your needs and feelings and commit to making that budget work. For example, if one of you wants to book a vacation to St. Thomas while the other would rather put the money into savings, you could compromise by putting some money into savings and taking a less expensive trip.
Making it work
Understanding how to manage family finances can keep the peace in a marriage or relationship. Therefore, it’s important to ensure that you and your partner are on the same page. Most importantly, you should both be able to navigate issues by working together, not against each other.
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