The Benefits of Budgeting Together
Money can either be a source of happiness in a home or the bone of contention that creates a rift.
It is estimated that finances are among the leading causes of divorce .
However, when handled well finances can foster trust, understanding and grow the home to financial independence.
Having a joint account is the first step at creating this financial unity.
I remember when first moved in with my husband it took us a while to find our footing, I overestimated how much he earned and hence expected more from him .
All the while he wanted to take care of his family and was afraid to ask for my help even when he was struggling. This created an unwarranted tension.
This post will take you through the process of running a joint account in case you want to join finances, budget together or invest together.
Consider this a guide at ensuring a solid financial foundation for your relationship.
1. First and Foremost Communicate
The saying communication is key may sound cliché. But until you have a disagreement based on assumption, then you will understand the importance of communicating about everything.
When it comes to finances, openly communicate on your goals, needs and clearly state your expectations.
You can purchase financial conversation starter questions, that will help you get deep without feeling intrusive.
This is the point to state your incomes, discuss responsibilities and come clean on debts.
Talk about money language differences and come to an agreement through compromise and understanding.
2. Set Clear Goals
Note down all your financial goals, the long-term and short-term plans. All the milestones you desire to achieve.
Note down even the most minute issues such as weekly dates and major issues such as vacations, owning a home or starting a business.
If possible do your research and estimate the amount of money you want to spend within each activity and state the minimum and maximum allocation.
3. Choose the Right Account
Now you have to extensively do your research on the various banks in your jurisdiction. Here are some factors to consider when choosing the right account:
Select a bank or financial institution that offers joint accounts
Features that meet your needs, such as online banking and mobile apps.
Low withdrawal fees.
High yield accounts on Interests.
Automation in paying of expenses where possible.
Bank ownership( this explains the banks ability to stand a financial crises).
Understand the terms and conditions.
4. Understand Ownership
Fully understand how the ownership of the joint account will work.
Can any of you withdraw funds from the account at any time?.
Do you require one of you to be in charge of withdrawals?
Irrespective of the agreement both parties should link their numbers, so as to receive a notification on their phones once a deposit or withdrawal is made.
This ensures trust is maintained. You can also create time for regular check-ins and planning.
5. Agree on Contributions
You can now determine how much each partner will contribute to the joint account.
The discussions on the amount to be contributed by each person is solely dependent on your family dynamics.
Put into account the differences in income, spending habits and individual expenses versus the disposable income.
Cultural requirements, Family dynamics and fairness where one partner doesn’t contribute more and still does more of the housekeeping.
The contributions should be up for review after some time to ensure you are on the same page and avoid overburdening one partner
6. Make a budget together and stick to it
Create a joint budget that outlines your incomes and has allocations for fixed expenses, savings and investments.
Ensure the funds allocated are efficient to curb overspending and ensure everything in the home is well taken care of.
This process is essential as it ensures transparency and fosters accountability. Everyone becomes well aware of the scope their expectations should fall under.
7. Maintain Individual Accounts
It will always be a good idea for couples to maintain an individual account apart from the joint account. This will have funds for your own personal expenditure.
It will stop you from over-relying on the joint account to meet your own personal needs.
It also helps you have an independent life away from your partner without being overly dependent.
8. Automate Savings
Allow for automatic system transfers, to ensure a month doesn’t go by where a transfer is not made to the joint account.
Automation can also be helpful when paying for the fixed bills, allocating funds for savings and emergency.
This process saves you time and ensures every payment is made on time without compromise.
9. Designate Responsibilities
Assign financial responsibilities like bill payments, tracking expenses, and managing investments to each partner based on their strengths and interests.
During the first week of the month, create time to go through your finances.
EnsurE each person accounts for the bills and expenses they are in charge of.
10. Discuss Large Purchases
Agree on any expenditure that requires funds from the joint account.
Create a spending threshold that will require both partners’ consent before making significant purchases from the account.
Any assets purchased from this account should be under both of your names for transparency.
11. Emergency Fund
Emergencies can throw you off balance.
As a contingency plan create and maintain an emergency fund within the joint account to cover unexpected expenses.
This helps you avoid using up your savings and also getting deeper into debt due to unexpected issues.
12. Manage Debt
If there are any joint debts, make a repayment plan.
If there are any personal debts, they should be discussed to avoid one partner being blind sighted.
If your agreement allows for it, you can help each other pay for personal debts.
13. Plan for Contingencies
Discuss the way forward in case of death, incapacitation or a divorce to avoid legal complications later in life.
Talk about the legal guidelines and expectations such as the availability of a will, the power of attorney transfer, insurance and even a trust fund to financially cover your families.
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