What do you want your money to do for you? As your individual and joint financial goals become clear, you will need to find creative ways to get as many of these goals realized as possible. Some of your financial goals can be reached immediately, but others will take long-range planning.
The following exercise will help you separate your financial goals into long-range and immediate ones, and will lead you through making a budget that will allow both of you to work together. A budget that both of you have developed will be easier for you to maintain because both of you "own" it. Successfully creating and staying within a budget gives couples a joint sense of direction and control.
Step 2: Calculate Your Costs
Put a monthly price tag next to each item under the immediate goals category and a general figure next to each of your long-term goals. Some of these items may be consistent (mortgage, newspaper delivery), whereas others may fluctuate greatly (electricity, dinners). Place a guesstimate figure next to any item that you are unsure about.
Next to your long-term goals, consider a total figure you'd like to get to, and then arrive at a monthly figure that you think will get you there. When it comes to items like retirement, remember that the money you set aside will be earning interest, so your monthly figure multiplied by the years until your retirement does not have to add up to your long-range figure. But do the best you can to come close to that long-range figure.
Add up all the individual figures. This is your monthly budget. Both of you should sign and date the bottom of the budget. Don't duck out of this task because you think it is too time consuming, or figure out some other excuse for not gaining control of your spending and your marital finances. The goal here is to find a healthy way of dealing with money. Resist the urge to just smile and say, "All right, let's just do the best we can to spend a little less." You may as well say, "You know, my emotional issues are a little too intense for me on this money thing so I'd rather pretend it away and risk continuing our dysfunctional way of dealing with it than actually taking responsibility for my actions."
Step 3: Write Down Your Purchases
Commit in writing to writing down every purchase for the next month. Each of you must write down in a little notebook every time money leaves your pocket, whether through check, cash or credit card. When you buy a magazine, shop for food, eat at a restaurant, go to the movies, buy a cup of coffee, or pay bills, have your book ready and simply jot down the date, the item purchased and the cost. You don't have to itemize the food shopping; just write the date and total cost. If you have a financial record program such as Quicken on your computer, you can just enter these daily totals into your computer records and truly simplify your budgeting.
Step 4: Analyze Your Spending
After one month, have a meeting and begin to categorize your expenditures. How much are you spending a month on food, clothing, entertainment, utilities, dry cleaning and household help? I guarantee you'll have some unpleasant surprises. Fifty bucks just for lattés? Resign yourself to feeling sheepish or embarrassed, or perhaps a little out of control. Forgive yourself and your spouse, and congratulate yourselves on taking a brave step. Now you will have a clearer sense of how much you spend and on what. The two of you can decide on some areas in which you could spend less. If saving money is important to you, decide on an amount that seems reasonable.
Read books like The Millionaire Next Door and Your Money or Your Life together; discuss the chapters to help you begin to formulate a lifelong plan of how you want to use your money. Begin to be psychologically aware of your personal relationship with money, and commit to creating a responsible financial lifestyle.
Step 5: Revisit the Budget You Created
From your one-month tracking of expenses, you should be able to create a more reliable budget. Review what your guesstimates were before you started recording every purchase for the month and see how close you were to the real number.
First, add the entire month's expenses and see how this total compares with the amount the marriage earns (after taxes). If you are spending more than you are earning, you must decide where you will spend less each month. Even if you're earning more than you are spending, consider whether you are comfortable with the amount of money you're spending in each category. You may realize that you're spending $250 each month on eating out and that you'd rather spend (or save) that $3,000 a year on something else.
Create a new realistic number for spending on each item that both of you agree to. Commit to your new budget for a month. Agree to use cash as much as possible. For example, if your monthly food budget is $500, take it in cash at the start of the month and place it in an envelope designated solely for food purchases. This helps you regulate your spending. It also avoids impulse purchases of "unnecessary" items.
Step 6: Keep It Up!
Maintain your weekly meetings and congratulate each other on taking control of a difficult part of life. Revisit and update your budget every three months. As the two of you start to recognize how well you can approach complicated issues like spending, it will reinforce your confidence in your marriage. It will help you trust your relationship more and motivate both of you to add energy and passion to your relationship.