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Married Money Management Step 1: Make a Budget

By Dustin | Finances & Careers

Welcome to the first installment of the Married Money Management series here at Engaged Marriage where we take a look at the keys to financial success for married couples.

How to Make a Budget that Works!The first and most important step to achieving financial success in your marriage is to make a budget.

Put simply, a budget allows you to tell your money where to go instead of wondering where it went.

Some couples are reluctant to create a budget for their household finances because they think it’s too difficult, too confining or they honestly just don’t want to know how poorly they’ve been handling their money.

While I can definitely relate to these feelings, the fact remains that creating a budget and living with a plan are absolutely essential.

Our First Big Mistake!

In the first few years of our marriage, we thought we could live just fine without a budget.  Believe it or not, I actually read Dave Ramsey’s Financial Peace right after we got married when a co-worker suggested I give it a look.

Well, I loved the book and thought Dave’s advice was excellent.  We decided we’d try some of his strategies…but we thought we could do it without bothering with a budget.

We’ll get much deeper into our own story as this series progresses, but suffice it to say that doing things our way resulted in the accumulation of more than $54,000 in debt and years of unnecessary financial stress.  Knowing what we know now, this is really frustrating.

In hindsight, it’s very easy to see where we went astray.  We skipped the most critical step in the journey to financial peace. We were too stupid and stubborn to create a budget for our household.

Please don’t repeat our mistake.  If you desire more financial success, you must have a budget!

Budgeting Basics

Based on the reactions I’ve heard from both close friends and Engaged Marriage readers, I know that some couples are intimidated by the idea of a budget and feel that it’s too complicated or cumbersome for them to take on.

Please know that a budget can be as thorough or basic as you decide to make it.

Basically, a budget is a summary of your financial “ins and outs” during a given month.  You just write down all of your income for the month and all of your expenses and you have a record for that month.

When you use that information to plan ahead for the next month, you’ve got yourself a budget!

This can literally be as simple as writing down your income and expenses on a sheet of paper.  The key is to track your expenses for a few months so that you can accurately project your needs for the next month.

The most basic way to do this is to keep receipts for all of your expenses for two months.  You can then use this information to establish a baseline in your spending habits.

Take a look at these habits and decide if and where you need to make cuts to meet your goals or if you need more income.  Put the revised spending and/or earning amounts down on paper to plan for the next month, and your budget is all set.

A budget does not have to be complicated or overly detailed. 

It must account for every dollar you earn and spend, and it must be agreed upon as a couple.  Aside from those two basic rules, it can take any form that you desire.  And please note that it will likely take several months of trial and error before you zero in on an accurate budget.

Bethany and I used homemade Excel budget spreadsheets and manual tracking of our receipts for several years.  It worked just fine, and it provided the information and motivation that we needed to attack our debt and live within our means.

We have since “graduated” from those manual efforts and realized the power and (awesome) simplicity of using budgeting software.   I’m now convinced that this is the best solution for most couples, and it makes things SO much easier that I feel it’s a no-brainer to invest a few dollars to get started with a solid budget software.

Budgeting Tools Are Your Friend

There came a time after we became debt-free that we found ourselves slipping back into old habits and getting sloppy with our budget. It was then that I decided it was time to look into options beyond our Excel spreadsheet and keeping a receipt for every purchase we made to track our spending.

Frankly, we had become so busy and bored with this approach that we would sometimes get a month or two behind in tallying up our spending and fail to even plan ahead, which defeats much of the purpose of budgeting.

Even though we used these manual methods of budgeting to get out of debt and meet other financial goals, we decided it was time to use technology to our advantage and make our efforts more sustainable.  I tried out most of the popular options for budgeting software and wrote a review based our experiences.

I encourage you to read my budgeting software reviews and see which option fits your family’s needs.  Any of these options (free or premium) make it so much easier and less time consuming to get your budget working versus doing it on your own.

After a lot of research and trials, we found that the best budgeting tool for our family is a software called You Need A Budget.  I can’t say enough good things about YNAB, and they now have iPhone and Android Apps available to make it even easier to track and plan.  Plus, when you use this link, you’ll save $6!

If you think that budget software would be helpful in your situation, please take a moment to read my full review of You Need A Budget based on our experiences.

If you decide to give YNAB a try, you’ll be able to get started on your budget today by importing your electronic transactions from the past two months to know where you’ve been with your spending.  As a couple, you can then decide what needs to change, quickly set up a plan for next month and then start following it.

You could literally have your budget ready to go in a matter of a few hours using this technology.  While premium software like this is not free, we’ve found that it’s money well spent.

In most cases, you’ll save much more than the software cost simply by getting started and tracking your spending, earning and saving habits.  Plus, using this link, you will save $6.

Budgeting Benefits for Your Marriage

The benefits of budgeting within marriage actually go way beyond laying the foundation for financial success.  Budgeting your money can actually be an awesome way to enhance the communication and trust in your relationship.

Build Communication

If you are married, both spouses should have input in the budgeting process.   This is really a critical component of any budget that is actually going to work, which means that it is respected and followed by the entire family.

After all, why would you follow a plan that you may not agree with or that you feel has been forced upon you?

This is why communication is key to the budgeting process.  You and your spouse need to sit down together and discuss your financial goals and decide in advance how you want to use your money.

This doesn’t mean that you have to combine all areas of your financial life or change the way you spend money.  While there may certainly be value in doing so, you can build your budget to accommodate joint or separate bank accounts, cash or credit card spending, and frugal or extravagant spending habits.

After all, this is your budget designed for your particular family’s situation.  You are in control…together.

It’s also totally fine if the “nerdier” spouse wants to create the draft budget and then get input from the other.  But there must be input and “buy-in” from both husband and wife that the final budget is a spending plan that they agree to stick to.

Again, this could be a plan to spend beyond your means and rack up crazy amounts of debt.  I hope it’s not, and most couples don’t plan to go deeply in debt, but the point is that you will communicate about your goals and decide together how to use your family’s financial resources.

That is the real beauty of building a budget for your own family and your own situation.

Build Trust

After you’ve sat down together and figured out your spending plan for the coming month, it’s time to put your money where your mouth was and spend as you have both agreed.

When a budget is in place, you can feel good about spending as you have planned.  However, you’ll have accountability to deal with when you are tempted to go astray.

Think back to the last time you spent a lot of money on something impulsively without talking to your spouse first.

Was it part of your overall financial plan?  Did you have a bit of buyer’s remorse afterward?  How did your spouse react when they found out about your big purchase?

You and your spouse create the budget and you control what it says.  However, once you agree to it and you commit to each other that you’ll stick with the spending plan, you have an ongoing promise to your spouse to uphold.

That doesn’t mean that you can’t buy something that’s not part of the budget.  However, it does mean that you need to give your husband or wife a call to make sure they agree there’s good reason to change your mutual financial plan to accommodate it.

And the two of you can decide on the limit where the other needs to be consulted when a “spending audible” gets called.

Simply put, it means that you must trust your spouse to be financially responsible, and you must hold up your end of the agreement to them as well.

Communication builds a budget and trust makes it work.

Go Take The First Step Today: Build a Budget!

Regardless of whether you decide to start with a pen and paper or a software tool, the most important takeaway from this post is that you must have a budget.  It’s vital for your financial success, and it’s a valuable marriage-building practice as well.

If you already have a budget, that’s fantastic.  Take some time to review it together and decide whether it still meets your needs and financial goals.

If you don’t have a budget yet, please do your marriage a favor and go get one!

After all, it’s the first step to effective Married Money Management.

Here’s a rundown of all the posts available to you in the Marriage Money Management series:

(photo source)

Announcing Married Money Management: 9 Steps to Financial Success

By Dustin | Finances & Careers

Marriage and MoneyIn the early years of our marriage, money was not a fun subject as we struggled with a lot of debt and only a little understanding of the importance of financial harmony in our life together.  We had no plan and just followed the (really, really poor) example of money management we witnessed among our friends and in our culture as a whole.

Fortunately, we learned a lot along the way and now enjoy a great deal of freedom in the financial area of our marriage.  We’re debt-free and honestly never argue about money.

I want to share our journey and give you the guidance that I wish we would have had before we were married nine years ago. Like our own path, this journey will generally follow the advice of Dave Ramsey’s Baby Steps, but it will include our personal experiences and specific advice for engaged, newlywed and not-so-newlywed couples.

To give this important topic the attention it deserves, I plan to break it all down into (at least) nine different posts.  I’ll begin sharing this series on Monday, and we’ll look at a new step along our financial journey each week for the next two months or so.

There are three things you should know before we get started:

  • I am not a financial counselor or professional, and you should view this information only as input from a friend who has “walked a mile in your shoes.”  I take no responsibility for your application of the information.  OK, end disclaimer. 🙂
  • If this interests you, I’d strongly suggest you sign up to receive free updates when new posts are published.  You can do so via an RSS reader or have them sent right to your email.  This is the best way to ensure you don’t miss a post.
  • If you know of an engaged or married friend that could benefit from this series, please share this post with them so they can get signed up for the series.  You can email them a link or use the Facebook or Twitter buttons below to spread the word.

I’m super excited to write a meaningful series that I really hope you’ll enjoy.  I’ll see you on Monday for our first step along the journey.

In the meantime, please take a minute to share any specific financial questions that you would like addressed in the comments below.  Or just share you thoughts on whether you think this series is a good idea.  Thanks!

(photo source)

Want a Better Marriage? Learn About Money!

By Dustin | Finances & Careers

Marriage and MoneyMoney is at the top of the list of issues that married couples argue about.  There are a host of money-related items to disagree about from not having enough money to differences in how to use the money that they have.

One way to reduce – and ultimately eliminate – these unwelcome interactions is to be open with each other about your “financial IQ” and set out on a course of learning about money and personal finances together.  That said, here are a few things to keep in mind.

First, both spouses may not have a genuine interest in personal finances (such as the case with my wife).  I would recommend that each spouse really makes an effort to learn the basics and more if possible.  We have all heard the story of the widow whose husband handled all of the finances and when he died, she was left not knowing anything about their finances (which included not knowing about his life insurance or his will).

Secondly, you each might have different learning styles, so what works for one may not work for the other. The good news is that financial education comes in many forms including books, videos, personal finance blogs, seminars, and one-on-one sessions with financial professionals.

The Money Basics That You Need to Know

So what should you seek to learn about with regards to money?  Here are my recommendations:

Budgeting

My philosophy on budgeting is to run your family budget like a business budget.  Your salary (income) is your accounts receivables (money coming in) and your bills or expenses are your accounts payables (money going out).  The receivables HAVE to be greater than the payables.

If not, you have three options: increase the receivables, decrease the payables, or do a combination of both.  You can increase receivables by putting in extra hours at work, taking on a second job, or starting a side business. You can decrease payables by looking at what you are spending and finding areas to cut back such as not having a $4 coffee every morning, not having multiple premium cable channels, or canceling gym memberships you don’t use.

(Note from Dustin: In my opinion, all financial success starts with a solid budget and open communication. Personally, I’ve tried a lot of approaches, and I feel that You Need A Budget is the best option out there for budgeting software.)

Credit

Learn the power of having and maintaining good credit. In a perfect world, we would not use credit, but if you need it, you will pay far less for the money you borrow if you have good credit.  The solution to maintain a good credit rating is never taking out a loan you do not have the means to pay back and always paying back your loans on time.

Savings

There are several different forms of savings from the emergency fund to a 3-6 month reserve, to long-term savings for major purchases such as a down payment on a home. It is important to establish your personal savings goals, and learn what financial vehicles exist to help you save.  You might be surprised to find certain financial instruments (such as insurance policies) that can serve more than one purpose such as helping you save while also providing a death benefit.

Debt Management

If you have debts, make sure you know the fastest way to pay them off.  A great way to pay off your debts is to use the debt snowball method where you pay off the lowest balance debt and then add that payment to the payment of the next debt on the list which allows you to continue to make larger and larger payments on your debts which knocks down the balances faster. Using the Infinite Banking Concept, you can possibly take this to the next level by paying off the debt snowball with a loan from yourself (more on that later).

(Note from Dustin: Our family used the good, old-fashioned Debt Snowball to pay off our debts, and it was one of the best decisions we ever made.  We did not leverage our efforts through the use of loans back to ourselves, as suggested here, and I am not endorsing that approach.)

Insurance

Although many people don’t like talking about insurance, you need to make sure you understand what you need and what you don’t need. There are some types of insurance that you cannot live without (by force) such as car insurance and homeowners insurance. But what about life insurance, renters insurance, health insurance, and the like?

I could write a whole blog post on just insurance alone but suffice it to say, you need to have an understanding on what is available and what will benefit you in your current situation and down the road as your needs change.

Investing / Retirement

I put these together because ultimately your investment activity should be building your nest egg or retirement fund.  There are lots of different types of investments out there and I will just say this; if you don’t fully understand what you are putting your money in, why you are doing it, and what the outcome will be, don’t do it.

In general, I would stay away from stocks and mutual funds because they are really a gamble (and this is my personal opinion and experience, not investment advice). One of the best investment vehicles that I have personally found are dividend paying whole life insurance policies.  Many will tell you that they are not a good investment and that you should “buy term life and invest the difference” but I will tell you that most people never invest the difference, and those that do have taken huge losses by listening to the “gurus” that preach this because their mutual funds tanked.  Dividend paying whole life insurance companies have produced positive returns for years – even during the great depression.

(Note from Dustin: I felt the need to interject here to let you know that I am personally in the “buy term and invest the difference” camp on this issue, so that’s the approach our family has taken.  However, like most issues, I like to be open-minded and invite opinions that are different than my own, so here you go. 🙂 )

The Infinite Banking Concept

This is a term that you may not be familiar with, but it is a financial strategy that I am personally passionate about. It is through the Infinite Banking Concept that you are able to leverage certain aspects of insurance policies to create a personal financing system with the additional benefits of retirement funds as well as a death benefit to leave to your family when you graduate from this earthly life. Of all of the arenas of personal finance I mentioned to study, I would put this at the top of the list because it will empower you to accomplish all of the others more efficiently from savings to paying off debts, to building a retirement fund.

(One final note from Dustin: Again, I have not used this Concept, so I cannot personally endorse it.  I tend to prefer to keep things fairly simple with our finances, but I also don’t discount other ideas on the sole basis that I don’t have any experience with them.)

As with any new venture, remember that mastering your personal finances is a process and not something you need to become overwhelmed with.  Take it one step at a time and every step you take will get you closer to achieving your financial goals.

Those that master their personal finances carry less stress and enjoy life more than those who are always broke or just getting by.  In the end, the financially educated have happier and healthier marriages as well – and that is my wish for you!

(photo source)

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Anthony Kirlew has been happily married since 2006 and runs the personal finance blog Fiscally Sound. Anthony has worked in the financial services arena for several years specializing in real estate, mortgage banking, and insurance services.  A lifelong entrepreneur, Anthony has also been a professional online marketer since 1999.

Finding Financial Freedom with You Need A Budget

By Dustin | Finances & Careers

Happy Independence Day to my fellow Americans!  I hope you are enjoying some fun family time over this long weekend and remembering all those who fought and continue to fight to preserve the awesome freedoms that we enjoy each day.

We are opting for more time indoors than usual this holiday weekend while we anxiously await the arrival of our third child sometime in the next week or two.  Thank God for air conditioning! 🙂

When I think of our family’s own freedom, the thought of finances always comes to mind.  As you may be aware, we paid off a LOT of debt and now enjoy much more financial freedom, and that carries through to all aspects of our marriage and family life.

I recently shot another video where I discuss the number one cause of divorce in America and why I think You Need A Budget is such a great tool for addressing this important problem.  And here’s another reason to celebrate: I just purchased a new video camera so this is the last really low-quality video post you’ll see from me! 😉

Please feel free to leave your thoughts in the comments, and if you’d like to see all of my Engaged Marriage videos (some of which don’t find their way to the blog) please subscribe to our YouTube channel.

If you can’t see the video, just click here: You Need A Budget Review: Married Money Management

Thanks for your continued support!

Get Rich Slowly Giveaways!

By Dustin | Finances & Careers

I am excited and quite honored to have a post featured today at Get Rich Slowly.  Please head over and share your thoughts in the comments of “6 Steps to Strengthen Your Family on the Journey to Financial Freedom.”

In honor of the occasion, I have some great giveaways to share…so please read on and enter to win!

Welcome to Our Friends from Get Rich Slowly

If you are a new visitor from Get Rich Slowly, I’d first like to welcome you to Engaged Marriage!  I encourage you to take a few minutes to look around, and I think you’ll find an awesome community of proactive people who love their marriage and family life.

If you like what you see, I’d also encourage you to sign up to receive free updates via RSS or Email whenever new posts are published here at Engaged Marriage.  If you’re really serious about getting killer content and exclusive advice aimed at helping you have an awesome marriage, please sign up for our free Marriage Time newsletter.

If you love finances as much as I do, I hope you’ll enjoy these posts:

Giveaway Number One – Your Money: The Missing Manual

J.D. Roth is the creator and lead writer over at Get Rich Slowly, and he recently released his first book.  Your Money: The Missing Manual has really been a hit, and it’s no surprise to me as J.D. is a dependable source of sensible advice for getting the most from your money.

In honor of J.D. accepting my post to share with his community, I wanted to share his fantastic book with the community here at Engaged Marriage.  More specifically, I want to give the nearly 400 members of our awesome Facebook page a special chance to win a cool exclusive giveaway.  If you want to join in, just head over and “Like” our page to join in all the fun we have there.

Let’s give away a killer book!

To enter to win Your Money: The Missing Manual, just do the following:

  • Head over to the Engaged Marriage Facebook page and leave a comment under the (very obvious) giveaway post there on the wall.
  • After you post on the Facebook page, you’ll get a bonus entry by tweeting the following message: Enter to win a FREE copy of “Your Money: The Missing Manual” from @EngagedMarriage http://wp.me/pEBYt-s3 #giveaway

I will randomly select one winner from all of the entries, and they’ll receive a free copy of Your Money: The Missing Manual!  The contest ends at noon CST on Friday, May 21st so act quick!

Giveaway Number Two – The Total Money Makeover

If you’ve read Engaged Marriage for very long, you know that another favorite financial book of mine is The Total Money Makeover by Dave Ramsey.  After all, it was Dave Ramsey who laid the groundwork and provided a lot of the motivation that we used to pay off all of our debt (other than our mortgage).

I want to give away a copy of this life-changing book, and I want to make it a special giveaway for our awesome Marriage Time newsletter subscribers.  Again, if you want to enter the giveaway, I encourage you to sign up for the newsletter.  I guarantee you won’t regret it, but if you do unsubscribing is always as easy as a click of the mouse.

To enter to win The Total Money Makeover, just do the following:

  • Reply to the welcome message email (which contains Marriage Mojo lesson one) you get when you confirm your subscription to the Marriage Time newsletter.  If you are already a newsletter subscriber, just reply to any previous email message and put “TMMO” in the subject line and you’ll be entered.
  • After you reply by email, you’ll get a bonus entry by tweeting the following message: Enter to win a FREE copy of “The Total Money Makeover” from @EngagedMarriage http://wp.me/pEBYt-s3 #giveaway

Again, I will randomly select one winner from all of the entries, and they’ll receive a free copy of The Total Money Makeover!  The contest ends at noon CST on Friday, May 21st so act quick!

Giveaway Number Three – You Need A Budget

In case you missed it, I wanted to remind everyone that we have yet another fantastic financial giveaway going on this week.  Please read my review of You Need A Budget and enter to win your own free copy of the awesome YNAB budgeting software on that post!

Thank you to J.D. Roth and all of the great members of the Engaged Marriage community for your continued support.  Good luck winning one of this week’s special “Get Rich Slowly” giveaways!