Engaged Couple trying to set up budget

[Gruntina]

Broken Arrow - Thanks, I needed to hear that. Sometimes encouragements are needed and this time I did. This board is filled with terrific people! Thanks everyone!

[vishenda]

First -- congratulations and best wishes, both on your upcoming marriage and on getting out of debt!

Now -- continue with your 401(k). Put as much as possible into that and don't take it out till you're at least 59-1/2. You should put at least as much into it as is required to get the maximum matching from your employer, as that's a great way to build for retirement. And best of all, a 401(k) not only comes out pre-tax, but also comes out before you even see it -- so there's no chance you can "accidentally" spend it before you bank it.

Because you say his house needs TLC, you may want to start a second medium-term savings account for home improvement -- but have the money deposited there automatically. If your employers have automatic deposit (and who doesn't?), you can instruct your payroll team to split the deposits into a number of accounts. The idea is, once again, if it goes into the second account it isn't there to be tapped by trips to the ATM or other impulse purchases; put the money in the home improvement account before you even SEE it in the main household budget.

Next, use personal finance software -- I have been member of the cult of Quicken since 2000, and I have to say it's completely transformed the way we budget, manage finances, and keep on top of bills. Not so much because it keeps track of what we HAVE spent, but because I enter "scheduled transactions" for the NEXT two months. I budget that way, so I can see where we have some extra and where we may be tight; if I know about a tight spot six weeks in advance, I can move things around and avoid a problem. And combined with online bill pay, I haven't had to pay a late charge or a bounced-check fee for years. It's like magic.

So with this background, what are your first steps?

1. Figure out how much it's going to cost you both to live in the new house -- total up all your expenses for a typical month. For now, combine your grocery bills but assume you'll get rid of your own rent, water, power, phone, and cable (if you had your own place that you'll be moving out of).

2. Compare that to your combined income -- remembering that you will be able to change your withholding when you're married, and also when you're half-owner of the interest on that insane California mortgage.

3. Now, here's what I believe is the secret to financial happiness for couples. Open three accounts -- call them "his, hers and ours." In the "ours" account, deposit enough out of every paycheck (yours and his) to cover the total you came up with in step 1, plus a cushion to make sure you have enough for months when you go over your cellular plan's minutes or you use the A/C more than usual because of a heat wave.

Then, you have the rest of the money divided among the other two accounts. Have it done directly -- your paycheck into yours, his into his, whatever makes you both happy. The idea here is that you're not responsible to him for what you do with the money in the "hers" account, and he doesn't have to get "approval" to spend the money in the "his" account.

Because there's nothing that makes you feel quite as good as having your own money that you don't have to get anybody's approval to spend.

Now, I did mention the 401(k) and a home-improvement fund, right? You're already participating in your 401(k), but your husband needs to start. If he doesn't have a program through work, he can at least contribute to an IRA; he should do this the same way -- have the funds taken out of every paycheck and held in an account he can use to purchase his IRA. And likewise, figure out how much you can scrape out of the budget to go into the home-improvement fund. Even a couple hundred dollars a paycheck adds up pretty quickly.

Oh, and if at all possible, resist the temptation to take out a loan or a line of credit or anything to do the home improvement. You've seen what it takes to get out of debt; STAY that way.

[Ima saver]

I can understand the feeling of wanting to keep some of your money seperately until you have been married for a while.
My first husband was a spender. He knew we had a savings, but he was always wanting to take the money out to buy something or to gamble.
so I had a secret savings account in my name only for emergencies. It was not much, but it made me feel better.
With Husband #2, I never had to worry about him spending, so we co mingled all the funds. My husband has never once, in 30 years, made a withdrawal from any account we have. He knows nothing about our money and really doesn't care to. I have it all written down in a book so he can handle it, if he ever needs to.
Making a budget does not have to be hard work. Just make a list of all your expenses. always plan for things to cost a little more. I budget $160 a month for electricity because that was the amount of my highest bill.
Remember those once or twice a year expenses, like property tax, house insurance, car insurance and put that money away out of each paycheck. Pay yourself first.

[abowers]

I am engaged and about to be married next year as well. My fiance and I live together, in an apartment, and we are both currently in grad school. We had this money talk a couple weeks ago. I am a spender-turned saver, my fiance is a saver. We split all the bills evenly right now. Neither of us will have a *real* job for a couple years, so there are no 401ks right now, but we've decided that we will put our income into a combined account from which we will draw out the money for bills. We will each get some sort of "allowance" that we can each spend however we'd like each month. We've decided we'd like to have $10k saved up in something like a RothIRA by 2010. (We are getting married in 2007). This is currently based on our small graduate stipends (me = $12k/year, he= $26k/year) plus I do some other stuff on the side like babysit and sell bags I make for extra income. Anyway, that's as far as we've gotten with the money talk, 2 months into being engaged.

[LuxLiving]

gruntina and abowers it sounds like ya'll are headed in the right direction!

I'm putting my vote on co-mingling funds. If you don't trust the person you are about to marry then you have larger concerns than money to be thinking about and I would seriously question whether or not you were with the right person and there would need to be way more pre-marital counseling needed before I would tie the knot w/someone I didn't trust.

My situation is very similar to Ima's. Hubster brings home the check and I manage the money. We have two accounts. Joint and I have one for my side-business. He is listed as POD (payable on death) on my side-account - no fear of him knocking me off as there just isn't that much in there! .

We each get an allowance to do with what we will no questions asked. Each month I report that the checkbook balanced, the bills have all been paid and there is X put back for emergencies. He's satisfied as long as he has his meals regularly, his snack cakes for lunch and a new computer every couple of years! Works for us.

Whatever you decide to do I wish you both many years of happiness!

[vishenda]

Now, here's what I believe is the secret to financial happiness for couples. Open three accounts -- call them "his, hers and ours." In the "ours" account, deposit enough out of every paycheck (yours and his) to cover the total you came up with in step 1, plus a cushion to make sure you have enough for months when you go over your cellular plan's minutes or you use the A/C more than usual because of a heat wave.
Then, you have the rest of the money divided among the other two accounts. Have it done directly -- your paycheck into yours, his into his, whatever makes you both happy. The idea here is that you're not responsible to him for what you do with the money in the "hers" account, and he doesn't have to get "approval" to spend the money in the "his" account.

Hope this helps, good day!

[Gruntina]

My bf likes the idea of having his account for himself, a joint account, and I have my own account to start off with. I am thinking we can use that for the first trial and when things are more comfortable with sharing everything, maybe eventually have all joint accounts. We are not living together yet (soon!) so we are still in the learning adjustment of what it will be like living together and doing things on a day to day basis. I am pointing out (actually stressing out) that I feel it’s important he starts a retirement account ASAP! He thinks he can not afford it because he has house mortgage and major home improvement repairs. I am trying to convince he can still do all of them.

That is a start for us. However, I will not be contributing to his home mortgage and home repairs until officially married. He has no problem what so ever on this because he has more traditional roles and we both are seeking a balance in finance and relationship, not the 50/50% method. Until then I will be saving everything I can.

Right now we are merely doing prep work and research and communication before everything becomes official. I have to admit... it’s so awesome this time around. I am excited to share with my bf and this makes thins so pleasant.

[PRICEPLUS]

I am so truly happy that things are going so well for you and BF! Congrats!!! I hope it becomes even more awesome as it goes along!!!

[Broken Arrow]

Originally Posted by Gruntina

My bf likes the idea of having his account for himself, a joint account, and I have my own account to start off with. I am thinking we can use that for the first trial and when things are more comfortable with sharing everything, maybe eventually have all joint accounts.

I think this is very wise on both of your part. Start with something simple and workable, then expand where you feel necessary as you get a better feel of it later on. Personal financing doesn't have to be a stressful nightmare.

[PrincessPerky]

Congratulations!!!!!

Simple is good, and so is slow, but don't go so slow you fail to mention it and grow..

And talk, talk now, talk again, reaffirm what you think he said, then say it again, write it down...then talk again..if you find you changed your mind or the situation changed, talk again, affirm what you and he said, then say it again, then write it down.....what I am trying ot say is..TALK alot! and listen

and never assume, you know what that makes out of U and me....not that you would but even the best couples have a 'hey I was thinking' conversation where the other says 'thats cool' and plans are made..when thats cool ,meant that is cool, not go cool enough to do.......

[Ima saver]

I like your plan gruntina, start small with 3 accounts. after a few years, you will know what feels right to you.