Tag Archives | budgeting

Money Management for Newlyweds

Money Management for Newlyweds

Relationships aren’t like they used to be a generation or two ago. The path to a ceremony is a more gradual one, with couples typically living together beforehand and sharing expenses. Women, through both necessity and choice, continue to earn an income after marriage and are confident in managing their own money. The result is that young couples are increasingly managing their financial affairs separately. Making a life-long commitment should be a trigger to review how money is managed within a relationship. Over a lifetime, a degree of financial interdependency can arise, especially if there are children. The ideal outcome is that each partner’s needs and wants are both respected and protected and money is managed effectively within the relationship to achieve common goals.

It is very common for partners to feel differently about how much money should be spent now rather than saved to spend later and how much money should be kept on hand as a slush fund in case of unexpected expenses. Some people are uncomfortable using credit cards, while others feel nervous about having debt. To avoid ongoing arguments about money, there needs to be agreement on these money basics. It is very important that each partner continues to have access to money of their own. There are two ways to achieve this. Incomes can be paid into a single account for joint expenses and goals with a transfer to each partner for personal spending. Alternatively, incomes can be paid to separate accounts with a transfer to a joint account for expenses and goals. It’s really a matter of deciding how much of each respective income should be used for joint purposes. In a healthy, committed relationship, allocating a high percentage of income to joint expenses and goals enables money to be used more effectively.

Comments { 0 }

The ‘As If’ Principle

The ‘As If’ Principle

One of the most useful techniques for planning ahead with your money is what I call the ‘As If’ Principle. It is a really simple technique that clearly identifies in advance whether a specific goal is achievable, while at the same time, helping you achieve it! The time to use this technique is when you have a future goal which has the effect of either reducing your income or increasing your expenses on an ongoing basis. Examples of such goals are:

  • Choosing to retire or work less
  • Sending your children to a private school
  • Preparing for possible redundancy
  • Planning to take parental leave
  • Moving from full time to part time work
  • Taking a job with less stress and less pay
  • Giving up your job to study at university
  • Buying your first house
  • Buying a bigger house with a bigger mortgage
  • Borrowing to buy a car

 Here is how it works, and it really is simple!

Step One: Prepare a new budget for yourself, ‘as if’ you are already taking your planned action; that is, a budget based on less income or increased expenses.

Step Two: Start living according to your new budget ‘as if’ you are already in your goal situation.

Step Three: Save the difference between your current and planned income or current and planned expenses into a savings account.

 This allows you to test your ability to achieve your goal, while adding to your savings. The more time you have to plan ahead, the easier it will be to test your budget, increase your savings and achieve your goal. If you find you are unable to live on your new budget without dipping into your savings, review the cost or timing of your goal and whether it is achievable.

Comments { 0 }