The Bush Wealth Advantage: Money Issues That Concern Married Couples: Part II

| June 20, 2017

By Kent Patrick | Bush Wealth Management

Money Issues That Concern Married Couples: Part II

Prepare an Annual Budget

The first step in developing a financial future together as a couple is to prepare an annual budget. The budget will be a detailed listing of all your income and expenses over the period of a year. You may want to designate one spouse to be in charge of managing the budget, or you can take turns keeping records and paying bills.

Make sure that you develop a record-keeping system that both you and your spouse understand. Also, keep your records in a joint filing system so that you can easily locate important documents.

  • Begin with your sources of income–list salaries and wages, alimony and child support, interest, and any other form of income that you and your spouse may have.
  • List your expenses. It may be helpful to review several months’ worth of entries in each of your checkbooks to be sure that you include everything. Put all the expenses that are paid monthly into one category, and put all other expenses (every other month, quarterly, semiannually, annually) into another. Some common expenses are:

Savings

Major purchases

Rent or mortgage payments

Insurance

Student loan payments

Car repairs

Groceries

Clothing

Pet care

Tax payments

Utilities

Medical expenses

Car payments

Gifts

Credit card payments

Automobile gas

Alimony/child support

Child day care

Household items

Entertainment/dining out

Personal care/grooming

 

  • Estimate your expenses for each category. How much money do you spend on these items on a monthly basis and on an annual basis? Try to come up with a realistic amount for what you think you will spend in a year’s time. Add another category to the irregular expenses list, and call it Contingencies. This can be a catchall category for expenses that you might not anticipate or budget for. The amount to budget for contingencies should be about 5 percent of your total budget.
  • Add your sources of cash and uses of cash on an annual basis. Hopefully, you get a positive number, meaning that you are spending less than you are earning. If not, review your expense list to determine where you can cut your spending. Consider using computer spreadsheets or programs like Quicken for assistance.

Create a Cash Flow System

After you have developed a budget, you should create a system for managing your monthly inflow and outflow of cash. It is a good idea for both you and your spouse to become involved in this process–at least at first–so that both of you have a clear understanding of the costs of running the family and household.

Cash flow systems like the one described below are simple and painless to operate. Once they are established, you will find that making financial decisions becomes much easier because you have done your homework.
  • Separate your regular monthly expenses from irregular expenses (every other month, quarterly, semiannually, annually) by using a different bank account for each. Otherwise, you may be tempted to use money that has been earmarked for something else. You should limit the number of checking accounts that you have in order to avoid confusion.
  • Each time you get paid, deposit some money into an account for irregular expenses. The amount of money you deposit should be equal to the total amount needed for the irregular expenses, divided by the number of paychecks you each receive annually. In so doing, you will have the money for the outlay when it arises. The rest of your pay should go into your checking account, to be used for regular monthly expenses and savings.
  • One variation to this system of cash flow management is to establish one or two additional bank accounts for one or both of you for personal spending money. Allocate the budgeted amount for personal expenses (e.g., lunches, haircuts, gifts) to this account. This way, you are free to spend the money in this account in any way you like without having to worry about meeting regular monthly expenses. However, all of these bank accounts may have fees.

Lookout for Money Issues That Concern Married Couples: Part III next week.

Securities and advisory services offered through LPL Financial, a Registered Investment Advisor, member FINRA/SIPC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Bush Wealth Management and LPL Financial are separate entities.

Edwards Joins SGMC as Administrator of Physician Services
Are You a Transactional or Transformative Leader?
×

Comments are closed.