I Coached My Wife On Budgeting Before We Were Engaged

by Kevin on January 20, 2010

Before there was a marriage, there was an engagement.

Before there was an engagement, there was a long serious discussion.

Before there was a long serious discussion, there was a budget.

Oh yea, baby. It’s the thing women absolutely croon over.

A True Relationship Test: “Honey, You Really Do Need a Budget”

My wife, then my girlfriend, was always frustrated because she never had any money.

To her credit she never enjoyed additional spending through improper credit card use. She was debt free except for student loans that her parents were helping knock out.

In other words she was spending her paychecks down to $0, but wasn’t going into the red.

Her parents were providing her with some income to supplement money she earned through working on campus and through babysitting. That money paid her rent, utilities, groceries, general shopping, and paying for trips to come see me. We lived two hours apart so you had to factor in gas, eating out money, etc.

Now our recollection of the story is a bit fuzzy. She thought she asked for help, I thought I offered to help. Either way we sat down, opened up an Excel spreadsheet, and developed her first budget. The key here is we worked together. I didn’t force budgeting on her as a command.

The budget was simple: we categorized what she needed to spend money on (rent, utilities, etc.) and where her money was coming from. Simple, but it worked. She had great insight into where her money was going and adjusted some behaviors due to that information.

You’ve got to remember we were just dating. I wasn’t her fiancé. We weren’t married. Money is a taboo subject for many people. I think it is a testament to both of us that we started working to manage our money in a similar fashion while “just” dating. (Not to pat ourselves on the back too much…)

But hey, it worked, she got her spending on track, and as they say… the rest is history.

This simple decision is a huge piece of the foundation of our marriage. We don’t argue over money. We got on the same page early — and now we don’t worry about it!

Curious to know how we manage our money today as a happily married couple? Read on.

How We Manage Our Money

We live off of last month’s income. Plain and simple.

I wrote about living off of last month’s income here:

This simple concept will change your life. I guarantee it.

It isn’t easy to get started. You first have to save up an entire month’s worth of budgeting power. But if you can do that task… everything is so much easier.

Why is living off of last month’s income easier?

You aren’t draining your account toward $0.00. You’ve essentially raised the level of money in the account by a full month’s worth of budget needs. So as you use up money in the month your checking account isn’t drawing closer and closer to empty (and thus closer and closer to overdraft fees).

You’re drawing closer to “empty” — empty for the month. But you’ve got money from that month’s paychecks piling up to buffer your account away from $0. Read the above two posts for a more detailed explanation.

Even putting just an extra $100 in your account today is a great first step. That $100 can save you from overdraft fees and a lot of pain. You can use that $100 as a starting point and build up your account from there.

Upcoming: Managing Money with Tasks

We also have specific money management tasks that we perform on a daily, weekly, and monthly basis. My next article will show you more specifics on our tasks and how we handle managing our money. Stay tuned.

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TheDebtHawk.com January 20, 2010 at 8:11 am

Thanks for pointing out your old articles on living off of last month’s income. Those are really great posts. Keeping that cushion in your checking account can really reduce the stresses of money. That seems like a great first step to financial freedom.

Kevin January 21, 2010 at 8:54 pm

Thanks! I should do that more often. I’ll post later in the month asking if people would want something like a review of the same month from the previous year. Sort of like a “best of January 2009…” post.

Megan January 20, 2010 at 1:28 pm

Wow, that’s impressive! When you think about it, it could have ended very, very badly – what if she thought you were being snarky about her expenses, for instance? (I’m picturing something along the lines of “You’re spending HOW MUCH on clothes/food/going out?!?”) Or, after getting her budget together, you realized that she’s not following it at all?

Kevin January 21, 2010 at 8:55 pm

Absolutely. It could have gone over like a lead balloon. 🙂

Lucky for me it was meant to be.

Vonny January 20, 2010 at 9:49 pm

It’s pretty hard to advise people (i.e. friends) on money issues. It seems kinda nosey and I wouldn’t want to intrude or offend. For a partner that is different because you’re usually closer but I do find it hard to talk to many friends about mine or their finances.
I always spend more than I earn but I know it’s not a usual thing with most people. I think it’s because my personality makes me a big saver. My strategy is kinda similar to saving last months pay. What I do is, I leave a small amount in my regular transaction account (AU$500), then I leave the months budget plus a little extra in a higher savings internet account (AU$3000 which allows instant transfer to the transaction acc), then I take the rest of my pay for the month and put it in another high interest savings that I never touch except for big budgeted expenses (this is the savings for my house). During the month if I need money, I move the money from the $3k acc to the transaction account. At the end of each month, I usually have left over in the $3k acc (similar to last months pay), so the next month i just top it up so that again i have $500 in one acc, $3000 in the other and the rest is savings. This is done as soon as I get my pay so I don’t end up spending what I shouldn’t and i’m saving before i’m spending. I never spend more than $3500 in a month except when there’s a big purchase like bookings for holidays and in that case, I take money out of the big savings acc. The 3500 total, means that I can see when I’m spending more than usual (the money runs down alot lower and earlier in the month). I find that I am never out of money this way and I never spend more than what I earn. Even when I was earning half the salary I do now, I saved a huge chunk of it. I confess I never really “budget” in terms of working out every little cent of what I spend, but I do a budget once every few months to see where I’ve been spending my money and if I look like I’m on track. Because I know how much I have in my account at the beginning of each month, I know how much I spend in total without having to do much paperwork.

Note: that I’m in Australia so it’s all in Aussie $ and this is all personal income because my bf and I manage our incomes separately. Also I get paid once a month – might be harder to do this if u get paid every week but it’s possible if you use smaller amounts and budget for the week rather than the month.

anastasia January 21, 2010 at 11:10 am

I have to strongly support the idea of the extra 100 quidt in your account! In the last couple of months (once I have started budgeting and monitoring my finances) I have coame to realise that we were paying each month overdraft charges that were higher than the actual amount that we have overdrawn by.
Ok, now we are changing the bank, but none the less those extra 100 would have saved me over 200 in charges:-)

Crystal February 9, 2010 at 10:22 am

Our financial life became much easier when we had a 6 month emergency fund, $1000 padding in each of our checking accounts (Chase and ING Direct), and we started living on last month’s money. It took us about a year (2005) to get everything squared away after we got married and we’ve been on track ever since.

We make about $5000 a month after taxes. At the end of our billing month, we pay all of our bills, we pay ourselves (all 6 of our savings goals), and we split the small amount left between our Emergency Fund and our Vacation/Fun Money account.

This system allows us to sleep easy.

Evan February 15, 2010 at 10:24 am

That is a very scary conversation! Did she know how responsible you were? Or were you preaching from a false pedestal sort of situation?

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