Engaged Couple trying to set up budget?

Question

I am trying to discuss with him how to plan a budget but I have no idea how to go about it as we are at different financial levels at this time. I am just about debt free from slaving away at two full time jobs to pay off an incredible amount. I am happy that I reach this point but at the same time I don't have anything saved up except for an EF and a $401k with matching program at work. I am still staying at my job. I make less than my fiancé but have the whole benefits package and incredible health insurance coverage as the company is above market level.
He is a home owner with a crazy mortgage and the house in need of TLC. At this time has no retirement vehicle set up. He does have a good job with dependable income. I want to set up a finance budget that will put each other in the best interest and yet at the same time none of us get the short end of the stick.. We live in California where real estate is beyond belief with high prices

Answer 1

Dave Ramsey has a couple of great books on the subject.. I recommend "Financial Peace" as one of the best. Or go to www.daveramsey.com there is allot of great info there. And stay debt free!!!!

Answer 2

Unless you're planning on making this relationship permanent, you need to isolate your budget from his as much as possible. You need to sit down with your boyfriend and all of the bills, plus pay slips to show income. A bit of simple math will show what percentage of the total income is your income and what percentage is his, this is the basis for your budget. Take all of the bills and apply your percentage to the bill, that is your contribution. For example: if your income is 40% of the household income, then 40% of each bill is your responsibility to maintain the household. When/if you two do separate, you can walk away without any lengthy financial entanglements and you can honestly say that you have been spending ____ number of dollars per month for living expenses. As far as retirement plans and other long-term obligations, the percentage that your boyfriend is saving in month-to-month (the percentage you're paying) could and should be immediately converted into a retirement savings plan. When/if you two make it a more permanent relationship and/or get married, then you can renegotiate the budget, retirement funds and the like.

Answer 3

when i got married we tried to figure it all out and decided it was too much work. We decidede to save one salary and live off the other. Simple plan but it worked. Attack each part of your budget seperately. Get the mortgage at a fixed rate first. He can't have lived there too long. That will start you off on the right path. Then go with the best match plan for 401k. Then the best credit card. Keep it paid off.

Answer 4

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.

To review:

1 - Pay yourself first -- once you figure out your actual expenses and calculate the maximum 401(k) or savings contribution you can afford, have it taken out before it even makes it to your joint checking account. This way there's no will power involved, it just happens automatically.

2 - Pool your resources -- the primary checking account should be a joint account used for resources you'll own in common (mortgage, utilities, groceries, etc.) Use the autodeposit feature at your employer (if available) to take care of the fundamentals.

3 - Keep separate "his and hers" checking accounts so you don't feel like you're always running to your spouse to clear the purchase of a baby-shower gift for your friend or a new pair of jogging shoes.

4 - Use some kind of personal finance software to track not only how much you've spent, but also to project how much you PLAN to spend in the weeks and months to come. The real power of software like this is that it gives you the ability to schedule your cash flow into the future, easily and with a lot of flexibility.

And once again, all the best on your upcoming marriage!

Answer 5

Give DR 10 pts..