How To Create A Budget and Savings Plan With Your Partner

If you're married or in a long-term committed relationship, chances are you've already discussed creating a joint financial plan together. 

But if you haven't yet created one, now's the perfect opportunity! 

Here are some tips on how to do just that.

Understand Financial Expectations

Before you create a budget and savings plan with your partner it’s important to get on the same page. 

To do this, make sure that you establish key financial expectations together such as your expectations about debt, retirement plans, children, and lifestyle. 

Set S.M.A.R.T. Goals

It’s important to set up specific goals with your partner about what you hope to accomplish financially. 

SMART goals are specific, measurable, attainable, relevant, time-bound goals that you set for yourself in order to achieve success. 

They’re also known as SMART goals because they have the following characteristics: 

• Specific – The goal must be clearly defined so it can easily be measured. 
• Measurable – You need to know how much progress has been made towards achieving this goal. 
• Attainable – Your goal should not seem impossible or unattainable. 
• Relevant – It is important that your goal aligns with what matters most to you. 
• Time-bound – Set deadlines for when you want to reach your goal.

Once you’ve set up your smart goals you can begin the step-by-step process of establishing your budget and savings plan. 

Figure out your after-tax income

The first step of any budgeting process is figuring out exactly where all your money comes from. First, make a list of all of your income from your primary employment or business. 

Next, make sure to take a tally of any other income sources like investments or recurring passive income. 

Add these sources of income togethe to establish the average monthly amount earned from all sources. 

Once you figure out your total monthly income, subtract the average taxes owed. Then add back in any deductions that reduce taxable income before calculating net pay. You can take a shortcut with this by looking at last year’s tax return if your income this year is similar to last year. 

Then come up with your yearly income by either looking at last year’s tax return or multiplying your average monthly income by 12. 

Do this for both you and your partner. When you’re done you’ll have your yearly after-tax income. 

Add Up Mandatory Expenses

Once you’ve figured out your after-tax paycheck, you’ll need to deduct mandatory spending such as: 

• Insurance premiums
• Student loan payments
• Mortgage/rental costs
• Car payment
• Credit card debt
• Debt interest payments
• Medical bills and expenses
• Childcare costs
• Car maintenance
• Educational costs
• Groceries and non-optional food costs

These items will likely take priority over discretionary spending since they aren’t optional. 

To make sure you’re tracking everything correctly, use a spreadsheet program such as Microsoft Excel or Google Sheets to keep tabs on your finances.

Do a deep dive into current spending habits

Next, calculate your discretionary spending. 

Now that you know how much money you bring home each month, you’ll want to start adding up all of your non-mandatory expenditures. 

Start by listing down all of your recurring bills including: 

• Utilities
• Cell phone service
• Cable TV & streaming services
• Internet access
• Gym memberships
• Subscriptions
• Eating out & Entertainment
• Vacations

Be sure to include anything else that isn’t covered under mandatory expenses. 

Make A Plan To Pay Off Debt

There are many great resources you can utilize to help you pay off debts in a manageable way. 

Two of the best-known strategies to pay down debt are the Debt Avalanche and the Debt Snowball. 

Debt Avalanche

With the Debt Avalanche Method, you make a list of all your debts and their interest rates. While making minimum payments on all of your debt you then apply any extra funds to pay off the debt with the highest interest rate first. 

This method will result in paying less interest over time. 

However, it can take more discipline as you may not perceive as much progress toward paying off your debt if you are focused on paying off a larger debt first. 

Debt Snowball

With the Debt Snowball Method, you make a list of all of your debts in order of the smallest to the largest. While making minimum payments on all of your debts you then focus any extra funds on paying down your smallest debt first. You then work your way up to progressively larger debts regardless of interest rates. 

This method can be incredibly motivating as you may see entire debts disappear quite quickly. 

However, you may end up paying more in interest rates over time than with the Debt Avalanche Method. 

Calculate What You Need to Save

Now that you’ve calculated all of your expenses, you’ll next want to set aside some funds for saving purposes. 

This is the time to go back to the S.M.A.R.T. goals you established initially with your partner.

Once you know how much money you make, and how much money you’d like to save, how much you have in debt, and your expenses you can make a plan for how much money to save each month.  

Now that you know how much you’d like to have in savings and by when you can set up some smart savings habits. 

Prioritize creating a household emergency fund

If you don’t already have an emergency fund in place, now might be the perfect opportunity to get started. 

Create a separate bank account specifically for emergencies. 

If possible, try to save around six months’ worth of income so that you can avoid dipping into your retirement nest egg during tough financial periods.

Set Aside Money Each Month

After calculating what you need to pay towards debt, prioritize setting aside money every single month either in savings or retirement accounts.  

This ideally means putting away anywhere from 10% - 20% of your monthly earnings depending on your situation. 

The more you put away, the faster you’ll see results!

Automate your savings

The easiest way to do this is through automatic transfers between checking accounts. 

Set up one account designated solely for savings and another account dedicated to paying off debt. 

Transfer a specific percentage of your paycheck from your checking account to your savings account each time you get paid. 

Start Small & Build Up From There

It may seem like a daunting task at first, especially when you consider just how many different areas of your life require funding. 

But remember: small steps lead to big changes. 

So instead of trying to tackle too much at once, focus on making incremental progress until you feel comfortable enough to move onto bigger goals. 

Start with small savings goals and move onto bigger ones with time. This might mean only saving $5-$10 per week at first and eventually moving toward saving 20% of your income. 

Establish Your Budget

Now that you have your after-tax income you can subtract your mandatory expenses from it and your minimum debt payments each month. 

Next, take a look at your savings goals and begin to make a plan for creating a basic emergency fund first. 

Next, focus on paying off debts with a debt payment strategy as outlined above. 

You’ll also want to negotiate discretionary spending with your partner at this time and create a budget and plan for what you’ll spend money on. 

Your budget can be highly reliant on your financial expectations. 

For one of you, the priority may be to pay off debt as soon as possible, while for the other it may be to have a comfortable lifestyle while carrying a certain “acceptable” amount of debt. 

It’s important to negotiate these expectations ahead of time before setting your budget and savings plan in action. 

Next, focus on bigger savings goals like retirement, your children’s college education, and investments. 

Dave Ramsey has a great concept called the 7 Baby Steps that he suggests when trying to determine whether to focus on saving or paying off debt. 

Dave’s 7 steps include: 

1. Save $1,000 in an initial emergency fund.
2. Pay off all non-home debt.
3. Create a 3–6 months emergency fund.
4. Put 15% of your income into retirement.
5. Create a college fund for your children.
6. Pay off your primary home mortgage.
7. Build an investment portfolio and build wealth.

Schedule a Weekly Money Date

One of the best ways to ensure that you stay focused on your long-term financial goals is by scheduling weekly date nights where you discuss any major decisions regarding your finances. 

Having these conversations regularly helps you maintain accountability and ensures that you remain committed to achieving your financial goals.

Stuck on getting started with Money Dates then let The Couples Guide to Financial Intimacy help you move in that direction.

Would you like more 1 on 1 support? Then perhaps Therapy Informed Financial Planning is for the two of you. I invite you to schedule your free 30-minute discovery call today.

Wishing You Healthy Love and Money,

Ed Coambs

MBA, MA, MS, CFP®, CFT-I™, LMFT

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