You and your partner need to create a life that will make your marriage work. Sure, you have come from different backgrounds, have separate careers, and even dreams.
Nevertheless, you are in this together! You will fly or sink together. Correct?
And so you need to get on the same page as far as your fantasies go.
I mean what type of life do you and your sweetheart fantasize on? Then, how do you realize your envisaged lifestyle, financially?
That’s where a budget for life events comes in.
Allow me to explain.
What Is Budgeting for Life Events In a Relationship?
Being in love is great.
Earning your own money is fantastic.
But when you are a couple, you need to create a plan touching on BOTH. Your romance will skyrocket and you will meet each other’s ambition.
Most importantly, you’ll have all the answers to major life questions such as:
- Affording frequent vacations.
- Owning a home.
- Raising your kid(s).
- Paying off debt.
- Living decently in old age.
- Making major investments.
- Tackling emergencies (disabilities, illnesses, sudden major repairs)
And whatever else life throws your way!
Here is Jack Lew, the former Secretary of the Treasury:
“The budget isn’t just a collection of (aimless) numbers but (the truest) expression of (y)our values and aspirations”.
In short, drawing up a financial plan to help you secure your later life is fundamental to having a prosperous co-existence as days go by.
Thus, you need to sit down, look each other right into the eye, and talk about how you can utilize your earnings to make life pleasurable for you both.
Well, let’s get into the nitty-gritties:
Steps in Budgeting for Life:
I know it’s difficult at the start. But this is a dragon that you must slay at all costs since looking the other way may come at the cost your eternal happiness.
The name of the game is thus to play it simple. And be strategic. Try these simple steps:
- Share About Your Fears And Yearnings
You or your darling may be coming into the love affair with some skeletons in the closet in form of Secret credit card bills, an old debt that you are still servicing, or knowledge that you’re a lousy money manager.
In such a case, start with confessions. Each of you should lay out all the bones-however stinking they are- on the table.
Also, communicate about any peculiar yearnings that you harbor. Maybe you passionately want to own a private yacht. Or an island. Or go on an around-the-world rendezvous.
This early honesty makes it easier to plan as you can easily come to a consensus on how best to approach them particularly if you admit them as “our” burden rather than “your” burden.
- Agree On Your Life Goals
Now it’s time for you to move into goal setting. Be sober and concur on the direction to take.
First list your life goals (each partner to create own list) then merge and narrow down with an aim of striking a deal on the priorities.
Plus, the date by which you would desire to accomplish each of the events. Remember to mark these milestone dates (MD) boldly in your calendar.
- Estimate The Costs
Now that you have your vision clearly outlined, it’s time to study the numbers.
Obviously, most of your lifelong investments will involve huge cash outlays. And unless you are always swimming in cash, chances are you want to arrive there via making regular small payments.
You next move will, therefore, be to come up with an estimate of the amounts needed to make your dreams a reality.
Then divide this by the number of months remaining until every item’s set D-day.
Assuming you decide to save for your $250,000 dream home (over taking a mortgage) over 60 months, you’ll need to sacrifice an amount of 250000/60= $4166.6667 religiously for the next 5 years.
Work out the relevant numbers for every other event not forgetting the emergency fund.
- Share Your Earnings/Expenses And Balances
Obviously, you want to be realistic so now forecast your total income -current and in future.
Remember to include any bonus incomes that either of you expects along the way, for example, an inheritance.
Also, take a calculator or an excel spreadsheet and compute your total mandatory and discretionary expenses.
An analysis of your total cash in and cash out will give you a rough idea of what you can afford to commit to the set life events.
Sweethearts should be open-minded as the aforementioned calculations may sometimes force a rethink of priorities when it becomes clear that their funds are insufficient.
By now you have everything tabulated nicely so it’s time to get down to action.
- Assign Responsibilities
Marriages run on accountability so it’s crucial for you to assign roles. You’re in a lifelong union and you don’t want anything to put out the fire- not least issues to do with money.
Here’s my advice:
Agree who will follow up payments for what based on your hobbies and experiences. The partner who works in real estate, for instance, is better placed to handle purchasing the family home.
Similarly, the banker girlfriend is in a strong position as far as clearing old debt is concerned. And so on and so forth.
- Review Dates
Arrange periodic ‘life events budget’ analysis dates with the principal agenda being to look at the progress. You will not only review but also tweak whenever necessary.
You see, there is no point in losing sight of the long picture when you can get back on track by cutting down on some expenditure (like holidays) so make adjustments if you feel that you’ve deviated.
If not, look at ways of getting more revenues trickling into the family kitty by engaging in side hustles or searching for a new, better-paying job.
Budgeting For Life Events: How To Meet Your Financial Goals
So, how will you, as life partners, ensure that you meet your lifetime financial goals? Here is a proven master plan:
Whether you are going to operate a joint savings account or separate accounts, start by saving. Under the 50/30/20 rule, experts recommend that you send at least 20% of your joint income to your savings fund (50% covers living expenses while 30% goes to flexible spendings such as movies and travel).
This 20% is the biggest weapon in your race to attain your life goals. Can you afford to save more? If yes, go ahead. Needless to say, the more you can save the better.
The interest you earn on savings may be nothing to write home about. You and your dear can ideally be better off turning over some of your savings to any of the numerous investment opportunities available in our country.
From treasury bills, certificates of deposit (CDs), annuities, and all the way to taking an insurance policy, you are spoilt for choice.
You can, if an opportunity arises, even consider venturing in business that’s agreeable to both of you.
The interest, dividends, or rent (for a mortgaged house) earned will come in handy in your journey to quality living.
· Living Within Your Means
Worried about keeping up with the joneses? Well, take it from me: It’s not worth your time and its draining, not to mention distracting.
Also, forget about the crowd who keeps reminding you about YOLO (You Only Live Once) and their teachings.
Sure, the pressure to loosen the purse strings can once in a while be overwhelming but sweet fruits come to those who stick to their life plan and spend on what they can afford.
· Having a plan
Your plan (budget) is your Google roadmap. Without this, you will be moving round in circles like a headless chicken.
And before you even know it, you are old, tired, and full of regrets.
Ignore everything else and remain truthful to the budget you made above.
Making budgeting a culture is one of the best ways to ensure you’ll fulfill your wildest dreams in a romantic relationship.
For this reason, you can have weekly, monthly, quarterly, semi-annually, annually, and decade-long budgets as you travel towards financial freedom in love.
The other fundamental step is making the budget reviews consistent. This will ensure that you remain on top of things all along.
Finally, give yourself some incentive to keep working hard. This can be in the form of spoiling yourself with an expensive dress or going out each time you attain a milestone.