This is part 2 of a 3-part look at ways to save money as a couple. In the previous post we will looked at whether a couple should have joint or separate bank accounts and how to manage debt. Click here to read Part 1.
Are you Thrifty or a Shopaholic?
It is not uncommon to meet couples who have different cashflow ‘personalities’. Just as we have individual habits for exercise, food, leisure etc. we all have our own way of looking at money and finances. If we think of a continuum – there are those who spend money as soon (or even before) they have received it and those who spend almost nothing and hoard it away.
There isn’t necessarily a problem with any particular personality – spending money is fine (as long as it’s available) and saving money is fine (as long as something is spent in the present and not hoarded away for the distant future).
But as you can see there can be two problems that arise from being at the extreme ends of the spectrum.
For those who are considered shopaholics, they may be selling themselves short on future opportunities, like purchasing a big ticket item such as a car, house or even retirement lifestyle. If they have a major problem with spending it is not uncommon to see shopaholics accrue debts, usually in the form of high interest credit cards. Those shoes that were on sale and “…had to be bought” might end up costing 3 times as much after interest has been accrued over time.
At the same time those who are considered thrifty can often be accused as being cheap by their shopaholic partners. There are some definite virtues in being thrifty – opportunities to purchase big ticket items, ability to live a life without financial worry, retire sooner or pay off a home earlier – all good examples. However, thriftiness for the future should not come at the expense of happiness in the present.
Balancing these two personalities in a relationship can take some work, but is relatively simple when budgeting (considered next) and joint accounts are used. Joint accounts, with separate individual accounts work well in this situation, as each partner contributes to joint expenses as they agree. Any remaining funds in their personal accounts can be spent (or not) as the individual sees fit.
Budgeting – One of the Best ways to save Money!
A discussion about couples’ finances cannot avoid a mention about budgeting. Why is budgeting important? Because it works!
The real value in budgeting is determining in advance where money is going to be spent and then checking how money was spent compared to the budget. A budget doesn’t have to be a morbid affair where every dollar is tracked meticulously – but you should look at why your end of month balances are not matching what you expected to have remaining at the end of month (or week/fortnight).
By determining, in advance, where money is going to be spent, couples can sit down together before expenses arrive and determine how expenses are going to be met. This is a much more productive time to discuss finances.
Waiting for a stack of bills to arrive is not the right time to discuss cashflow.
Budgeting for now and into the future.
Metaphorically, budgeting works like a roadmap of your finances. Sure you can wing it and you might get to where you want to go. Or you can take a little time to ensure your grand plans eventuate.
To keep budgeting relevant, it is important to think of it in terms of both the short and long term. It’s easy to deviate from a budget week by week, because it’s hard to feel the impact on your long term financial position when you do. Going over budget by $10 doesn’t seem like a lot in a week, but make that same decision every week for a year and your long term budget is short $520.
This is part 2 of a 3-part look at couples’ finances. In the following post we will look at saving toward common goals and how to ensure each individual is on the same page. If you haven’t already, check out part 1 where we look at whether a couple should have joint or separate bank accounts and how to manage debt.
At Perron we work with Couples to achieve financial harmony with their finances.
Contact us on (07) 5437 9243 or at email@example.com for an obligation free discussion to see
how we can work with you.