Ah, money. For many, it’s a taboo subject, but avoid it too long and you and your partner are likely to end up with it being your biggest stressor. Many different reports list money as the top reason couples divorce, so with that in mind, isn’t it better to have some strategies in place early on in your marriage?
I’m not saying I’m a money expert (I have zero clue about the specifics of most of my investments), so take my advice with a grain of salt. What I can do is balance a budget like nobody’s business. Having some of these strategies in place early on has been critical in keeping money less of an issue for David and I. This is not to say it never comes up – we’re human – but these are my top 10 tips for money management in your first five years of marriage.
1. Talk Often. Talk Early.
If you’re tying the knot, you both should know where the other one stands financially. Who has debt? How much do each of you have in assets? What are your joint expenses? What are your individual and joint financial goals? You need to know both where you’ve been and where you’re going.
2. Make a Smart Budget
Now that know where you stand, make a budget… a smart budget! Yes, I’ve made an acronym for my budget. I’m like that.
S – Simple to use
M – Mindful
A – Adjustable
R – Realistic
T – Timely
I created an excel sheet that took a bit of time to set up in terms of building the formulas, but now that I have it, the budget is simple to use, I can adjust it as our situation changes (maternity leave) and see what kind of impact a big expense will have on our month. What I mean by mindful is that we created our budget being mindful that we knew very little early on about how much we should be spending in certain areas. I based our spreadsheet off of money management expert Gail Vaz Oxlade’s various budget spreadsheets. She believes that to successfully save money, certain categories shouldn’t exceed a certain percentage of your income. For example, your home expenses shouldn’t exceed 30% of your budget. I have a feeling if many people looked at their mortgage… it would probably blow the 30% figure out of the water. She has many free worksheets available here to get you started.
3. Track Your Expenses
You have the budget. Now how do you know what you’re spending. This took David and I – and still does – a while to adjust to using regularly, but we use an app on our phones called Purchase Log. It literally lets you log your purchases by category, so create categories that match those in your budget. At the end of your budget period (we go monthly) you can then export the excel spreadsheet and match it to your budget to see where you saved and where you splurged. It’s often surprising!
4. Save 10% of Your Income Off the Top
My Aunt has had a rule throughout her life that she would save 10% of her income, regardless of the job she was in. I’ve copied this in my life, so what was maybe $10 a week when I worked part time at a dry cleaners has become significantly more now that I’m somewhat established in my career. If you can do this saving through your work, through an RRSP or a matching program, even better. Why? Because you’ll never see the money in your home bank account. If your work doesn’t offer something like this, set up an automatic transfer with your bank to take 10% off your wage the day that it’s deposited to your account. If that money pushes automatically to a savings account, you’ll be surprised how quickly it adds up.
5. Joint Accounts vs. Individual Accounts
I’m a believer in having both. David and I have a joint account where our mortgage and main expenses come out of, and where our paycheques get deposited to, but there’s still something about having your own individual account. It’s important to keep your individual credit ratings, in my opinion. If one partner is carrying debt, student loans for example, you don’t want it to affect the other partner. Joint accounts can be used to pay shared expenses like rent, utilities and groceries, whereas individual accounts can keep your personal RRSPs, savings, etc.
This is such a personal one, so do whatever feels right to you.
6. Buying a House? Put 20% Down
Don’t get me wrong, it can be tempting to be a newlywed and want to buy a house RIGHT AWAY. Here’s the thing – unless you have a sizeable down payment, you’ll be paying more than 30% on top of your house price as interest. That’s insane. INSANE! The benefit of having a 20% down payment is that not only are you paying less in interest over the years, but you also don’t have to get mortgage insurance, an extra cost to your monthly payment.
And here’s another thing on buying a house, stay within your limits! Just because the bank will offer you a larger mortgage, doesn’t mean you should take it. They’ll offer you a mortgage where about 50% of your monthly income would go towards mortgage payments. This basically means you’re going to be house poor. So, bigger down payment and buy within your means. You can always upgrade down the road, but better to start out with an affordable mortgage that keeps things a little less stressful.
7. Babies On A Budget
Having your first baby (if you want kids, that is), possibly in your first five years of marriage, is no small financial undertaking. Walking into stores like West Coast Kids gives me the sweats. No joke. Twenty dollars for a onesie? ONE onesie? It kills me. I don’t care how cute the damn onesie is, you know your kid is gonna puke all over it. People can spend a fortune on their first kid. ALL IN (yes, I calculated it), we spent about $1,800 CAD getting everything we needed for our baby. That includes clothes, bottles, diapers, diaper bag, crib, Baby Bjorn, the car seat and more.
That might sound like a lot, but I guarantee most people will spend more like $3,000 – $5,000 if not even more. It’s so easy to go overboard. Everything seems like a must and man, do brands ever know how to market to pregnant women!
I feel like this could be its own post, but in a nutshell the ways we saved on baby expenses were:
- Let your colleagues and friends know you’re having a kid. Seriously, that easy. Many parents are more than willing to get rid of all their crap. We were given a stroller for free! A good stroller, even. One that would cost about $500 new. Other things we were given by friends and family? A mountain of clothes, a bouncer chair, a bassinet and more! No joke, parents are super generous.
- Buy clothes on Kijiji or CraigsList (whatever your local version is). They outgrow clothes so quickly, chances are whatever you buy secondhand was barely worn to begin with. This is how we got a snowsuit for $5! Bonus – you can resell the items once your baby has outgrown them.
- Breastfeeding and/or Reusable Diapers. While I planned on breastfeeding, it didn’t work out for us. As a result, we spend about $100/month on formula. Once our kid is 10lbs, we’re moving to reusable diapers. Compared to the roughly $1,500 the average baby consumes in diapers per year, we’ve spent $250 for all the diaper shells that will last until they’re potty trained. So, while we’re losing out on breastfeeding savings, we’re going to benefit from reusable diapers. Do both and you’re double winning!
8. Find Your Financial Subject Matter Expert
We’re not all supposed to be geniuses in every area of our lives. As long as you can master your own budget, when it comes to investing, I encourage you to find a subject matter expert! There are plenty of investment companies that can help out. The good ones will work with you on what your financial goals are, what big moments are coming up in your life (kids, buying a house, going back to school, etc.) and help you invest accordingly.
9. Buy Experiences, Not Things
Particularly in your first years of marriage, it’s my opinion that money is better spent on experiences rather than on things. Before you have kids (if kids are in your life plan) is the ideal time to capitalize on your free time. Trust me (!), once you have a kid you’ll realize how much free time you really did have. Spend your money on travel, meals out, sports, adventures, you name it. Anything that gets you and your partner engaged and gives you a shared experience is a memory that will last. The day will come soon enough when you’re either on a tighter budget or you simply don’t have the time. Make the most of it while you can, but obviously don’t go into debt for such experiences. Set a budget line for it in your SMART budget.
10. Have a Rainy Day Fund
Look, life happens. People get laid off, or choose to quit their jobs. Someone could get sick. ANYTHING can happen, so make sure that you have a rainy day fund. Experts advise you have 7-8 months of living expenses in savings. If everyone had this kind of fund in reserve (and few do), it would take a good chunk of stress off of what is likely a trying time.
Bonus Tip! If the Going Gets Rough, Get Help
Back to the beginning about how money is one of the top reasons couples fight. If things are getting tough financially or otherwise, get help. Work with a financial advisor to get your finances in order, but consider couples’ counselling as well. Stress over money will likely bring up more issues than you could expect, so nip it in the butt early, don’t let problems fester. Your relationship will thank you!
Money is such a personal topic for many. I’m not a financial expert by any stretch of the imagination, but these are some of the tips that have gotten David and I through our first five years together. Money is always a challenging topic, but these strategies help us work through financial matters as opposed to letting them strain our relationship.
What money management tips would you add?