If you’ve ever had that unpleasant money conversation with your spouse, significant other, or even children about how much things costs and where money is getting spent, you’re not alone. Whether it’s a discussion or an argument, proactively getting on the same page with your family unit about spending is a topic that tends to get avoided.
Even just the word “budgeting” can trigger a range of negative emotions depending on how a couple chooses to approach the conversation or implementation. If you’re like most couples, one person is often labeled the “saver,” while the other is coined the “spender.” The saver can make the spender feel bad about spending and the spender can make the saver feel bad for saving.
Budgeting, which is typically a backwards-looking approach to estimating future spending based on past spending, can be incredibly uncomfortable for all if it involves accusations, criticisms and finger-wielding for past spending decisions.
But what if budgeting didn’t need to be a dirty word in your household? Here are a few ways to change the conversation about budgeting into a positive and effective experience for everyone involved.
Schedule a conversation instead of having an argument
Rather than having the conversation as a reaction to a bill or upcoming large purchase, schedule time on your calendar to meet with your spouse to talk about money. By scheduling a money conversation while you’re both in neutral, this can allow you to talk openly about what you’d like see happen in the future rather than focusing on past missteps and frustrations.
Both of you need to feel you can talk openly and honestly about money without being attacked or judged. Proactively scheduling a money conversation where you can meet in the middle and address any range of topics that are important to you. Both of you should come prepared with a list of things you want to discuss and be as equally prepared to listen as you are to engage in the dialogue. Consider having these conversations monthly or quarterly so you remain on the same page and keep the lines of communication open.
Track your spending with automation tools
One of the most painful parts about traditional budgeting is that it requires you to look back a month and recalculate everything you spent. While it’s important to know where you’re spending your money, there are plenty of applications available to you that can automate this part of the process so that you don’t have to. Mint.com is one such example that allows you to safely connect all your financial accounts and will organize your spending categories for you and send you a report. After as soon as two months, you’ll be able to observe spending patterns and see which categories gets the largest portion of your income.
Focus on values
Rather than nit picking expenses and how expensive life is, focus your attention on what you and your spouse want and what you both value most. Regardless of what you are spending money on at the moment, what would you like to spend your money on? Maybe it’s more time together, taking a vacation, making improvements on your home, getting a different vehicle, saving more for your children’s education.
Now, look back (for just a minute) at your past spending over the last two months. Where is your money going and does it align with your values? If it doesn’t, now you can quickly look forward again and make some decisions about which areas consume a lot of your capital that you’d much prefer it didn’t and explore what you can do to change that.
Take action, together
Ultimately, the most important aspect of any budgeting exercise is coming together to agree on some action steps to get you closer to where you’d like to be financially. One of the best ways to move forward and better understand your spending is to break it down into non-discretionary and discretionary buckets.
Non-discretionary items are your fixed, must pay bills, such as: rent or mortgage, insurances, utilities – this monthly spending tends to remain constant every month.
Discretionary spending breaks down further into savings and variable buckets. Savings include: retirement, education saving, project saving, emergency fund, vacation fund – whatever it may be for you. These tend to be future planning type accounts so you can save the money necessary for you to accomplish something that is important to you later.
With the money that’s left we allocate toward the discretionary variable spending on categories that fluctuate monthly depending on the market or season, such as gas, groceries, gifts, meals, etc. These are the monthly expenses you always have, but they range in amount depending on other conditions. Some of these expenses can be limited if necessary if you are trying to put money towards other things instead. Maybe you limit how often you eat out for the next couple of months so that you can save more money for that upcoming vacation as an example.
When budgeting is approached as a way to help you better manage your cash flow, it offers a much better application for your life that can lead to greater financial fulfillment all around.