Managing finances in a relationship is hard isn’t it? Financial issues are one of the most common factors leading to divorce. Two different people can have very unique views on money and partners in a relationship are no exception.
Everyone values money a little bit differently. We all spend money in different ways. You might prioritize good food while I might prioritize expensive clothes. Couples have different priorities when it comes to money and if those aren’t communicated then its easy for this to cause resentment, anger and frustration between partners.
My wife Sue and I have been managing our money together for 10+ years and I feel we’re pretty successful at it. We still have disagreements, and we each manage our money completely differently, but we have a good system in place to ensure we’re communicating regularly about our finances.
Recently Sue and I were on the Because Money podcast talking about how we manage money as a couple. Sue and I talked to Sandi Martin and John Robertson about a few of the things we do on a regular basis to make money less stressful for us as a couple. You can listen to the whole podcast, but I’ve summarized a few of the main things below.
Whoever invented the ‘latte factor’ or ‘avocado toast’ created a very skewed sense of how to save money. Saving money by cutting back on coffee, restaurants, going out, vacations etc are very difficult ways to save.
They’re difficult because they’re very visible and often very social occasions… plus they’re a lot of fun, so why cut back there?
Hidden ways to save, on the other hand, are the best ways to save. Saving money on things that no one sees, or cares about, makes it easy to save.
This is the secrete to saving money, save money where no one notices.
What someone considers a “hidden way to save” will be different from person to person. Some people really care about certain things, it all depends on what they value. Maybe they really value the car they drive, the house they live in, or only eating free range/grass fed/organic foods, but for many of us these are easy ways to save money, if you do it right.
These are five hidden ways to save money. No needs to know how much you pay for these monthly expenses and saving money in these area’s can be very easy.
Budgeting is one of those financial skills that can transform your life. The difference between a solid financial situation and a complete financial disaster can be as little as a few percentage points of your income. Even a few $’s in the right direction, over a long enough period of time, can have amazing results.
The key is to create a budget that works for you and what you value.
Everyone is unique and so is their spending. What I value is different from what you value and our spending will reflect that. Even with the same income, in the same city, we will have vastly different budgets because we value things differently. Making a budget involves understanding those differences and understanding what you value.
It also involves understanding your habits.
Not only do we value things differently, but we also have different experiences. Our spending habits are the result of years and years of experiences with money. Some of these experiences begin at a very young age. The way our parents spend money will impact how we spend money. Sometimes in a good way, sometimes not. Friends, family, coworkers, they all impact our spending habits. You can change habits but fighting too many bad spending habits at one time will lead to budgeting disaster.
It’s good to start slow. Build a budget one step at a time. Practice each step before making your budget more difficult. And if you need help, just ask. Partner up with a friend and hold each other accountable. Or seek out a financial coach to help guide you through the process.
Routines add structure and discipline to our lives. They make things easier. When we’re in a good routine things seem faster, easier and more efficient. We know exactly what to expect and how to do it.
Creating a routine for your finances is a great way to add structure and discipline to your financial life. It makes you more efficient and happy with your finances (and who doesn’t want that?).
Anyone who has spent too much time managing their finances knows how quickly you can feel burnt out. This is called budget fatigue and it’s a very real problem. It’s when you spend so much time and effort managing your money that you end up making worse spending decisions because you’re just so tired.
Having a routine helps you manage your finances more efficiently. It’s one of the easiest ways to improve your finances for the long term. Your routine can include things like budgeting, investing, saving etc.
For years and years, we’ve been on a 4-month personal finance routine. We review our finances only three times per year. How’s that for efficient!
We review our finances once in mid-January, once in mid-May and then once in mid-September.
During these reviews, we sit down and look at our spending, our budget, our investments, our contributions and we see if we need to rebalance or not. We also talk about the next 4-12 months, what special expenses we can expect, and if we should make changes to our regular budget.
During these financial “check-ins” we also review our long-term financial goals. We check to see if we’re on track or if we need to make changes to either our expectations or our savings rate.
Having this routine has improved our personal finances immensely and I recommend everyone create a routine for their finances so you can experience these benefits too.
There are four main ways our personal finance routine has helped improve our finances…
How many transactions to does the average person make per day, one, two, three or more? For the last eight months I’ve been averaging about 1.3 transactions per day but I suspect the typical person averages closer to 2.
Since the beginning of January I’ve been religiously tracking my spending. This has been a departure from my normal budgeting routine but it’s been extremely interesting because of how much detail I now have on my spending habits.
For the longest time, I was an anti-budgeter. I would set a savings goal and then each month I would put away enough money to cover my savings goal plus any fixed expenses, then I would leave the rest in my checking account and spend freely. Over time I created good spending habits and most months I would have a bit left over.
Personally, I found the anti-budget to be a great balance between managing my money and my time. I could hit my financial goals but didn’t have to spend much time tracking expenses.
This all changed when I came across this super simple way to track your spending. You don’t need to give Mint all your passwords, you don’t need to pay YNAB a monthly fee, all you had to do was use Google Forms and Google Sheets to setup your own semi-automated spend tracking.
Adding a new transaction didn’t mean opening a spreadsheet, you could do it right from your phone. Tracking your spending took just 10-15 seconds after each transaction.
So, since January I’ve been tracking every transaction I’ve made and one thing I find super fascinating is how many transactions I make.
Where do I want to spend my time? Not managing my finances, that’s for sure.
If you spend more than 30-minutes per week managing your finances then you need to simplify! That includes budgeting, paying bills, making debt payments, and moving money around.
Spending a lot of time managing your finances can actually be bad for your net worth. It zaps your energy and leads to bad financial decisions. Spending a lot of time on your finances can lead to budget fatigue and makes it more likely that you’ll make an impulse purchase.
Simplifying your finances doesn’t have to be difficult. It might require a bit of time up-front but once you’ve made a change you’ll immediately start to see the benefits.