Personal Finance

How to Approach a Household Budget for First-timers

Did you just get married or recently move into a new apartment with your best friend? Suppose this is your first time living with someone. In that case, you may be inexperienced in how to start combining finances and sharing a budget. Yes, sharing money is something many people forget to consider when moving in with another human being. And if not done correctly, it can result in many conflicts arising. So before you get excited by the lifestyle you envision you will live together, you may need to determine how you will make that lifestyle financially feasible. Below is a simple but impactful approach you can take to achieving stress-free living through sharing a budget.

Discuss Your Financial Goals: Before you even start discussing how much each person needs to put down on the table, you first need to talk about your household goals. For example, you both may want to have a healthier diet, impacting the type of food you need to buy. You both may want to travel more and need to open a savings account for that. Or you both may want to start a business at home and need to invest in entrepreneurship. These goals are important as they shape your budget and how much money you have access to for spending.

Discuss Your Financial Goals:
Before you even start discussing how much each person needs to put down on the table, you first need to talk about your household goals. For example, you both may want to have a healthier diet, impacting the type of food you need to buy. You both may want to travel more and need to open a savings account for that. Or you both may want to start a business at home and need to invest in entrepreneurship. These goals are important as they shape your budget and how much money you have access to for spending.

Discuss Your Income: You may need to discuss whether it is essential to know how much each person earns.
You may not want to falsely assume that the other person makes over R25,000 and be surprised when they opt for the cheaper grocery items. However, just because a person earns a certain amount doesn't mean that all of that money comes home. If one of you has a child living with the grandparents, money may need to be sent home for food and school fees. If one of you has a chronic medical condition, higher medical aid premiums may need to be paid. Such types of situations do affect how much you can both contribute. But don't let this be something to worry about; there are methods you can use to make to make it work:

• Minimum Amount - you can decide on the minimum amount to contribute. For example, you both agree to contribute R8,000 minimum, no matter how much each earns.

• Minimum Percentage of Income - each person contributes a certain percentage of their income. For example, if one person earns R20,000, they contribute R4,000. And if the other earns R28,000, they put down R5,600.

• Use One Account - this may work if you are married to the person you live with. Have one bank account where all expenses will be paid from.

• Pick a Bill– you each choose what you will be responsible for paying. For example, one person can pay for the food, and the other can pay for electricity, water, and wifi. You can try to balance the expenses so that even though you are each paying for different things, the amount paid is roughly similar.

Discuss Your Household Expenses:
Once you know how much you can both put on the table, you can then look at shared expenses. The first month of living together may be a trial-and-error month as you may not know what to expect. Still, you can always make a rough estimate by consulting with people who live a similar lifestyle to you. Some things may be once-off payments like buying furniture, cutlery, or even a wifi router. So, your budget may need to be flexible to accommodate such things.

Complete transparency is needed when dealing with another person's finances.
There may be a few misunderstandings at first, and the budget might need to be played around with a couple more times. But eventually, you will find a sweet spot in managing your combined household finances. As long as you communicate, you can avoid conflict. You may even be able to help each other save faster and achieve your goals.

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