Cash Flow Planning For A Newly Married Couple
When it comes to managing cash flow as a newly married couple, it is important to understand your goals, how you will track your cash flow & know where your money is coming from vs where it is going. Cash flow management is one of the first steps to financial planning. Why? Well, if you are running a deficit each month (meaning you spend more than you make), it is hard to get ahead. Managing your cash flow so you are spending less than you make, then making the right decisions with the surplus money is how you will get ahead.
What is Your Combined Monthly Income?
Start by listing all of your income sources. This includes both spouses’ salaries, side hustles, rental income and any other sources of money.
Calculate the total household income you expect to receive each month after taxes.
Let’s say you earn $4,350 each paycheck and your spouse earns $5,700 each paycheck. You both are paid twice a month. You have no other income sources.
Take $4,350 * 2 + $5,700 * 2 = $20,100 of income each month, net of taxes
What Are Your Monthly Expenses?
Start with listing out your fixed expenses. These are predictable, regular expenses like:
Mortgage or rent
Utility bills (electricity, water, gas, internet)
Insurance (health, car, life)
Loan payments (student loans, car loans)
Subscriptions (Netflix, gym memberships, Spotify, Apple TV)
Next, list out your variable expenses. These fluctuate from month to month, including:
Groceries
Dining out
Entertainment
Travel and vacations
Clothing
Gas
Personal Care
Gifts
Use tools like Monarch Money or YNAB (You Need A Budget) to track your expenses automatically or use an Excel/Google Sheet to manually categorize your spending.
Set Up a Joint Budget
Some couples prefer joint accounts, others prefer a combination of separate and joint accounts, while some couples prefer completely separate. The key is clear communication about how you’ll handle your finances.
Read more about combining bank accounts here:
https://www.moneymattersfortwo.com/p/how-to-merge-bank-accounts-as-a-newly-married-couple
Create Categories for Your Budget:
Essential Expenses: Rent/mortgage, utilities, insurance, debt repayment
Discretionary Expenses: Dining out, entertainment, shopping, hobbies
Savings & Investments: Retirement, emergency fund, general savings, college savings
Fun Money: Having “fun money” accounted for in a budget is a great way to not feel restricted from enjoying the present.
Setting Financial Goals
Short-Term Goals: These might include saving for a vacation, paying off a credit card, or buying a car.
Medium-Term Goals: This could be saving for a down payment on a home or paying off student loan debt.
Long-Term Goals: Consider goals like retirement, children’s education, and paying off a mortgage.
Prioritize Savings and Emergency Fund
Emergency Fund: An emergency fund is a safety net between your monthly cash flow and having to tap into savings/investments. A great place to start is 3-6 months of living expenses set aside in case of job loss, illness, or other emergencies.
Retirement Investing: Set aside a portion of your income for retirement. If you have the option to invest into a 401(k)/403(b) and/or an IRA, investing into these account types for retirement is a great idea.
Read more about retirement planning here:
https://www.moneymattersfortwo.com/p/retirement-planning-for-a-newly-married-couple
Savings for Goals: Set aside money for specific goals (home down payment, car, vacation). This is money that isn’t for retirement. It is to fund short/mid term goals.
Automate savings as much as possible with the use of auto-transfers. This will help ensure that you prioritize savings rather than spending.
Debt Management and Repayment
If either of you has debt (student loans, credit cards, car loans), list all of them, including interest rates and minimum payments. Build out a plan to help you become debt free. Two common methodologies are the debt snowball method or the debt avalanche method.
As much as possible, try to live within your means and avoid taking on new debt, especially high-interest credit card debt or personal loans.
Once you’re debt free, you’ll have more room for savings, investments and spending money.
Plan for Taxes
If you’re both working, make sure you adjust your W-4s for the right tax withholding. Reach out to your HR department to change your withholding from single filer to married filing jointly.
If either of you has additional income (side hustle, freelance work), you may want to set aside money for taxes. A good place to start is 30% of all revenue set aside for taxes.
Consider contributing to retirement accounts or health savings accounts (HSAs), which can help lower your taxable income.
Set Up a Regular Review Process
Life changes quickly, and your budget should reflect those changes. Set aside time each month to review your expenses and financial goals. As you do this more and more, you can change those reviews to quarterly, semi-annually or even annually. However, when starting out, you’ll likely want to review more often.
If one spouse gets a raise, starts a new job, loses a job, or you have a baby, this is a good time to review/change your budget.
Communication is Key
One of the most powerful things you can do as a new couple with finances is to set aside time to talk about your finances, especially as life changes. Keep the conversation open and supportive. Maybe one person is a spender and the other is a saver. Maybe money is new to one person. Be supportive, understand it will take some time to get used to this new financial set up. But don’t give up!
Sharing your financial concerns, goals, and habits helps build trust and ensures both spouses are on the same page.
Make sure both partners agree before making big financial decisions, like buying a car, going on a big vacation or making a major home improvement.
Cash flow planning is super important because it is the foundation to financial success. If you are constantly spending more than you make as a couple, it will be difficult to get ahead. If you are constantly spending less than you make, but are not sure what to do with the extra money, then you have a missed opportunity to start saving and investing. This is where meeting with a flat fee, fiduciary, independent financial planner can help optimize your new financial life together.
Thanks for reading & I hope you found value in this post.
-Kolin
If you are looking to get organized on your finances, read this post: Getting Your Finances Organized As A Newly Married Couple
Disclaimer: The content provided in this blog post is for educational purposes only and should not be considered as financial advice. While every effort has been made to provide accurate and up-to-date information, the content on Money Matters For Two is based on personal research, opinions, and experiences. The financial landscape can change rapidly, and what may be applicable at the time of writing may not necessarily be applicable in the future.
Any financial decisions you make based on the information provided here are entirely at your own risk. Money Matters For Two encourages readers to do their own research and, when necessary, seek the advice of a qualified financial advisor or professional to ensure that any financial choices are appropriate for their individual circumstances.