Do you hear the wedding bells ringing? Now that you are in union with your loved ones, not only do you end up with the love of your life, you also are tied up together financially.
You can finally afford a bigger house, better cars, and way more shopping money, right? Not Exactly. Having two incomes in your household have advantages but be wary. This might trap you financially in the long run.
To avoid this, these are steps to manage your now two-income household.
Be Transparent. Review Both your Financial Standing
It may be a sensitive topic to talk “money” with your spouse or partner. But then, if you want to be financially free, it’s a necessary beast you have to face. It’s good to know the financial standing of both.
How much are you earning? Do you have outstanding debts? How did it accumulate? What are your goals for the short-term and for the long-term? Communicate and accept each answer without judgment.
Create a Budget. Talk who Pays for What
Now that you are familiar with each other’s secret financial achievements (or burdens), it’s time to create a budget. Whether both of you have fixed incomes or freelance incomes, you can create a budget for your family. Check this guide for astep-by-step guide to budgeting and investing your income.
Tally your income and expenses. Your income levels might be different, but you can use that to your advantage. Assign for each person what expenses to pay for. Do you take care of the rent and utilities? Does she take care of the food expenses? Communicate which is best.
Also, you can still have financial privacy with this setup. You can open a joint account for joint expenses. And still have individual accounts for your personal expenses.
Battling The Two-Income Lifestyle
After seeing the budget, you might think, this is certainly way more than what we currently have. We can afford so many things now.
Well, that may be true, but couples should not be hasty to swipe their cards to that latest fashion sale. You might get cornered with “two-income trap”.
The two-income trap is when couples inflate their lifestyles so much they absolutely need their two-incomes to maintain it. This may be good, but then when emergencies happen, you can be left bleeding. Couples accustomed to this lifestyle are often times severely hit when one of the spouses got retrenched. And you don’t want that.
Instead of having that more expensive lifestyle, why not use the extra money to pay off outstanding debt, build a more robust emergency fund, or just plain save for the intention of investing.
You will thank yourselves later.
The Goal: Live of on One Income
Ultimately, the goal is to live off with just one income. Choose the higher of the two incomes, and strive to limit your spending to that one revenue. And use the lower salary for your financial goals.
This will make you more financially stable when emergencies or layoffs happen. But just in case nothing bad happens, you’ll be secured with more money in investments and savings.
Financial Freedom? It can be achieved! Cheers!