How to Budget When Your Spouse Won't: Part 3 of our 10 part budgeting series
Updated post: 11/28/23
Original post: 8/21/22
Table of Contents
How to save money as a couple
Saving is an art and a science. To understand the challenges of saving money, we must look at how money is used in our modern world.
Money management is now primarily done electronically. For most, money is directly deposited into our bank accounts; for some, money is frequently managed from our mobile devices. In other words, cash is becoming invisible.
There is a clear trend line among the age groups that predominantly represent the Modern Husbands community. According to the Federal Reserve Bank of San Francisco, cash use accounted for 19 percent of all payments, down 7% from 2019.
Multiple studies have found that folks tend to spend less when they use cash compared to plastic. The rationale typically stated is that there is more pain to make a purchase when you see cash leave your hands.
How we interact with money is changing in a way that makes it harder to save if we do not change savings strategies. It is becoming increasingly important to understand our psychology of spending and savings behaviors and utilize the digital tools at our disposal as guardrails to reduce the ease of impulsive financial transactions.
If you’re like most of us, you receive payments or paychecks digitally from a direct deposit.
“Among employees who responded to America Saves survey questions about using a split deposit, 95 percent reported that split deposit helped them save more easily and 90 percent said that split deposit has helped them feel more confident about saving money.”
In other words, when folks have money deposited directly into their checking accounts without automating deposits into their savings accounts, they are far more likely to save less.
Setting up a direct deposit is easy. In the earlier post, Tips for How to Save Money: For Couples, we wrote about this. What is important to stress is that you can save more effectively when you split a portion of your paycheck into the checking account you use for spending and then you split a different bank or financial institution that you plan to save each paycheck in a savings account.
This strategy creates a guardrail that prevents you from glimpsing at your accounts on your phone and quickly moving money from your checking account to your savings account.
Where to save money
Our family has many different accounts, accounts assigned toward specific savings goals. We label the savings account after the goal, and we set our savings goals together on a Money Date. We hold our savings in different types of accounts, based on two factors: APY and liquidity.
Higher Annual Percentage Yields (APYs) often come with liquidity restrictions, which means that you may not be able to withdraw your money immediately or without incurring penalties. Here are four account types couples should consider:
High-Yield Savings Account
A high-yield savings account is a type of savings account that typically offers a higher interest rate than a traditional savings account. These accounts can be a great option for short-term savings goals, such as building an emergency fund.
I Bond
A type of savings bond issued by the United States Treasury Department. It is a low-risk investment that pays a fixed interest rate plus a variable rate that adjusts with inflation. I Bonds can be purchased online at the TreasuryDirect website, in amounts ranging from $25 to $10,000 per year. They can be redeemed after one year, but if you redeem them before five years, you forfeit the most recent three months of interest.
Money Market Account
A money market account is similar to a high-yield savings account, but typically requires a higher minimum balance. These accounts often offer higher interest rates and can be a good choice for short-term savings goals.
Certificate of Deposit (CD)
A CD is a type of savings account that requires you to deposit money for a set period of time, such as 6 months or a year. In exchange for leaving your money in the account for this period of time, you typically receive a higher interest rate than a traditional savings account.
Use Raisin
Raisin is a leading financial savings platform that connects users to FDIC insured community banks and NCUA insured credit unions nationwide. Our family uses Raisin.
Savers can access competitive interest rates and the aforementioned deposit products from multiple partner banks and credit unions through the platform. Raisin offers a convenient way to grow your savings without dealing with multiple banks or credit unions.
How to save money fast
Saving money fast requires a combination of reducing expenses and increasing income. Here are some tips on how to save money quickly:
Cut Expenses
Look for ways to reduce your expenses, such as by canceling subscriptions you don't use, cutting back on eating out, or negotiating lower bills with service providers.
Obligating yourselves to high fixed expenses such as a mortgage or vehicle loan can make it hard to ratchet your savings rates up if you're in a jam.
Create a Budget
Make a budget and stick to it. Determine your essential expenses and prioritize them, and look for ways to cut back on non-essential spending.
Use Coupons and Discount Codes
Look for coupons and discount codes before making purchases, and take advantage of sales and promotions.
Sell Unwanted Items
Sell items you no longer need or use, such as clothing, electronics, or furniture, on online marketplaces or at garage sales.
Increase Income
Look for ways to increase your income, such as taking on a side job or freelance work, selling items you no longer need, or negotiating a raise with your employer.
Consider a No-Spend Challenge
Challenge yourself to go a certain period of time without spending any money on non-essential items.
Your financial life in a spreadsheet, automatically updated daily. Build your budget, now.
How much a couple should have in savings
There are a number of factors to consider when deciding how much money to save as a couple. To begin, the couple should assess their current and future financial goals, including short-term and long-term goals. For example, you might want to save for emergencies, retirement, or major life events such as buying a home or having children.
Couples should evaluate their income and job security. Income volatility, that is, monthly changes in income, is as high as 35% for a large group of middle-class folks. Couples need enough savings to smooth out monthly income fluctuations to avoid high-cost borrowing.
The typical monthly cost of expenses should also be a driving factor in how much married couples should have saved. A rule of thumb is to set aside a minimum of three months of expenses if you are a dual-income egalitarian couple. For households with a clear or sole breadwinner, a minimum of six months of expenses set aside in savings is recommended.
Ideas for married couples to manage savings accounts together
Not all couples throw all of their money together. Some choose to keep their finances separate, and others prefer a hybrid model – having a joint account for shared expenses and separate accounts for discretionary spending. Research has found that couples who pool all of their money together have the fewest disagreements about money.
Saving as a couple is not easy. That is why we invested so much time and resources into our Money Marriage U Save course.
Money Marriage U Save: A course for couples who want to spend a little time learning to save a lot of money together. Subscribe to our bimonthly newsletter to receive the course as a gift.
How to invest money as a couple
Your future self will thank you for investing in your future life now. Investing for retirement does not need to be complicated. Here are basic concepts and facts to keep in mind.
Never take investment advice on TikTok, or any social media for that matter. It’s nonsense.
There are several investment options that couples can consider for retirement savings, including:
Employer-Sponsored Retirement Plans
Many employers offer retirement plans like 401(k)s or 403(b)s. These plans allow employees to contribute a portion of their pre-tax income into an investment account that can grow tax-free until retirement.
Some companies automatically enroll their employees into retirement plans. In these cases, retirement account participation rates are 91% under automatic enrollment. However, for those forced to voluntarily enroll, participation is an abysmal 28%.
In other words, if your employer does not automatically enroll you into their retirement plan you need to take the initiative to do so yourself. Do all you can to invest whatever is needed to earn your full employer match, and more.
Individual Retirement Accounts (IRAs)
IRAs are personal retirement accounts that individuals can open and contribute to on their own. There are two main types of IRAs: Traditional IRAs and Roth IRAs. Both offer tax benefits for retirement savings, but the specific benefits depend on the type of IRA.
Real Estate
Investing in real estate, either by owning rental properties or investing in Real Estate Investment Trusts (REITs), can provide long-term growth potential for retirement savings.
Retirement investments should be chosen based on your specific financial situation and goals. It may be helpful to consult with a financial advisor required to adhere to the fiduciary standard to determine the best investment options for your needs.
Start investing as soon as you can. I originally created the graphic below for the post Money Lessons for Kids: Investing to illustrate the magic of compounding. To make it simple – beginning investing for retirement at the earliest age that you can.
If money is tight, coordinate with your spouse to determine how to make the most of the retirement plans available to you.
Don’t be fooled into believing that you can be a stock picker. Index funds outperform actively managed mutual funds over time, so keep it simple. By investing in a low/no fee index fund such as the S&P 500, you will earn the market average and the market average over long periods of time makes millionaires out of a lot of everyday folks!
If you decide to get a financial planner, choose the right one for you.
You can find information about individuals named in SEC court actions or administrative proceedings who had judgments or orders issued against them.
Search your investment professional's background and make sure they are registered. It's a red flag if they're not! You can also check whether they've ever been in trouble with securities regulators.
Investment returns compound, but so do fees! Know what you will be charged when meeting with a financial planner and choosing an investment. These 10 questions provided by the CFP organization can help.
Choosing the correct type of tax shelter to minimize your tax burden is essential and could be worth the one-time fee of an appropriately accredited financial planner or CPA. Below are images illustrating the basics of two common tax-sheltered investment options.
Note: The Husband and Wife Budget Template I built out assumes that any employer based contribution has been deducted from your paycheck and is reflected in the net pay you record using the budget template. This is why you do not see a 401k as an option.
The psychology of saving and investing together
One final tip to help you become a saver and investor. Make good habits apparent and easy.
Schedule autosaves or auto transfers to savings for windfalls such as extra paychecks or tax refunds.
Set up at least one savings account at a different financial institution than where you primarily bank. Make sure it offers the best low/no fee and interest options.
Sign up for “round up” services with your financial institution if they are free. If not offered, consider these services from third parties.
Set up a direct deposit to save a portion of your paycheck automatically.
Budgeting Series Overview
When you plan a budget with your spouse, you are not budgeting with Excel or other tools such as our Budget Template for Couples. You are using these tools. You are budgeting with someone you love and share your life with.
Our free Budget Template for Couples is designed specifically for couples. Each category includes linked graphic-centric short videos to help couples in the budgeting process, providing essential prompts to consider budgeting each categorically appropriately.
This 10-part series is dedicated to helping you work with a spouse to budget together and provide the information you need to make educated decisions with your dollars.
Learn More
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Citations
Merry, Ellen A. “Mobile Banking: A Closer Look at Survey Measures.” The Fed - Mobile Banking: A Closer Look at Survey Measures, Board of Governors of the Federal Reserve System, 27 Mar. 2018, https://www.federalreserve.gov/econres/notes/feds-notes/mobile-banking-a-closer-look-at-survey-measures-20180327.htm
Claanen. “2021 Findings from the Diary of Consumer Payment Choice.” San Francisco Fed, Federal Reserve Bank of San Francisco, 5 May 2021, https://www.frbsf.org/cash/publications/fed-notes/2021/may/2021-findings-from-the-diary-of-consumer-payment-choice/.
Pemberton, Carolyn. “The Benefits of Encouraging Your Employees to Use Split DepositCarolyn Pemberton.” America Saves, America Saves, 12 Dec. 2021, https://americasaves.org/resource-center/insights/the-benefits-of-encouraging-your-employees-to-use-split-deposit/#:~:text=Among%20employees%20who%20responded%20to,more%20confident%20about%20saving%20money.
Toner, Matthew. “How Much Is Your State's 529 Plan Tax Deduction Really Worth?” Savingforcollege.com, Savingforcollege.com, 29 July 2022, https://www.savingforcollege.com/article/how-much-is-your-state-s-529-plan-tax-deduction-really-worth.
Clark, Jeffrey W., and Jean A. Young. “Automatic Enrollment: The Power of the Default.” Vanguard, Vanguard Research, Feb. 2021, https://institutional.vanguard.com/iam/pdf/ISGAE_022020.pdf.
Liu, Berlinda, and Gaurav Sinha . “Spiva U.S. Year-End 2021 Scorecard - S&P Global.” SPIVA® U.S. Scorecard, S&P Dow Jones Indices, Dec. 2020, https://www.spglobal.com/spdji/en/documents/spiva/spiva-us-year-end-2021.pdf
“Epic Issues - Income Volatility - Current Issue - Income Volatility.” Aspen EPIC Dev Site, http://www.aspenepic.org/epic-issues/income-volatility/.