Budgeting For a Blended Family
You’re married with a brand new family. So, first, congrats!
Second marriages often provide opportunities for wonderful new family adventures, and they can also create new challenges. It’s not uncommon for families—blended or not—to have issues around budgeting and other financial matters.
The difference-maker can be how the couple deals with budgeting issues, with a 2018 SoFi survey suggesting that couples who openly and honestly discuss financial matters may be choosing the easier, less stressful budgeting path.
So, what are the challenges specifically connected to blended family finances? How can couples work together to create a budget that works well for everyone involved? This can be challenging for marriage partners to figure out, especially if families coming together:
• came from different income levels
• budget, save, and/or spend money differently
• have different philosophies about money and children, including allowances
In fact, even if both halves of the merging family used satisfactory money management strategies in the past, this may not be enough in the new family life. Strategies may simply not be the same after a family is blended together.
Fortunately, though, there are numerous strategies to help create a successful budget for a blended family.
Joint Bank Accounts
When blending a family, it’s important to make decisions about what parts of your financial lives will be combined and what will be kept separate. Will you have joint bank accounts? Or will each spouse have a separate account, paying his or her share of bills? Or will both partners have both joint and separate accounts?
There are pros and cons to each approach. Joint accounts, for example, can be helpful to:
• save for shared goals, perhaps a bigger house or a dream vacation for the family
• pay for shared expenses, such as mortgage or rent payments, utility bills, and insurance payments
• get a clearer picture of where each person stands, savings-wise
• take advantage of benefits, such as a fee-free account (balances might be higher when both parties contribute to the same account)
• create a sense of teamwork, an intangible benefit that may be quite valuable for a newly blended family
Overall, joint accounts can create a more convenient, streamlined way of managing a blended family’s budget. With this type of account, though, either party can typically withdraw funds without the other person’s consent, meaning all of the funds, not just half of them.
It can also be hard to surprise a new spouse with a gift if he or she has access to all of the account information. This is why some couples choose to have both a joint account and separate ones.
Examining Values About Money
When discussing financial issues with a new spouse, this conversation may come with significant emotional baggage. For example, one or both parties may have been single parents for quite a while, therefore responsible for making all of the family’s financial decisions.
When it’s time to start making those decisions with someone else, it can be a tough transition. Or perhaps if there was a difficult divorce or other troubles in the previous marriage, there may be trust issues around money.
As yet another possible issue, one or both partners may be bringing significant debt into the marriage, whether that’s credit card debt, student loans, child support payments, spousal support payments, or something else. Clear and open communication between both partners can be very helpful when sorting through money values, plus financial goals and dreams.
Setting Up a Blended Family Budget
As a foundation step, it can be helpful to delve into how much of the family’s income is spent monthly. SoFi Relay makes it easy to track cash flow and spending habits, helping to streamline the saving process—all in real time.
Typical expenses to track include housing costs, utilities, health care, insurance, credit card expenses, student loan payments, groceries, transportation costs, child care, entertainment, clothing, and so forth.
When creating a blended family budget, a good rule of thumb is to put:
• 20% of income towards savings
• 50% towards necessities
• 30% towards discretionary spending
Another approach is to list all income sources and monthly expenses and compare the two lists. Ideally, income will be higher than the expenses, and both partners can discuss how to use the difference. Whatever approach works best, the key is to thoughtfully make the budget and stick with it.
Weekly meetings can help, using the time to deliberately focus on upcoming bills and decide whether the budget needs to be adjusted. It may also help to track the progress on long-term financial goals.
Many people suggest putting three to six months’ worth of living expenses in an emergency fund in case of an unexpected illness or injury, home repair, or job loss.
If setting this amount aside is too difficult, you may opt to put aside whatever seems reasonable for unexpected expenses. You may wish to include investing for retirement as well, even if that seems far away.
Here are a few more tips for managing a blended family’s finances:
• Consider after-tax income only. If a partner owes or receives monthly child or spousal support, be sure to account for that as well.
• Record exact spending amounts. The more accurate the budget, the easier it is to determine what’s helping or hurting the family’s finances, and adjust appropriately.
• Consider opening a separate account to save for big goals, such as the down payment on a car or house, or nest egg funds.
• Watch those seemingly small expenses, whether that’s ATM fees, ride shares, an extra cup of coffee, and so forth. You can keep all receipts and record those expenses in SoFi Relay.
• Save for inevitable expenses, whether that’s Christmas gifts, birthday presents, or something else. As a blended family, there are more loved ones to surprise with special gifts.
• Trim the fat wherever possible, such as unnecessary online subscriptions.
• Be consistent and persistent.
When it comes to saving, it can help significantly to see this process as an opportunity to work toward and enjoy family goals, rather than as a necessary evil. If the entire family participates, momentum can occur more naturally, and everyone can celebrate together.
Avoid comparing finances with others. Everyone’s situation is unique and requires tailoring challenges, goals, and dreams. Using the “should have/should/will” formula might help with money management.
For example: “I should have created a better budget earlier in life.”
Might turn into: “I should create a better budget.”
Finally, transform it into a “will” statement: “I will create a better budget.”
You could make a list of “should have” statements and follow this process for each of them. And, because children tend to follow the lead of their parents, this can help set the stage for how they perceive saving and spending.
Put your financial philosophy into practice around them as well. Instead of going out to restaurants every weekend, for example, make Friday night an interactive cooking night with the family. Get the kids involved and create silly faces on pizza bagels, using sauce, pepperoni, veggies, and cheese as artistic tools. Instead of going out to blow money at the arcade, make Saturday night the time to play age-appropriate board games as a family. The opportunities are endless with the right money mindset.
Another option is considering SoFi Money® when creating a new family financial plan. This is a cash management account where you can save, spend, and earn all in one place. You might also consider using SoFi Relay to keep track of your spending and investments across all accounts. Our goal is to eliminate as many fees as possible. That being said, our fee structure is subject to change at any time.
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