Ask LH: How Should I Set Up A Shared Budget?

Dear Lifehacker, My partner and I want to get our finances in order and create a shared budget we can actually stick to. We'd like a system that both of us can easily use that'll work across our different operating systems (iPhone, Android, Mac and Windows). Can you help us streamline our shared budget so we can get on the same page financially? Thanks, Wannabe Bean Counter

Photo remixed from an original by Leremy (Shutterstock).

Dear WBC,

It's hard enough creating and sticking to a budget when you're one person, let alone two people. That said, working together on your finances is one of the best things you can do for your relationship, and you can create a budget that works for both of you (even if one person is a spendthrift and the other is a tightwad). The key, as with all types of collaboration, is communication. Here are a few tips and tools to help you out.

Step 1: Review Your Financial Situation and Goals Together

The first step is to just sit down together and figure out where you stand financially, as well as what your spending and savings goals are. If money has been a contentious issue for you as a couple, agree with each other at the start to talk openly about money and your spending habits without fear of being judged.

Take a look at the big picture together and discuss what you both want your money to go towards: for example, travelling the world, buying a house or having a child. Establishing and regularly reviewing our financial goals reminds us why we're bothering with all the budgeting and money-tracking in the first place.

Tools: The Financial Goal Worksheet and Financial Priorities Worksheet from Money Management International can help you figure out what you both want and need to achieve financially — or at least get the conversation started.

Step 2: Create a Budget or Spending Plan

Keeping in mind your financial priorities, it's time to create a plan for your savings and spending. The reason people hate budgets is because they're too rigid to follow or time-consuming to set up, but there are lots of different ways to create a budget, ranging from the zero-based budget that accounts for every cent to the classic envelope budget method of divvying cash in envelopes.

Perhaps the most straightforward way to set up a budget is to tally up your income and then subtract your fixed expenses and savings to make sure you're not spending more than you're making. With any surplus, you can allocate the money to discretionary categories, such as dining out or entertainment. Also, for more flexibility, set aside some "fun money" from the surplus for each of you to use on whatever you want — an allowance of sorts for adults!

For an accurate assessment of your expenses, it's helpful if you can both track your spending — every single receipt — for about a month or two. Or you can go through a few months of bank and credit card statements together to see where the money is going. Paper and pen work fine for a simple income versus expenses review, as do spreadsheets (here's a simple budget planner and a much more detailed household budget worksheet on Google Docs). I really like LearnVest's simple yet elegant Budget tool, which accounts for your monthly income, necessary expenses and savings goals (free membership required).

Step 3: Keep Track of Your Spending

With your budget in place, now comes the hard part: following it as a team. Deciding to use a shared bank account and the same credit cards can simplify keeping track of your spending on the shared budget. (Some credit cards also offer helpful categorisation of your spending.)

To keep tabs on your budget on a day-to-day basis, these family-friendly budget apps — that are cross-platform — can help:

Easy Envelope Budget Aid (EEBA) is a great tool designed for shared budgets. It's based on the envelope budgeting system, where you assign monthly and annual budget amounts across different categories and see what's left. The free account syncs the web app with up to two Android or iPhone devices for tracking your spending on the go.

Toshl Finance is another cross-platform (web, Android, iPhone, Blackberry, Nokia and Windows Phone) budgeting app. It features really quick expense input, tags for expenses and great visuals. You can share your account with your family. The best features of Toshl, however, such as adding more than one income, are restricted to the pro account, which costs $20.99 a year.

Finally, You Need a Budget is a robust budgeting tool that works on Mac, Windows, Android and iPhone, with data-syncing across the devices. You can import bank statements, split transactions and easily make adjustments to your budget. However, the software is not cheap, at $US60 (which covers all your computers) and $5 or so for the iPhone and Android apps each (the desktop client is required).

The most important thing is that you both actually use the tool to enter your transactions, so pick one that you both like. Whichever tool you decide to use, be sure to set aside a regular time (perhaps monthly or even weekly) to review your goals and finances together.

Good luck with your new unified financial plan!

Cheers Lifehacker

PS Know of any other cool tools for this job or ways to make a shared budget work? Let's hear them in the comments.

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    You Need A Budget (YNAB) is a brilliant and easy to use program . Can highly recommend it.

      Yep, +1 for YNAB. Been using it for a year and it's excellent. Bear in mind though that the full app only works from a desktop OS (Windows, Mac, Linux) and the mobile apps are only forentering transactions to be synced later to the desktop app.

      Also, make sure the YNAB file is backed up somewhere (we use Dropbox). The developers are working on a cloud version and (hopefully) a full mobile app to easily edit the budget on the go instead of just entering transactions (editing the budget file on an iPad would be great!)

    +2 for YNAB, been using it for a month, its great!

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