Vernon Sikes Herald ColumnistThe young man was on the right track, all right.
He was having a fine time boasting about the fact that he and his girlfriend were to the nitty-gritty of their relationship: the discussion of how they're going to handle their money.
“Yeah, we've been talking about how we're going to handle our money. What's hers, what's mine and what's ours,” his mouth said, while his eyes said, “I'm not at all sure if it's going to work out.”
“Nothin' to it!” his friend interjected. “Just add up how much you have to spend and don't spend any more than that.”
While the friend went straight to the bottom line of financial peace, the method used to achieve true financial contentment is as varied as the stars.
Disagreements over money among couples are among the top causes of divorce. If every couple had the wisdom to come to an agreement over how they were going to handle their finances BEFORE marriage, divorces would most likely take a drastic plunge.
But like good food and wise decisions, financial saavy is often wasted on the young.
Whether a person is wealthy or poor, everyone should observe some constraints and concessions when it comes to handling their money. Reckless and unplanned spending eventually leads to disaster whether the wanton spender is an individual, a club, an organization or a government.
One principle in budgeting is to give every dollar you have a place to go before you begin your spending. In other words, set amounts should be designated for housing, for food, for utilities, for automobile expenses, for insurance and the like.
When the money runs out of a category, you stop spending, and that's what leads to nights of peaceful sleep.
By categories, the national average budget category percentages of net income are:
Housing (mortgage, rent, real estate taxes) – 24 percent
Utilities (water, power, garbage collection) – 8 percent
Food – 14 percent
Clothing – 4 percent
Medical and healthcare – 6 percent
Donations and gifts to charity – 4 percent
Savings and insurance – 9 percent
Entertainment and recreation – 5 percent
Transportation (car payments, gas, maintenance) – 14 percent
Personal, debt payments, miscellaneous – 12 percent
If a family's total monthly income is, let's say, $4,000, the budget should earmark $960 for housing, $320 for utilities, $560 for food, $160 for clothing, $240 for medical care, $160 for charitable contributions, $360 to savings, $200 for entertainment, $560 for transportation and $480 for miscellaneous expenses.
When the money in a particular category gives out, it's time to back-off the spending. Often, however, you'll find extra funding for the depleted category by going to another category that hasn't been tapped as much. If you've run out of entertainment funds, perhaps your miscellaneous category is still relatively flush with cash and it's almost the end of the month.
Just few more principles will promote years of marital bliss:
In a successful marriage, there is no such thing as “his money” or “her money.” It's always “our money” regardless of which one actually earned it.
Never hide money from your spouse.
Always be completely and totally open with your spouse about your family's financial picture, i.e. don't hide bills or purchases. Set a dollar amount as the top figure you can pay without consulting with your spouse.
If couples plan their spending together and stick to the plan, that's a fail safe way to guarantee a much more peaceful life.