5 Common budget missteps for young couples

May 1, 2012 at 4:22 a.m. ET

Most couples start out with the best intentions when it comes to setting a budget, but because they haven’t set one before they may not have a clear sense of what to budget for.

Unhappy young couple looking over finances

Here are five budget hints to alleviate wasted time and money with the most common mistakes young couples make.

Not setting a budget at all

Budget is such an ugly word, isn’t it? Its utterance suggests restrictions, limitations, discipline. Yuck. Budgeting is welcome with the same enthusiasm as the cabbage soup diet. But don’t let all these preconceived notions about a budget keep you from making one. Call it something else if you want, like a financial plan, for example. Whatever you call it, sit down and assess how much money comes in each month, how much money is spent on hard costs (like rent and utilities) and what is left over.

Not setting a realistic budget

Okay, now that you’ve wrapped your head around the idea of a “financial plan,” let’s get real with what to do with money left over after expenses. If that amount is $300, don’t allocate $150 to savings and $150 toward the down payment on a house. Why is this a bad idea? Because if you are like most couples, life has a nasty way of interfering with the best budgets. Review your last six months of credit card statements or unanticipated bills and see how much that equals monthly. A successful budget has to have a miscellaneous fund. If it doesn’t, you’ll feel defeated because sticking to a budget is impossible if you don’t account for unanticipated expenses. If you don’t use the miscellaneous fund one month, put that money in savings so you have it to help cover life’s little unexpected costs.

Careless use of credit cards

We’ve all done it starting out. Christmas comes around and you receive a credit card offer with all kinds of seductive introductory interest rates and reward packages. This is sort of the "which came first, the chicken or the egg" syndrome. If you had a budget (that included setting aside money for Christmas each month) you wouldn’t need the credit card, right? Here’s what young couples need to know. If you use a credit card regularly, you are inviting debt. If you have debt, budgets and saving money become much harder. If you don’t have debt, the money you would be spending on that monthly credit card bill can go into savings. Think of it this way. If you don’t have the money to pay for the expense this month and that’s why you’re using the credit card, what makes you think you’ll have it next month? If you have no choice but to get a credit card to pay for a big unanticipated expense, budget a monthly payment (for more than the credit card minimum) and pay it off as soon as you can. Credit card commercials should have the same slogan as alcohol commercials: Use responsibly.

Not getting help

There is really no excuse for not setting a successful budget these days with the aid of budget calculators and smartphone apps. (Of course, sticking to these budgets is another matter. Smartphone apps can’t help you with that). Don’t be afraid to enlist the help of experienced adults, whether that’s one or both sets of parents or someone at work whose financial decisions you admire. The saving and spending of money, like so many other things, is a tremendous learning curve, so why not solicit the help of those who have already gone through it? If you don't have any financial mentors in your immediate circle, look into adult education programs in your area.

Not saving for retirement

We’re all going to retire. So you can pay a little now or a lot later. Stewart Welch, author of 10 Minute Guide to Personal Finance for Newlyweds points out that someone in their 20s can set aside ten percent of their income, while those in their 30s will have to set aside 12 to 15 percent to retire comfortably. When you’re just starting out, retirement seems like a long way away, so it’s easy to push it down the list of priorities. Just be aware that if you don’t start budgeting for your retirement now, it will consume a bigger chunk of your budget later.

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