Tips for a productive household budget meeting

by @PaulFiarkoski

After seventeen years of marriage and countless arguments over money, my wife and I recently got serious about getting out of debt. We’ve been following the Dave Ramsey Total Money Makeover program where you take a series of steps with the ultimate goal of becoming completely debt free. First you cut out all frivolous spending and set aside $1,000 in savings. Then you start attacking all your debt from smallest loan to largest. After all your unsecured (no collateral) debt is paid off, you get aggressive with investing.

One of the keys to cutting out frivolous spending is to hold a monthly budget meeting, presumably with your spouse. It’s a good idea for domestic partners and single people too. We’re prepping for our third monthly budget meeting and are really starting to see some results – mainly in the way of fewer arguments over money.

Below are some tips that we have found help us have successful budget meetings and outcomes. If you have questions, post them in the comments and I’ll respond the best I can.

Set some ground rules
Create some simple ground rules to review at the beginning of each meeting. You should read them out loud before getting into the money discussion. We have found it’s also good to pray before starting the money talk to get our heads and hearts in the right place.

Here are the ground rules we abide by:

1. We’re a team and we’re doing this activity for a mutually beneficial outcome.
2. It’s not about judging or finding fault; it’s about being responsible stewards with the gifts God blesses us with.
3. Each will listen and respect the other’s feelings and opinions.
4. We are not perfect and we won’t do it perfectly but we must get better over time.

Have an agenda
Make the best use of your time by sitting down with specific talking points and outcomes in mind. We use the same agenda from month to month. Below I have outlined the key things we talk about.

Track progress with net worth
Having been a registered financial consultant for over a decade, I learned that the best way to measure financial progress is net worth. Net worth is a pretty simple calculation; although gathering up the numbers can be a chore.

To calculate net worth, add up all your assets (what you own) and subtract your debt (what you owe). Include everything – home, cars, timeshares, retirement accounts, etc. On the credit side include all your debt, even credit cards and no short term furniture loans, etc.

Here is what we include in our net worth calculation:

Net Worth = Assets – Liabilties
Assets
Checking
Savings
Health Savings
Retirement account
IRAs

Liabilities
Mortgage
Overdraft line of credit
Medical bills

Pulling together the net worth data takes some time, but talking about it takes only about a minute. What I do is gather up the data and have it all set to go in a one page report prior to the monthly meeting with my wife. Websites like mint.com simplify this monthly task by aggregating multiple financial accounts into one application. Many banks and credit unions now offer these online aggregation services too.

The idea is to look at your net worth on a regular basis to see if it’s increasing or decreasing. It’s sort of like using a scale to keep track of weight loss.

Wins and losses
Next, talk about what you did well last month from a budget standpoint. This can be a great opportunity to score brownie points with your partner if you approach it right. Focus on things each other did well, rather than spotlight ways where the other blew it. This doesn’t mean you should ignore obvious “withdrawals” of fiscal trust; just be careful in how you approach shortcomings on the part of each other.

Talk about things that pulled you off course.  If talking about who spent how much on coffee, nails, hair, etc. is likely to start an argument, consider making the decision that each of you get a set amount of cash each month to spend as you wish. Then take that cash out at the ATM and don’t hold each other accountable to it.

What’s coming up
Once you have made it through what will likely be the most emotionally charged part of the meeting, talk about what the next month looks like in terms of money coming in and money you need to pay out. I have found it helpful to use spreadsheet and plot out every day of  the coming month and what money we expect to receive or to pay out. It’s time consuming and sometimes painful, but it’s what you will do if you want to break out of a financial rut.

Agreed goals
Finally, close the meeting by reminding yourselves of the financial goals you have in common and discuss how you’re tracking to meet them. If you haven’t established any goals, consider starting with the baby steps that millions of debt-free Dave Ramsey followers have based their success on.

How often to meet
My suggestion is to have the budget meeting once a month for starters. Sit down in a distraction free environment at least an hour and talk it out. We get together on the back patio. Stay in constant communication with each other about the budget, especially when one of you is about to spend money that wasn’t part of the last budget discussion.

Don’t put it off
The only way to fail is to not try it. Feel free to use some of the ideas that have worked for us or create your own approach. I have also found some great resources on Dave Ramsey’s website.