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Budgets for Beginners

Nobody likes the "B" word, but saving for the future doesn't have to mean living in your parents' basement, either.

Budget? You? Sure, sitting down together with a spreadsheet isn't the sexiest way to spend a Saturday, but having one puts you two in control of your cash flow so you're able to buy what you want. Think of it as a sort of financial foreplay (and yes, you both win in the end, wink wink!). Here's how to start, strengthen and secure your nest egg to keep it—not to mention you—from cracking.

Step #1 Pick a Pot
The first move in your budget strategy is to ask yourselves: Where should our money go and how will we manage it? (Ahem, that requires a face-to-face conversation.) "It's common for couples to grumble about how much they spend but not really do anything about it," says Katie Dunsworth, a 26-year-old member of the Smart Cookies, a group of women who got out of debt and lived to tell about it in The Smart Cookies' Guide to Making More Dough. "There's no golden rule for every couple, so you have to discuss what works best for you as a team." The big thing to decide is which "pot" you'll pour your golden paychecks into. See which of these options is right for you:

Split Pot:
Money Motto: "Halfsies." What it is: You each have your own bank account and split bills or pay them separately, as in: "I'll take the electric bill; you take care of cable." Who Might Be Interested: Individualists. Don't mind paying your share or splitting stuff down the middle? Then this model might work. Things to Consider: This pot model can be tough if you don't make the same amount of money each month, so start by sorting through your net income (the amount after taxes).
How to Save: You each should put a set amount into savings, such as a 401(k), to avoid getting into some major arguments later on.

Split/Shared Pot
Money Motto: "Some for us, some for me." What it is: You each have your own money but also share an account. Who Might Be Interested: Semiautonomous couples. You dig the idea of pooling cash for joint expenses but still having separate accounts. Things to Consider: Hiding money is a definite no-no, so be up front about how much each of you plans to put into your accounts. Also decide what to do if one person makes more, as in whether or not the extra dinero should go toward shared savings.
How to Save: Take a similar approach here and set up a single retirement account that you both make contributions to every month.

Shared Pot
Money Motto: "We're in this together, baby." What it is: You have one joint account. Who Might Be Interested: One-paycheck duos. This traditional model is the only option if just one person works. But be flexible (no freaking out over each other's spending, like his brand-new snowboard). Things to Consider: Agreeing to share everything takes an extra dose of communication. Be open with each other about how you spend your money and what you need to be happy.
How to Save: You could live off of one salary and then save and invest the other. Or just come up with an amount you can sock away.

Step #2 Deal with Debt
Now that you know which pot your cash is going into, it's time to decide which debts to pay off first. Before you have a panic attack imagining your pot of gold shrinking before your very eyes, remember that shouldering some debt is okay—it just depends on what type. Here's how to prioritize:

Pay Off Credit Cards ASAP
This is the #1 must-do for getting out of debt. Credit cards have the highest interest rates and are a major red flag to banks and lenders. Can't pull it off right away? Try asking your card company for a lower rate. It's surprisingly easier than you think. Or you can transfer your balance to a lower-interest credit card.

Don't Freak About Student Loans
Investing in your future by borrowing for a degree isn't a bad thing. Banks look at this as "good debt," which means, sure, you might owe $25,000 now, but you've also positioned yourself to be in a higher earning bracket down the road (go you!). Make a strategy to pay it off incrementally.

Be Smart About Your Mortgage
Owning a home, even if it means taking on debt, is a good thing. In fact, paying off a mortgage won't feel much different than paying rent. Shop around for all kinds of lenders, like thrift institutions, commercial banks, credit unions and mortgage companies. Consider hiring a broker to help you find the best rate since they'll have better access to lenders.

Step #3 Develop a Plan
Once you've figured out where you'll put your money and how to handle your debt, sit down and develop what the Smart Cookies call a "spending plan" for the next five years. What are your goals? Where do you see yourselves 5, 10, even 15 years down the road? Planning for your future is the first step toward getting there, so start moving!

Goals
"My husband and I have a vision board with the things we'd both like to accomplish. We want to be mortgage-free, buy a cottage and have kids," says Dunsworth. "Actually looking at those goals every day can be a real incentive. It reminds me why we're working so hard." You can make your own vision board by writing down your monthly budget on one side of a dry-erase board and long-term goals on the other to see how far you still need to go. Also do it online at TheNest.com/budgeter.

Investing
Putting all of your nest eggs in one basket isn't the way to go, and neither is depending entirely on a savings account. So where should you save? Roth IRAs, for one, are a smart way to invest because of the tax savings (learn more about IRAs in our "Money Q&A" on page 94). Real estate is another solid investment, as well as a 401(k)—think of it as free money since many employers match the amount you put in, or at least a percentage. The stock market isn't the best place for investing newbies, but if you do plan on investing in stocks, check out investment newsletters like Value Line or NoLoad FundX.

Budgeting
Instead of a budget (we hate that word too), try dividing your money using your spending plan (that's not so bad, right?). The goal is to separate "needs" from "wants," and those needs can range from clothes to entertainment. The flip side is that you've gotta cut your spending in other areas. After you assess how much money you have to dole out for your needs (like food and housing), consider anything left over as "fun money," say, for redecorating the guest bedroom.

Nestpert: KATIE DUNSWORTH, coauthor of The Smart Cookies' Guide to Making More Dough

-- Caitlin Moscatello

See More: Budgeting , Getting Out of Debt , Money