Financial Matters for Couples!

Last week we had a very engaging discussion at our couples’ game night about finances. The question on the table was, “How do you create a financial system that is inclusive of both parties?” Since then, I asked for more feedback, ideas and suggestions.  Ideas and suggestions by others are written in italics.

Communicate, communicate and communicate some more!

Communication is key, as with every other part of marriage. Just like you have a regular date night, have a financial date night where you spend time discussing your current financial state, as well as your goals and dreams. My husband and I pool our resources and don't hide money from each other. We decided in the beginning that we would sink or swim together; do or die we are in it together, so there is no need to separate ourselves financially. That doesn't work for everyone, but it works for us, and I think it's a healthy option.

I must say that I truly love this idea! I never thought about having a financial date night before, but I sure will try it. Thanks Karon! I too believe that both parties should pool all their resources together and create a financial system that is fair and balanced. No one person should have more power because they make more, or more power because they are male (sorry, my feminist side just kicked in there:-).

SAVE like your life depended on it!

My non-married theory is to start off by trying to live off the equivalent of one person's income so that you can easily pay off debts or save for a house with the other income. I know one couple that managed to pay off all their debts in one year and another who used the money to buy a house in cash after five years. Then having your shared expenses (way below the sum of the two incomes) and I'd at least start by trying it so that each party pays their fraction of the household income (i.e. if both parties make the same, they split the costs 50/50, however if one partner makes 75% of the total household income, then they pay that share of the expenses.). I think it'll create a fairer share of "me" funds between the partners. But I'll let you know if it works once I actually try it.

I must confess I am a save-a-holic…in remission! We know how to live on one salary…especially when we only had one salary for the first two years of our marriage!  We got married when Jared had 2 more years of med school and I just graduated from college. We were both unemployed for the first three months, and it was literally my savings during college that held us over until I found a job. Thankfully, neither of us had any debt coming into marriage…no student loans, wedding bills, car payments, etc. I can only credit God and my father’s cheapness for that.

I probably started saving when I was 5 years old. By 10, I knew the concept of simple and compound interest and charged my dad 50% interest if he every borrowed money from me. I loved lending because it grew my savings! Because that was ingrained in me since I was a child, there has never been a day where I never had any money saved in the bank.

Adrienne, you reminded me that with the right focus we can pay off our house in 5 years!!! Whoooo, what a goal! I might have to start that 5 year plan when Jared graduates from residency…

Right before we got married Jared read an article on MSN relationships about how to handle finances. It said to give each partner equal "spending money" per month regardless of what each person made. We took the principle and use it today. We consider each other's income 100% OURS. The combined income is used for expenses and savings...Technically Jared contributes everything towards expenses and I contribute everything towards savings...that's just how it worked out practically...And then once we bought a house, the total savings decreased and the difference went towards the house. Our equal spending money goes into a separate individual accounts...I had to insist that Jared do this because his spending money ended up morphing with the expenses and we were never sure what he had to spend or save. The idea with the equal spending money is that each person can do what they want, spend it how they please and the other person should not be upset by it. Anything that comes out of our savings is discussed and agreed upon...and if we can’t agree we table the discussion until we can come to some compromise. Examples of that would be buying a house or car. There has never been a decision that we could not agree on even if we start on different sides of the fence.

We I have a joint "Bill Account".  A certain percentage of our income goes into this account each month to be used for all of our household bills.  He is the primary bread winner, so the percentage that he contributes is greater than the one I do.  We also have a joint savings acct that we both try to contribute to on a monthly basis. We also each have a separate checking acct that we use solely at our own discretion.  This helps eliminate fussing over the small things that come up...like me getting my hair done or him purchasing some electronic device. It also helps us surprise each other occasionally with gifts!  Anytime the need/desire arises for one of us to purchase something "big", we discuss it with each other and usually pay a portion of the price from our individual acct and a portion from the joint acct.  As for giving LARGE amounts of money to family members...we don't "lend" anything.  If we can't afford to give it away, then we don't do it.  And we discuss and agree on these matters before any transactions are made. Both of us are always open minded about these types of issues, but if both parties do not agree, then a suitable compromise is made that each person is ok with.  Again, this method has worked great at our address, but it may not be for everybody….Often times if there is something that I want that my spending money does not cover, he will just give me money from his acct to prevent us taping into a joint acct, and vice versa.  We may be different that way from many couples but we really haven't had major problems in this area b/c we trust one another and we make our financial needs known to each other.  He knows that I like to spend money and that makes me happy.  I also know that he would rather save and plan for our future.  This way, he has managed to give me the spending money that I need, (b/c he doesn't require as much), and I am aware of this so whenever he needs/desires extra from me, I have NO PROBLEM giving it to him.

One thing that I must say that one of the biggest predictors of a couples’ financial success is their attitude towards money and each other. The key is for both parties to be happy and comfortable with the arrangement. Whether one person has more spending money because they spend more, or  the other person pay more bills because they make more, the key is to agree and be happy with this. One person should not be left feeling hurt because they have less spending money because they make less…(I personally would feel this way if I had less spending money because my husband made more) or one person should not be upset because they are a saver and don’t spend as much but their spouse is a spender. It’s important that each person not only understands their spouse’s spending style, but try to respect it…as long as it does not jeopardize the family budget.

More practical tips on dividing your income! Thanks Matt!

LONG TERMS SAVINGS JOINT-1 joint long term savings account for major purchases (home, car or serious emergencies with 6-9 months of expenses available) contributed to together with 10% of our incomes.

SHORT TERM SAVINGS SINGLE-1 personal short term savings account managed privately by each partner for gifts, mainly, or individualized purchases that you don't necessarily want to get "permission" to spend. Like my Amazon addiction...Again, 10% of income.... See More

SINGLE RETIREMENT-10% of each income goes into our individual retirement.

JOINT BILL ACCOUNT-30% from each income goes towards a joint bill account (rent, utilities, groceries, gas...)SINGLE CHECKING-40% from each income goes to individualized checking.

http://articles.moneycentral.msn.com/SavingandDebt/LearnToBudget/ASimplerWayToSaveThe60Solution.aspx

Other suggestions:

• If one person is solely responsible for managing the expenses the other party should know where ALL the usernames and passwords are for all accounts. You never know what can happen to your spouse where you would suddenly need to manage the expenses…How frustrating would it be if you have no idea where to find the online electric bill etc. that needs to be paid!
• Track ALL your income and expenditures from ALL your accounts in one place – http://www.mint.com/
• Track your monthly expenses in an excel spreadsheet and email it to your spouse every month.
• Don’t forget life insurance, retirement, emergency savings, long term and short term investments. There are nonprofits who can offer financial advice. Check out the black urban league.