Tying the Knot in a Meaningful and Memorable Way (Without Losing Our Savings or Sanity)

Tuesday, June 8, 2010

Managing Money in a Marriage

Meg started an awesome discussion about Marriage & Money over at A Practical Wedding the other day. Hooray! Money is one of the top stressors on marriages. There are lots of ways to configure money structures within our marriages and relationships, so the more we talk about it, the more ideas we can get on the table.

Neither Matt nor I had any debt as we entered our marriage. However, I had amassed about $20,000 worth of savings, while Matt had about $5,000. The discrepancy made it a little difficult for me to merge our finances. In the end, I got over the discrepancy by fully embracing the idea of partnership. Besides, we were going to close on a house two days after our wedding, so all of our money was going to go straight to the bank, anyway. (As a side note, during our first year of marriage, Matt made approximately $20,000 more than I did, so it evened out rather quickly!)

I think one of the things that helped make the merger smooth was that Matt and I are both savers. Our financial goals and habits are very aligned. In general:
  1. We save before we spend. In other words, we do not like to carry any balances on credit cards. We use a Discover Card for the cashback rewards, but we pay it off in full each month.
  2. We would rather prioritize long-term, bigger goals (like a house, lots of land, a DSLR camera, etc.), than short-term treats (like lots of new clothing, shoes, etc.).
  3. We try to balance saving for the long-term with enjoying life. We have special savings accounts for vacation and home improvement. We don't want to be so obsessed with saving that we don't appreciate the present.
  4. We are okay spending more money to eat healthier/organic/local food, to support local businesses, and to buy less toxic products.

Here's how we manage money in our marriage:
  1. We made a list of all our expenses in Excel. You can see all of our categories here. We give ourselves personal allowances every month that each of us can spend however we want. We don't have to ask for the other person's permission to spend the money. For any spending outside of our personal allowances, we consult each other first.
  2. We created a formula in Excel that would add all of our expenditures. We played with our expenditures (including all of our savings accounts) until our expenditures matched our income.
  3. We have all of our paychecks directly deposited into a centralized, online checking account through ING Direct.
  4. We set up automatic transfers from that centralized account (called "Homebase") into separate savings accounts: Retirement, Home Improvement, Vacation, Property Taxes, Baby, The Dream--based on how much we determined we could afford to save in the Excel document.
  5. If anything is a "Joint Expense," like groceries, meals out, entertainment, etc., we pay for it with our credit card, and I record it on an index card in my wallet, so we can try to stay under budget. If Matt buys something using his personal allowance, he uses a separate credit card. If I buy something using my personal allowance, I use our Discover Card, but I record my purchase on the back of the index card.

Our system works for us in a lot of ways:
  • The automatic transfers into our savings accounts help us save more money than we otherwise would.
  • The personal allowance system gives us freedom to spend our money on whatever we want, without over-spending.
  • The monthly budget helps us prioritize our spending. For example, if a new expense comes up (like Matt's running coach), we can rework the numbers to make our income match our expenditures.

It's definitely not always smooth financial sailing in our household. Sometimes, we get in fights when we ask each other for permission to spend more than our personal allowance on something (mainly, I get mad when Matt wants to spend money to fly across the country to run in races; Matt is much more patient and understanding when I want to sign up for e-courses).

Matt still makes a little more income than I do, but we basically work the same amount (it's just that I spend a lot of time "working" on things that I don't use to generate income, like this blog!). Just because society values our work differently (in the form of higher pay for his job, and less for my teaching job), doesn't mean that we value our work differently in our household. For example, Matt doesn't get a larger personal allowance, just because he makes more money.

Also, we figure that we will flip flop back and forth over the years in terms of who is earning more than whom.

What kind of systems work for you?

Other posts I've written about Money & Marriage:
  1. Savers versus senders
  2. Monthly budgeting
  3. Why I'm glad we didn't go into debt planning our wedding
  4. Wants versus needs

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spankey said...

You are right, money can be a huge issue if not handled correctly and discussed at the beginning of your partnership. I wasn't as lucky as you, my husband and I are very different when it comes to money. To be honest, he is much better at handling it than I am. But, I was upfront about my finances and we came up with a good plan that we were both happy with. I get a little frustrated when he disagrees with an expenditure, but he's teaching me about picking and choosing how we "treat" ourselves. I'm teaching him about the joy of buying new underwear when you need them.

Angie said...

Our system is actually fairly similar. We made a color coded spreadsheet for each of us, but I like the way yours is streamlined into one.

I can't direct deposit money into our savings or my savings b/c my paycheck can only go into two accounts (my personal checking and our checking). But I've been good about moving money over to savings every two weeks.

I guess my question is how you hold each other accountable and after the spreadsheet is made, how do you follow it? We have the spreadsheet, but it's tucked away in our laptop where we rarely see it. We could definitely be more organized. Sometimes I think because we don't own a home and since we're not planning for baby, that we haven't been as strict as we should be.

A-L, said...

I think your system is great, particularly the multiple credit card method of keeping track of whose expense are whose.

We've got a little over 5 months before the wedding, but we are planning to discuss all of this soon. Got a book (Smart Couples Finish Rich) and might cover some of it in premarital counseling next month (as this month is insanely busy for fiance).

But thanks so much for posting this and sharing how you and Matt organize yourselves financially. Because as others have said before, you're a whiz!

CCL said...

We also use a similar system. Although, we are each keeping separate savings and sharing a checking account for common expenses and a joint savings for joint goals. Sara talks about the struggle with coming into a marriage with different levels of savings (or debt). One challenge my fiance and I have is that I own the house we live in -- I used my savings to pay for the closing costs and the down payment, yet he helps pay the mortgage. It is challenging to think about how to split all of this -- and we have different levels of student loan debt. We created the joint expense spreadsheet, and then came up with the amount of $ we would need each month for it, and then we calculated that 33% of each of our salaries (one of us makes more than the other) will cover our expenses. So, the one of us who is making more, contributes more. And we both treat our joint savings the same way. And the rest of what each of us has left over goes into separate savings. While separate savings may not seem like a partnership -- neither of us views it that way. We both have the same financial goals and values and talk to each other at length about what we are saving for, how to invest savings, when to spend anything, etc. But the separate savings just make our world a little easier and helps me feel like I have some independence should anything terrible happen. Thanks for sharing, Sara! Women have some many more options in our generation that I am so grateful that we can even have this conversation out in the open!

Sharpiegirl said...

Love the system. We need to do something like that in the near future.
And to go a little off topic...I know you want to get better with your photography. Here is a link to a great website for photography tips. I get a daily email at work and a weekly recap at home. I am always learning something new!
And a great site that my photography teacher told us for editing our photographs...if you don't already have photoshop.
I love free downloads.

Ms. Bunny said...

Wow, thank you for sharing this so openly and thoroughly. My parents don't share money very well, so I've never had a good model. But this post was so incredibly practical and laid it all out there. It was extremely helpful. Thank you again. I'm bookmarking this post.

Anonymous said...

Thank you so much for this post! My fiance and I just went through the chapter in our premarital counseling book about money, and I'm trying to show him the merits of a "four-pot" system of joint checking, joint savings, and separate accounts for each of us to have allowances go into.

Once again, a wonderfully thorough post!

Meg said...

So it's interesting that you say that money is one of the biggest stressors in marriage. People were saying that over my way as well, and I know that's the common wisdom. But I'm not sure if it's always *true.* David and I don't really fight about money. That makes it seem like we have it easy, but we don't, particularly. I'm earning all the money at the moment, I came in with savings, he came in with debt. But that just sort of is the way it is. I think we both really enjoy finally having a partner in this money stuff.

I wonder how much of it is learned and/or something we create because we expect it? (I'm just theorizing here, so, um, feel free to rebut). Neither of us come from a family where anyone ever fought about money. His family had plenty, mine did not, but I've never seen a fight about money in my whole life. I grew up thinking money = calm reasoning. So I think I just never contextualized money as something you fight about, so it never occurs to me to fight about it. I mean, we make plenty of MISTAKES, don't get me wrong. We're far from perfect. We just don't fight about those mistakes. Anyway, all very interesting, and clearly more from me later this week.

Eleanor said...

This is a timely post. My husband and I are similar when it comes to money,and believe in living way beneath our means, so we haven't had any major disagreements. BUT in many ways any conflicts have been disguised by the fact that we are DINKS (Double Income No Kids) with comfortable corporate salaries. I am seriously considering leaving said corporate job because I just can't stand it anymore. This is really when we'll see if we have big money conflicts. We're getting a trial run this year because we have saved for a year and a half to take six months off to travel and visit friends and family and living from our mutually saved pool of money. So far so good, but I will definitely come back to re-read this post when we have to sit down and really hash out a system that works for our day-to-day life when we return to the 'real' world.

Abigail said...

You and your husband are quite an inspiring couple. Many couples seek our counseling to help out primarily with reconciling money problems. Have you thought about exploring the issue of job loss in particular?


Roxanne said...

I read a post on how you guys manage your money before I got married, and we developed a very similar system. I can't say enough how well it works. The concept of a "personal" account allows for some fun spending and I think it leads to less fighting.

Unknown said...

We use one joint account for "operating (recurring) expenses" and have designated emergency and vacation/splurge savings accounts, plus a retirement investment account and individual IRAs. We each get an allowance each month that is no-questions-asked (although it doesn't go into a separate account, just a line item in our budget). We have to talk about any expenditure over $200. It's worked well for us.

For those of you who want to budget but can't seem to figure it out, I cannot recommend mint.com highly enough.

My husband and I started with an excel spreadsheet, and entering in all of our expenses/ spending, but that lasted exactly one month, because we hated it.

A very frugal friend recommended mint.com-- it's FREE, it imports your financial data from checking, credit cards, savings, investments, etc., you can set up budgets and it lets you know when you're almost over, etc. A lifesaver. I now see where our money is going and can see the big picture as well as the small details.

(and no, I'm not affiliated with mint.com, I just love it!)

jasfitz // the daily frolic said...

I'd like to second the Mint.com thumbs-up. It's been such a fabulous tool for us. But, in our case, we combine it with an excel spreadsheet. Mint helps us to evaluate how we're spending our money, and if we're over/under budget… and the excel spreadsheet makes a huge difference in sorting our concrete savings. We each have a private bank account, but in addition to that, we have the main pool—an ING account that maximizes our wee profits. So, we use the excel spreadsheet to divvy up the large pool of money we have in there.

The spreadsheet tracks our individual and joint contributions, lets us list specific saving goal items, like the DSLR I bought for myself today, which took about 6 months to save towards; and then joint items, like our "emergency/buffer fund, or our wedding fund (we eloped, but are still planning a delayed wedding). We just update these totals as we move money into the pool, dividing it towards the different goals as we see fit for that month. It's actually become a kind of treat to regroup at the end of every month, review our budget together on mint to see where we were over or under, and then according to our contributions breakdown, we get to move our remaining saved income into ING, updating the spreadsheet according to how much we each get to save individually, and then what our joint contribution is. Whew! It's a little annoyingly mathy, but on the other hand, it's incredibly empowering.

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