Managing the Finances of a Two-Income Household
Before I got married, I had been warned that money was the root cause of many marital disagreements. My wife and I hoped that we would be exempt from this trend, noting our comfortable individual salaries and modest tastes. Each of us is good with money and we had no problem agreeing to share it 100% from day one. But we didn't realize that merely sharing money with your spouse, even without financial difficulties, can sometimes prove to be a challenge.
So what's so hard about sharing money with another person? If you can each afford the things you want on your own, how does bringing in another person with his or her own income affect this? I can tell you from experience that joint checking accounts will sometimes test you. In a couple that carefully manages their finances, one may feel controlled by the other, like he or she can't spend a dollar without first asking the other. Or a person risks being sneaky by making a large purchase without a spousal consultation.
Sentiments of control or sneakiness can also be amplified by factors outside of spending, like differences in salary, the number of hours worked each week, or even the amount of chores that one does around the house. If a wife makes more money than her husband, she might feel entitled to spend more than him. Or if she feels like she does more around the house than her husband, she should be able to splurge without first consulting him because, hey -- she earned it. On the other side, the husband, though he makes less money than his wife, might work more hours than she does in a given week. Therefore, he justifies spending money on an expensive leisure item -- maybe a boat or a case of expensive beer.
When we are single, we choose to reward ourselves for varying reasons. We might reward ourselves for something big, like getting a high-paying job, or for something smaller, like finishing a long 60-hour week at the office. These are habits that we probably developed as bachelors and bachelorettes and it's easy for them to be part of the package when we promise to have and to hold and till death-do-us-part. But once you're married and have checks with both of your names on them, it's easy to disagree with the other's spending habits. The good news is that there are a couple of simple things you can do to help ease the transition.
#1 - Talk about money regularly, but only at established intervals
If your wife comes home from the mall with an armload of shopping bags or your husband walks in the door with leftovers from Outback, it's easy to call him or her out on it. "Hey, didn't you just buy new clothes?" or "Hey, isn't steak a little out of our budget?" The opportunities to micro-manage your partner's spending are limitless, but they should be avoided because they can give the impression that you're being controlling.
What I suggest is this: Only review your budget and spending at established periods -- be they weekly, bi-weekly, or monthly -- and not in-between. As you know, I am a huge proponent of using free online personal finance tools, such as Mint.com. Mint has a feature that will email you every Friday with your account balances and month-to-date adherence to your budget. And it gives you the option to send the message to two email addresses. So each period, you and your spouse should look at those items together and note any flags. "Hey, we're way over budget on restaurants this month -- we should start eating in more," or "I've already spent $300 on clothing this month. Maybe I should hold off on another shopping spree for a while." These regular reviews will help prevent micro-management of each others' spending while allowing the two of you to stay on top of your finances as a whole.
#2 - Establish a $100 rule
Call it whatever you want to call it -- the $50 rule, the $100 rule, or the $500 rule. Establish a spending threshold that will constitute a required consultation with your partner. If you have a $100 rule, any time one person is going to spend more than $100 on anything, the other needs to be consulted. You can bypass this by setting up spending limits for trips. For example: "When you're in Pittsburgh, don't spend more than $200." Again, this is a rule to help alleviate sentiments of one controlling the other's spending while ensuring that the couple's financial goals are on track.
It's easy to have be critical of your partner's spending -- especially if you do more around the house, work longer hours, make more money, etc. But if you two have decided to pool your green, forgive the expression, but you'll have to put your money with your mouth is. Check your grievances at the door and manage your finances as an individual with two jobs. Play nice, don't micro-manage, and consult one another on large purchases. Active or passive aggressiveness won't cut it.
How do you and your significant other share finances?
So what's so hard about sharing money with another person? If you can each afford the things you want on your own, how does bringing in another person with his or her own income affect this? I can tell you from experience that joint checking accounts will sometimes test you. In a couple that carefully manages their finances, one may feel controlled by the other, like he or she can't spend a dollar without first asking the other. Or a person risks being sneaky by making a large purchase without a spousal consultation.
Sentiments of control or sneakiness can also be amplified by factors outside of spending, like differences in salary, the number of hours worked each week, or even the amount of chores that one does around the house. If a wife makes more money than her husband, she might feel entitled to spend more than him. Or if she feels like she does more around the house than her husband, she should be able to splurge without first consulting him because, hey -- she earned it. On the other side, the husband, though he makes less money than his wife, might work more hours than she does in a given week. Therefore, he justifies spending money on an expensive leisure item -- maybe a boat or a case of expensive beer.
When we are single, we choose to reward ourselves for varying reasons. We might reward ourselves for something big, like getting a high-paying job, or for something smaller, like finishing a long 60-hour week at the office. These are habits that we probably developed as bachelors and bachelorettes and it's easy for them to be part of the package when we promise to have and to hold and till death-do-us-part. But once you're married and have checks with both of your names on them, it's easy to disagree with the other's spending habits. The good news is that there are a couple of simple things you can do to help ease the transition.
#1 - Talk about money regularly, but only at established intervals
If your wife comes home from the mall with an armload of shopping bags or your husband walks in the door with leftovers from Outback, it's easy to call him or her out on it. "Hey, didn't you just buy new clothes?" or "Hey, isn't steak a little out of our budget?" The opportunities to micro-manage your partner's spending are limitless, but they should be avoided because they can give the impression that you're being controlling.
What I suggest is this: Only review your budget and spending at established periods -- be they weekly, bi-weekly, or monthly -- and not in-between. As you know, I am a huge proponent of using free online personal finance tools, such as Mint.com. Mint has a feature that will email you every Friday with your account balances and month-to-date adherence to your budget. And it gives you the option to send the message to two email addresses. So each period, you and your spouse should look at those items together and note any flags. "Hey, we're way over budget on restaurants this month -- we should start eating in more," or "I've already spent $300 on clothing this month. Maybe I should hold off on another shopping spree for a while." These regular reviews will help prevent micro-management of each others' spending while allowing the two of you to stay on top of your finances as a whole.
#2 - Establish a $100 rule
Call it whatever you want to call it -- the $50 rule, the $100 rule, or the $500 rule. Establish a spending threshold that will constitute a required consultation with your partner. If you have a $100 rule, any time one person is going to spend more than $100 on anything, the other needs to be consulted. You can bypass this by setting up spending limits for trips. For example: "When you're in Pittsburgh, don't spend more than $200." Again, this is a rule to help alleviate sentiments of one controlling the other's spending while ensuring that the couple's financial goals are on track.
It's easy to have be critical of your partner's spending -- especially if you do more around the house, work longer hours, make more money, etc. But if you two have decided to pool your green, forgive the expression, but you'll have to put your money with your mouth is. Check your grievances at the door and manage your finances as an individual with two jobs. Play nice, don't micro-manage, and consult one another on large purchases. Active or passive aggressiveness won't cut it.
How do you and your significant other share finances?
Labels: couple, family, finance, financial health, financial planning, joint checking, marriage, money, partner, personal finance, significant other
posted by Scott Bliss @ 9:45 AM
5 Comments:
At November 13, 2008 11:15 PM ,
Brian Guppy said...
Hey, good topic. We've definitely dealt with this stuff before - after 4 years Chris and I are just now getting to the point where we're on the same page regarding money.
Both of the points you listed are things that we've learned, the hard way, that we have to do. We have a twice-weekly session where we record our expenses, making sure to check our online account records for any transactions we may have missed, update our budget spreadsheet, and evaluate where we are relative to our targets. We've gotten to the point where we can do this in about 15 minutes.
We've found that it's vitally important that both of us are equally well aware of our budget standing - the most contentious purchases have come at times when one or both of us was not paying adequate attention to this.
We also have been using a spending consultation threshold as you suggest - in our case it's $50. We also try to account for as many different types of purchases as a possible in our budget to minimize the number of times we have to discuss individual purchases. For instance, if Chris knows she has $60 left on her art / writing supplies budget then she can go ahead and spend that since we've already allocated it as part of our planned expenditures.
One thing that should be noted is that any perceived inequities in housework, hours on the job, income, etc. need to be dealt with apart from the issue of who spends what. It's important to come up with a living arrangement that makes both parties happy - if you don't have that, then shopping sprees aren't going to make up for it.
At November 14, 2008 9:53 AM ,
Scott Bliss said...
Thanks Brian. Would you say that one of you is more involved in managing finances than the other? I know that in a lot of households, one will assume that role. With my parents, it's my mother. With me and Michelle, I handle the bill paying, etc.
At November 14, 2008 11:17 AM ,
clssguppy said...
Hi, Scott - I can answer your follow-up question. Truth is, we ran into trouble when it was just Brian running the show, financially. Not that he did a bad job of it - far from it. But because I "didn't want to deal with it" - I was far less aware of what money was going where - and where money was coming from.
So now we pay bills together: I pay the ones that need a paper check; Brian does the online bills. We do "balance book" nights together - twice a week - where we can discuss the purchases we've made, too. It keeps us both informed, and it also gives us an opportunity to discuss our priorities with each other, what we'd like to spend money on in the weeks and/or months ahead. Brian tells me he needs new climbing shoes, which cost $100. So together, we work out a way to make that happen without a big surprise at the end of the month.
Brian remains the math whiz. He's the one who set up the Excel spreadsheet, who kept records on our spending for 12 months so we had an accurate model for a budget.
Frankly, at first, it was hard for me to relinquish control. I'd lived alone for 10 years, had bought my own house before we got married. But eventually I got to the point where teamwork won out over my pride. I discovered that going on a shopping spree didn't make me more independent from my husband. It just put me further in debt ... and caused a fight.
It's taken us a while, and a series of trials and errors, to find something that works for us. So I guess my other comment is to be patient with yourself and each other. You're not just making ends meet. You're making a life.
At November 15, 2008 12:21 AM ,
Tim said...
Interesting topic. Before we got married (together 7 years), we kept our finances completely separate. This meant we both learnt how to manage money independently.
After marriage we finally pooled everything, although we both still have independent accounts. I think it gives us a nice sense of ownership, although we don't think twice about transferring money between the accounts without consulting the other. There have been a few occasions where I felt my wife had bought things she didn't /need/, but never felt that she was spending money in a way I fundamentally disagreed with.
My main concern is how to manage financial responsibilities. A lot get left to me, and although I don't mind too much, some months I wish I didn't have to worry about remembering to pay the rent, reallocate the Roth 401k, etc etc.
At November 19, 2008 7:55 AM ,
Anonymous said...
don't merge finances
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