How We Manage Our Finances as a Couple is a guest post from Maria at The Money Principle where she blogs about financial health and challenges her readers to think about their money and their lives. It is one of the articles in the latest edition of the Yakezie blog swap.
Well, the short answer is we didn’t! We didn’t manage our finances – individually or as a couple – for a long time because I assumed that earning as much as I could is enough and John assumed that…well, I am not sure what John assumed. What I heard is that he didn’t want to talk to me about money because he didn’t want to bother me with this and upset me.
Yep, you guessed it! Living like this led to financial crisis when it didn’t matter what we earned – our cash flow was more often than not negative, our only assets were our labour, our competencies, a rather large house in the nice part of town in which we live and an apartment overseas. And we had decent pension funds but this is because of the ways things work around here rather than our financial acumen.
Now all this is history and we are facing a much, much brighter financial future. In fact, I can’t wait to start building some serious wealth – which is not only possible but very highly likely.
And you know what? We still don’t manage our finances; our money pretty much manages itself and any intervention is very light touch. More monitoring and minor adjustments than hard core management, really.
How We Manage Our Finances as a Couple
To get here we had to discuss and agree on a three of things; and no, the things we had to discuss were not only about money.
First, we had to agree the basic family contract. This is a negotiated agreement about the roles each of us has in the family. Different arrangements are possible including a provider and a home-maker; a main provider and a secondary provider who is also home-maker; two providers who outsource home-making; and two provider who share home-making. In this scheme we fit under ‘two providers who share home-making’…well and we outsource some of the more tedious sides of ‘home making’ like cleaning and ironing.
Secondly, we had to discuss and align our attitudes to spending. Here it was particularly important to figure out whether we are, or one of us is, ‘things’ people or ‘happenings’ people. At present we lean towards converging on ‘happenings’ people with ‘stuff’ playing a very minor part on our lives and being a very small line in our budget. We share decisions about stuff we need; for instance now we need a new vacuum cleaner because the old one gave the ghost. Discussions are underway: I want a Dyson and John wants something else…but I am a good negotiator so watch this space.
And thirdly, we had to work out and align our attitudes to debt. This is still work in progress because we started from very different initial positions – John used to see debt as an inevitable part of life; I fear it and even the smallest amount of debt escalates my sense of insecurity immensely. I think that gradually I am learning to be more rational about it and John is learning to be less accepting of it.
Once this was sorted the following arrangements were made:
- We have a joint bank account where most money that is earned goes (except any income from the small businesses we are growing which stays in a business account);
- 10% of this goes automatically in an account we call ‘the play account’ but it is savings that can be used to invest when above certain level (below this it is emergency fund);
- 20% of our monthly income, and any money earned above and beyond that, is directed to debt repayment; this is expected to end soon;
- About 8% of our monthly income goes to a ‘I’m so worth it’ account – this is used for fun and has to be spend every month;
- We allocate a small amount as our ‘pocket’ money – this is for small things at our discretion. Usually I spend mine on coffee and books.
The rest comfortably covers all other expenses – this is what I monitor using a tool I developed. This is it! Since we talked and set out this system, our finances run like clock work; and very low maintenance at that.