Apr 6, 2011

Money and Marriage, Part 2 (Guest Post by Alisha)

Hi everyone! I’m back with the second part of my story. In my first post, I shared how my husband, Neill, and I handled money throughout the first two years of our relationship. Once I finally found a job, we realized that we seriously needed to get real about how much money we made versus how much money we spent. So, we made our very first budget in good ol' Excel!

To do this, we made a list of all of our monthly expenses. We had 24 in all--from groceries, restaurant, phone bills, household bills (e.g., electric), car insurance, medical bills, money we put in savings, public transportation costs, etc. Then, we looked through our bank statements and wrote down the amount we
spent on each category for the preceding three months. Finally, we averaged these three numbers to determine how much money we typically spent in each category. For example, on groceries we spent $613 one month, $498 the next month, and then $402 the month after that. This averages out to spending $504.33 every month on groceries.

Then, we looked at how much we were spending each month on average for personal expenses (e.g., buying a new shirt), bills, and joint expenses (e.g., going out for dinner together). All of this gave us a good snap-shot of what we were spending. For example, we discovered out we spent an average of $970 dollars a month on joint expenses (groceries, restaurants, gas, and miscellaneous items) and we had an average of $3,566.17 hundred dollars of household bills per month (mortgage plus all the monthly bills).The next step was to look at the money going in and compare it to the money going out. Obviously, we hoped to find that the money coming in far outweighed the money going out so that the extra money could be spent on frivolous shopping sprees put in savings.

But, no such luck. Taking a cold hard look at our bank statements and comparing our in-put versus our out-put helped us realize that if we wanted to save the sort of money we wanted to save, we had to readjust our monthly spending habits. Since most of the monthly bills were fixed, one area that we targeted was how much money we spent at restaurants. For example, we reasoned that if we were spending an average of $500 on groceries every month, we probably didn't need to be spending an average of $300 dollars on going out to eat. So, we developed a budget to help us curb our spending on non-essential items so that we could put more money in savings.

Awesome, right?

Eh.

I must admit that I don't think we ever truly stuck to our goal spending in each category. Keeping up with a budget every month is time-consuming and hard work! But, our first foray into money management together was still really helpful. It raised our awareness and forced us to talk about our financial details more than we ever had. It set a precedent in our relationship that each of us would be open and honest about finances. Plus, it gave us a chance to really discuss what our financial goals were. Looking through our past spending also showed us that a lot of what we spent money on was joint expenses. So, we decided to open up a joint checking account.

With the addition of the joint checking account, we had five bank accounts between us! We each had a personal checking account, a personal savings account, and then one joint checking account. Our respective paychecks got automatically deposited in our personal checking accounts and then each time we got paid we would transfer a certain amount of money to the joint account, a percentage of money to our personal savings, and keep a percentage of money in our personal checking accounts to pay our credit cards and use as we pleased. We would use the joint account to pay for groceries and anything we did together. But, the boundaries were (and still are) pretty fluid. If I needed something but had no cash left, I was free to use the joint account. Similarly, if our joint account was empty and we wanted to order food one of us would cover it. While this is basically the opposite of sticking to a budget, it has worked for us. After opening up a joint checking account a joint credit card was the next logical step. This way, we could make big purchases together without worrying about how to split the cost. Even though I knew it made logical sense, I was definitely aware that opening a credit card together was a big step to take. I remember being pretty nervous about what might happen and I refused to be the primary name on the account! I guess I was worried about being in charge of a credit card that I didn't have complete control over.

Making a budget also helped us realized that if one of us spent a big chunk of change it would inevitably effect the other. So, it became less acceptable for one of us to make a big purchase without consulting the other. Do we always consult one another on things we buy impulsively? No. For example, I didn't need to get Neill's permission before I went on my recent shoe buying binge and Neill doesn't need my
permission before he buys accessories for his guitar.

So how do we know what we need to talk about? Since we don't usually keep a lot of extra cash in our checking accounts, a good rule of thumb is that we need to talk it over if we would have to take money out of our savings account or put it on a credit card to buy it. We try to frame the conversation like "I want this. How can we make this happen?" rather than seeking permission, but sometimes we just can’t
make it happen. For example, I’d love to get rid of our hand me down couch in the living room, but have you seen how much couches cost?!? We just aren’t willing to spend that kind of money on a new couch when our current one is still usable. Honestly, we tend to talk over most things we are planning to buy. Not because we necessarily have to, but because we talk and it comes up in conversation. But, I think if either one of us was constantly buying small things impulsively we would have to have a conversation and figure out some sort of system to manage it.

We've basically stuck to this system, with a few added tweaks, for the last three years. Our attention to finances as waxed and wane--some months making a big effort to keep our spending down and other months allowing our selves to put things on the credit card and worry about it later. However, after about 9 months of marriage we decided to make some big changes!

Have you ever made a budget? Where you able to stick to it? If so, what are your secrets? How much do you and your partner talk to one another about things that you buy? Do you keep a stash of money that you're allowed to spend however you want? How do you manage having a joint account or joint credit cards?

Alisha is a 20-something newlywed pursuing a doctoral degree in psychology and blogs at Married in Chicago.

3 comments:

Annie said...

I love this series of posts. I'm a newlywed too and my husband and I are figuring out together how to budget, etc. We've had a budget for about 3 months so far and it seems to be working, we've merged everything so we're on one account, one credit card together, etc. I can definitely be a spender, so what's helped is we both have a set amount of "mad money" we can use however we want. That way I really think about how I'm spending my money. We'll definitely do more tweaking to our budget, but we've been open and honest about money from the beginning, which is great.

Natalie said...

This was definitely a hard thing to do when my husband and I got married. We had both been out on our own (and single) for awhile and got used to doing whatever we wanted with our money. Needless to say, it was a HUGE adjustment!
My husband takes care of the money and pays the bills each month. We also do "fun money" each month that we each get to spend on whatever we want. It's nice to blow through that money and not feel guilty about it :) We're not super strict with our budget ... but we do have set amounts we try to stick to for our various expenses. We tried an "eating out" budget for awhile and that didn't work. Now we just allow ourselves to go out once a week. I think the biggest thing for us has been to be open, be honest, talk about things, and be willing to adjust as necessary if something isn't working.

Married In Chicago said...

Annie - I love the idea of mad money! That seems like such a nice way of balancing have joint finances, but also having some independence.

Natalie - My husband takes care of paying the bills too :) It makes me feel good that I'm not alone on this - something I feel guilty that I we don't split that responsibility.