Jun 9, 2006

The "B" Word

If you are married or living with someone, how do you handle the household finances? Do you combine everything or do you keep things seperate and each do your own part? I think that there are pros and cons to each style. Many financial experts counsel that couples should combine everything and work together from one checking account. Some even say this is a must for you to win financially. I can see the reasoning for this advice, but I disagree that it is an imperative to use a single checking account. Many folks are financially ignorant and out of control when it comes to managing money and working together on spending and saving has great value, relationally and fiscally. Certainly no one wants to be surprised to find that they are the last person in their relationship to find out that they are bankrupt. Also there is power in shared decision-making and goal setting, if one person controls the finances, the other will feel marginalized. If you and your spouse (or spouse surrogate) are not planning savings and spending together you have problems. They may be financial, they may be in your relationship or they may be both. I am 100 percent on board with planning together. I can't get hung up on the absolute necessity of one shared checking account though. In our house we have long operated with two checking accounts, because we have had two incomes for most of our married life. This doe not mean we lead separate lives or have a “joint venture”, rather than a marriage. We have found that this works best for us. The lovely Mrs. Sneed and I agree on the need to save for our old age. We have our retirement savings deducted from our paychecks into our 401K plans. We then divide the household expenses between us. I pay our house payment, cable bill and internet service. I also make the charitable donations to groups we we support at the beginning of each month. Mrs. Sneed pays various utilities, insurances, eating out (usually), and buys the household supplies. Since we have very little debt, this leaves each of us a nice bit of cash to spend as we decide. We both agreed that we would like to pay off the house early, so I kick in an extra $500 per month to do that. Mrs. Sneed and I decided to buy a new car for $30,000. I wanted to pay cash and she thought she could pay it off in one year. For her having $30,000 in the bank was important. I would rather not have the debt. We utimately decided to pay half down and the other over 12 months. Mrs. Sneed uses some of her discretionary money to accomplish that goal. The point is that we make these decisions together. We also share absolute priorities when it comes to money. We save first, we pay our bills and eat next and then, and only then, do we spend on wants. This makes a formal written monthly budget unnecessary as far as we are concerned. Some might disagree. The use of two checking accounts for our spending also provides a level of convenience. There is no danger in me making a withdrawal from the joint account that I forget to record and she doesn’t know about or visa-versa. In addition, no one has the power when it comes to money. I use Quicken to track our finances so we both know what is being spent by the other, although that has not been something either of us has been hung up on. This has served us well and we are pretty financially secure so I guess we will keep it up. Whatever your system, it is vital to work together if you plan to succeed. Tag: Tag:

1 comment:

DarrellH said...

A well-thought-out system, indeed. :)