Hi friends! Hooray for Thursdays! And hooray for another Marvelous Money post! I was tempted to launch right into budgeting this week, because it’s so important and so many of you are interested in the subject, but I thought it might be better to talk a little bit about managing joint finances first.
Let’s start with a little timeline of our joint financial history, shall we? Consider it a case study.
Senior year of high school: We begin dating. Our finances are completely separate.
Sometime during college: We both independently open savings and checking accounts at the same bank, ING Direct. We keep our own budgets and have our own savings goals, but talk often and openly about what’s going on with our money. (What can I say, we love personal finance!) When we do something together like go out for dinner, we either take turns paying, or reimburse each other after the fact. (ING has a nifty electronic transfer feature which makes this very easy.) We have the same campus job and earn roughly the same amount, so this system works well for us.
Summer 2009: We graduate – whoo! We move to NC and became a one-income “family.” We consider ourselves a financial unit, even though we are not married. (However, all of our accounts are still separate.)
2010: We begin keeping one joint budget instead of two separate budgets. We both contribute to mutual savings goals like our emergency fund, wedding, and vacation. John becomes the point person for our investment and retirement accounts while I manage the day-to-day duties of making sure every bill gets paid. We agree that neither of us will rack up a large joint expense — or really any unexpected joint expense — without consulting the other.
2011: We co-sign on each others’ cars.
2012: We give each other access to accounts, but maintain individual IRAs, discretionary investment accounts, checking and savings accounts, and credit cards. John begins helping to pay down my student loans. We get married :)
SO that’s us in a nutshell. But, what does this look like on a day to day basis? Currently, we pay our joint bills out of my checking account, and then I bill John for his share. (I just total everything up and email him the amount once a month, and then he transfers it electronically back to me.) Our joint expenses get paid on our joint credit card, which also gets paid twice monthly out of my checking account. We pay expenses proportionately — so, if one of us makes 40% of our joint income, then he or she pays 40% of the joint expenses. Since John pays for some joint expenses I do not, like our health insurance, I compensate for that by contributing a larger amount toward our joint savings goals and debt reduction plan. Any money left over stays in our individual accounts for paying individual expenses or individual savings.
I tell you all that to show you how one couple manages their joint finances, and I hope it was helpful! Our system works for us; it may or may not work for you. Whether you feel good or bad about the current state of your joint finances, I have a few suggested action steps for you this week:
1. START TALKING. If you’ve never done so, or haven’t done so in a while, sit down with your partner and talk about what accounts you have, how much is in them, how much debt you have, how you expect money to be handled, your beliefs about giving, and your hopes for the future. Talk, talk, talk! And, of course, do lots of listening. Many sources say that money problems are the number one cause of relationship problems, so this couldn’t be more important. Get comfortable talking about money!
2. EVALUATE. Pick a time to sit down together and talk about the system you’re currently operating under. Is it working? Could it be improved? Are either of you doing something that stresses out the other?
3. PUT IT ON THE CALENDAR. If you’re not in the habit of talking regularly about money, I’d highly recommend putting a monthly money meeting on your calendars. Saturday mornings work well for us. Plan to talk about what’s working and what’s not, about what’s coming up that month, about progress made toward long term goals, about the state of the budget. I know that might sound a little basic, but it’s amazing what can happen when you’re in step with your partner and focused on the same goal – your whole perspective changes on what’s possible!
Speaking of which… next week: The nitty gritty of how, exactly, we make and stick to a written budget. In the meantime, I would really love to hear what y’all think. Do you use one joint account, all separate accounts, or a combination? We are certainly not perfect, and tips are always welcome!!
P.S. New to this series? Check out this post, where I tell our money story and explain why I think financial literacy is marvelous.