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Zen and the Art of Couples Budgeting

by J. Money on Monday, August 8, 2011

minimalist zen pebbles
(Guest Post by Gene Roberts)

The title of this post is more than just a rip-off of the book, “Zen and the Art of Motorcycle Maintenance.”  There are useful parallels between perspectives in that book, and my thoughts on couples budgeting.

In the book, Robert Pirsig discusses two different personality types: romantic and classical.  The romantic tends to live in the moment, whereas the classical digs into the nuts and bolts of things to learn how to master them.  What the narrator comes to realize as the story progresses is that neither viewpoint is better than the other. Which approach is needed depends on the specific situation.  He suggests that viewing the world both by living in the moment and using classical rationality can lead to a higher quality of life. (Wikipedia)

I see the two different types applied to couples:

  1. The “live-in-the-moment” romantics – who pool all their income into one account and yet (incredibly) live together in perfect harmony
  2. And the classical couples – who selectively pool resources to pay for shared expenses, and yet retain some funds to spend independently.

I admire those couples that are able to just throw everything together in one pot and have it just “work” for them.  I think that’s great (It boggles my mind a bit, but I respect it).  However, I do have to roll my eyes and sigh when I read comments that suggest that couples that don’t share every last penny are inferior in some way. The comments tend to go something like this: “If you have separate bank accounts, you’re just roommates. Why get married?”

My theory is that couples who are able to pool money harmoniously over long periods of time have very (extremely) similar values and goals.  With such minor differences they are able to intuitively agree with each other most or all of the time – so no conflicts arise.   Similar views and/or enough individual flexibility allow these couples to come to joint decisions organically – thus “live-in-the-moment” romantics.

But sometimes it is our differences that attract us to each other.  And although I might predict problems if someone with a 580 credit rating got together with a 780, I think that discussion and agreements beforehand can do a lot to offset those differences.  Couples with differing fiscal views can have relationships that are just as stable as those that seem to be like two $100 bills stamped from the same set of engraving plates. For the classical couples, delving into the details and making plans and agreements beforehand allows them to live in the same harmonious state of bliss as the romantics.

I specified “over long periods of time” earlier because my ex and I started out by pooling all our resources.  We put all our money into one account because that’s how we thought you were supposed to do it.  Who knew you had choices?  (I know, I know, you saw the word “ex” back there and are now thinking “What’s a freaking divorced guy doing trying to give me advice about couples budgeting?!” Ok, that’s a fair question.  Well, I have 14 years of married financial experience.  And once we resolved our differences we never had a fight over money again. (Hallelujah!)  When we did get divorced it had absolutely nothing to do with finances.  In fact, we are still good friends.  And it’s the story of how we resolved those differences that I hope will help others step around the piles of dog crap that we stomped right through.) [Ex-wife’s note: “Yup, it’s true we’re still friends. He asked me look this over for accuracy.”]

With us, pooling everything worked fine – for a while.  We made it about five or six years before it started taking its toll on our relationship.  We had some consumer debt (about$6k – seemed like a lot at the time) and she would want to pay it down.  Which was fine but I still wanted to be able to do and get things I wanted sometimes.  It started putting us at odds.  I began to feel that if I wanted to be able get something I wanted, I had to go out and get it right away when we had the money. Otherwise the money would be gone and I would feel I missed out.  Needless to say this didn’t do good things for my saving habits.  And I’m sure that she felt very frustrated that I was ruining her plans to pay ahead on our bills.  It wasn’t a good time for either of us. Voices were raised, feelings were hurt, and tears were shed. Something had to change.

We sat down and talked it all out.  We needed to agree about what we were going to budget (including accelerated paying off of debt).  And we needed to each have money that we weren’t accountable for to the other.  After our talk, I sat down and drew up a budget.  I figured up everything we had agreed on, and compared it to what we made in a year.  Hooray!  We had disposable income left over.   Now we just had to divvy it up fairly.

Here’s where it can get touchy.  It is unlikely that both individuals will make the same amount of money.   So what do you do?  If you split up the discretionary money 50-50 then the person that has a higher income can feel that they are paying a disproportionately higher amount of the budget.  On the other hand if you split the budget 50-50 and have each person keep what they have left over after they pay their half, the person with the smaller paycheck might walk away with nothing!  That dog won’t hunt, Monsignor.

So I decided the fairest way to share expenses and bills was to have each of us contribute the same percentage of our income towards the budget.  If I got to keep 25% of my income, then she kept 25% of her income.  The amounts were different, but we were each contributing the same % of our work effort to our joint expenses.  We each deposited the agreed upon amount into the joint account each time we got paid and the rest went into each of our personal accounts.  And we didn’t have to get buy-in from each other for whatever we spent out of our personal accounts.  Once I wasn’t afraid it would disappear, I started actually saving money up for bigger things I wanted in the future instead of spending it on crap.We both thought that the plan was fair.  And for the rest of the time we were together we didn’t have any issues with money.

At the time, I was very proud of myself for coming up with this grand scheme – especially after it worked out so well for us.  In my defense, I did come up with the idea of each putting in the same percentage of our income independently.  But I know now that all I did was re-invent the same wheel that had already been invented many times over (and to my chagrin I also found a sizeable chuck of it in the comments from May’s “Married 3 Years & Still Haven’t Combined Finances”).  Hey, if you actually come up with something new under the sun in this day and age you’re a phenomena. So if you think that this method might help you out, here are all the steps:

5 Steps to sharing this couples budgeting method:

  1. Make up a budget of agreed expenses/investment that is less than your income.
  2. Calculate the % of your income that must go to your budget. (divide total budget by total income)
  3. Every time you get paid, deposit that percentage into a joint account that you will pay bills out of.
  4. Deposit the remainder into each individual’s personal account.
  5. Live happily ever after – Lather, Rinse, and repeat.

This plan isn’t the right one for everyone, but it worked great for us for many years.  I hope that a few couples might find it useful without having to go through the pain we did to figure out the solution.

There are more ways than one to skin a cat.  As long as you can come to an agreement you both approve of everyone can be happy (with the possible exception of the cat). No one approach is right or wrong for every couple.  The right approach is the one that works for you.

So, how do you share with your mate?  Does it work all the time or do problems come up?  How do you handle them?

————–
Guest post by Gene Roberts – a 40 year old machinery technician working in the semiconductor industry (BUM, , , bum, BUM, bum, BUM) and lives in Chandler, AZ. His net worth is about $280k and its growth has been conforming with the get rich slowly method all too well.

(Minimalist photo by MinimalistPhotography101.com)


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{ 17 comments… read them below or add one }

1 cashflowmantra August 8, 2011 at 6:49 am

I suppose we are classic since we pool everything. It isn’t difficult since I make the majority of the income and my wife has elected to stay home with the kids. Now that they are getting older and starting to move out, my wife is starting to work a little more out of the home. We will probably still combine all our funds except that which is needed for her business.

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2 RamblingsFromMyMessy Desk August 8, 2011 at 8:28 am

When I was married, I was the one who brought home the $$$ as I wanted a stay at home wife at that time. Every payday I would deposit my check, wait a couple of days so she could pay the bills, etc… and if I had been good, I’d get a small allowance to do whatever with. ‘Mad money’. It worked for me. She was better at managing the $$$. Now that I am single and without a financial manager, I pay big bucks to my accountant to ‘keep me in line’ and out of the poor house.
You certainly do have a few good tips here. Something I would consider in the future. Now… where’s the help for someone like me? Huh? Huh? :)

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3 Gene Roberts August 8, 2011 at 8:32 am

@ cashflowmantra
Actually, per the analogy you’re one of those romantic superstar couples that combine your finances and live in-the-moment.
Your situation brings up a case that I neglected to address in the original post. Namely having a stay at home spouse.

I had come up with a way to apply this budgeting method to the stay at home case, but hadn’t thought about it when I wrote the post since it didn’t apply to our situation.

I thought it would be fair to figure up what everything a stay at home parent does would cost if you had to hire someone and use the comparison of that amount to the working parent’s income to divvy up the discretionary income. You would simply give the stay at home parent the same % of the discresionary income as their (fictitious) income divided by the total income (working parent’s income + stay at home’s fictitious income).

For example: Let’s say you had $1000 discretionary $$ per month. You figure up that keeping house, watching kids ect. would cost $2,000/month and the employed parent makes $3,000/month (the 3K would be the only real income – presumably the couple’s budget would be 2K/month). The stay at home % of discretionary would be 2K divided by 2K + 3K = 40% or $400. The employed parent would get 60% or $600.

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4 Jake August 8, 2011 at 9:10 am

Glad to see that you have remained thoroughly impartial as to what the right answer is … your names for two different types of couples doesn’t imply *any* kind of judgement….

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5 Jeff Bell August 8, 2011 at 10:52 am

Actually, I share expenses with my spouse but the hardest part wasn’t the agreeing to budgets, it was actually tracking the spending. With each of us dipping into the account, things became difficult to manage. We started using a free online/mobile tool called Chext (chext.net) to help us track. It’s been a life saver for us and saved a ton of headaches (and surprises). Basically, it’s like a checkbook register only with text messages. Whenever we go out and buy something, we just send a text into Chext. Chext calculates our new balance and sends a text to each of us. It’s saved so many arguments about those morning coffees that tend to add up. After my wife sees a few of those come through, she usually texts me back with a little reminder of our goals… :) It’s also got a cool calendaring feature that allows us to see our future balances after we pay bills. It’s really been great and I highly recommend it to anyone!

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6 Ginger August 8, 2011 at 12:25 pm

My spouse and I combine all our money, except for our spending cash. We each get an “allowance” to spend however we wish. I normally spend it on eating out and my DH on video games or extra hockey. It works for us.

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7 Jenna August 8, 2011 at 1:33 pm

Thanks for the article and suggestions! Your last sentence summed it up: “The right approach is the one that works for you.” Everyone’s definition of “fairness” will be different, but the key is to find the one on which you can both agree.

Right now I am our main income source while my boyfriend is going back to school, but we’ll need to revisit this exact conversation next year when he graduates and goes back into full-time employment. We are both pretty independent and will always need some individual spending cash with no strings attached, but we’ll have to decide what we think is fair for us. At the moment, we contribute a small $ amount monthly to shared expenses (groceries, household expenses, dinner out, etc.), but I contribute more in the form of the mortgage, utilities, vacation savings, etc. It’ll be interesting to see what we end up doing next year when the second income comes into play!

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8 Stephanie August 8, 2011 at 1:41 pm

Right now my husband and I do a sort of hybrid approach. We deposit all our income to the same account, but like Ginger and her spouse we each get an allowance. We can do whatever we want with that money, save it or spend it, and we don’t have to be accountable to each other as to what we do with it. It can be frustrating when you have two people both using a debit card that draws from the same account, but I balance the checkbook every day or two anyway, so it’s not too bad. I just give my husband a heads-up if the balance gets low or if we’re overspending in any particular category and/or not meeting savings goals. It forces us to have discussions about finances on a regular basis and we can address problems when they’re still small instead of having a big fight when all our money is gone and we don’t know where it went. ;-)

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9 Jen @ Master the Art of Saving August 8, 2011 at 4:26 pm

We put all of our money into one account (which works great since I’m unemployed) and just discuss any uncommon purchases before making them. We get along fabulously and still haven’t had our first fight (after 9+ years together). Sometimes we disagree with financial matters but we just sit down and discuss things until either one person “sees the light” or we can make a compromise. We’ve always put a high value on communication, even if we don’t feel like it.

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10 T. Thema Martin August 8, 2011 at 5:25 pm

I have never been married, but I wonder if a good option is to assign responsibilities? For example, the breadwinner would be responsible for the mortgage and everything it costs to maintain a house. The other person would be responsible for groceries, entertainment, etc. Therefore, each person would keep a separate bank account or 2 joint accounts with each person responsible for one account.

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11 Natalie @ Mango August 8, 2011 at 5:41 pm

The money thing is always tricky in relationships. It’s funny, you can get along with someone just swimmingly in all aspects– until it comes to money. People are funny about money. I like your take on the two money personalities.
I work for Mango Money’s blog and we recently did a guest post on Living Richly on a Budget about money personalities in relationships, too; but we had them broken down a bit further. No matter what money personality you do have, though, it’s important to figure out a way to make it work with your partner’s.
Check out our infographic for a more visual representation. Might help you all out! http://www.livingrichlyonabudget.com/whats-your-money-style

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12 Gene August 9, 2011 at 12:50 am

@ RamblingsFromMyMessy Desk
At least being single means fewer confrontations over spending money (assuming your accountant isn’t aggressive). :)

@Jake
I’m not sure what the source of your sarcasm is. I’ll cop to being personally biased towards the solution that worked for my situation. The point of the post was to describe what worked for us and how we came up with it. But I thought I made it clear that there isn’t a one-size-fits-all solution.
I would agree with the author (of Zen and the Art of Motorcycle Maintenance) that using both ways of viewing the world will benefit you. I’m a nuts and bolts guy with my finances. But I totally get the live-in-the-moment perspective. That’s what I aspire to while riding my motorcycle through the curves. It almost becomes a meditative state when you’re not consciously considering every individual aspect of riding through the turns, but taking in the whole experience at once. Living in the moment is awesome. If you hear riders talk about being “in the groove” or “zone” that’s what they’re talking about.

@Jeff Bell
That Chext service sounds interesting. We went the hard way and made a spreadsheet budget (my link is in the comments section of the Budget Templates) that does some of that. It forecasts my bank account balance into the future and shows what I’ll have when the bills come in. It was difficult to set up, but runs like a dream. I just check it every couple of weeks and make sure everything’s good.
I find that it’s easier having a separate account for budgeted items (whether you pool resources or not). I put what I know I’ll need in the budget account so my bills and goals are met. Then the discretionary $$ goes into a separate account for things like morning coffee. I could spend down my discretionary account if I wanted to and still know that everything in my budget is covered from the other account.

@Jenna
I’m glad you enjoyed it. It always comes back to doing what works.
It’s ironic – the most important part of a relationship is communication. Yet no four words in the English language can strike terror in a guy’s heart like “We need to talk.” :)

@Stephanie
It’s good to discuss issues before they get big.
Having a separate account for each of us made it much easier to balance our budget account. Sometimes I would go a couple of weeks without balancing, spend a half hour or so and it would be done.

@Jen@Master the Art of Saving
Good method. An ounce of communication is worth a pound of marriage counseling.

@T. Thema Martin
I’ve heard of couples splitting it up like that. If that works for both that’s all that matters.

@Matalie@Mango
Depending on how they are raised, people can have a variety of hot button issues. Money is certainly one of the more important ones.
I’ll have to check out your site’s interpretation.

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13 JMK August 9, 2011 at 7:13 am

I’ve never understood the whole concept of an allowance, mad money, personal/private spending etc. Maybe it’s because we’re so similar in our spending and both have a lazer like focus on early early retirement with travel being our only exception to the normal extreme saver mentality. I can’t think of anything I would buy that I would feel the need to justify to my husband and vice versa. If we each set aside designated spending money it would probably just pile up unspent in different accounts rather than being combined and put to work immediately as an extra mortgage payment or another contribution to our retirement accounts. If one of us wants something nonessential the money will be there in the joint account, why hoard it off privately just in case something catches my eye? Why would we make double the work of maintaining two sets of accounts and spreadsheets when one is simpler? Why would we each separately make transfers to our retirement accounts instead of having all the excess funds pile up in our main joint account where it is cleared out weekly and invested as a single transaction? Maybe other folks spend a lot on stuff their partner finds wasteful or frivolous and it’s less painful if you don’t have to “see” that. I suspect budgetting for miscellaneous spending is precisely what leads to miscellaneous spending.
I hope all those that have separate finances are at least planning jointly for their retirements. It would be a real shocker to find out decades later that one of you was saving more and is ready to retire at 50 and the other was spending their discretionary money on crap and will never be financially ready to retire.

I have to disagree with the description that the combined money folks are “living in the moment”. It’s exactly because we want to travel now and are also saving so intensively for our future early retirement that the combined finances works so well for us. No hidden, unexplained spending tends to mean we maximize our combined savings. Every week after the pay is in and the bills are paid, the excess is skimmed off and invested (we do keep a $1k minimum to avoid bank charges and have easily accessable emergency funds). A combination of decent incomes and frugal living means we can cover the bare essentials on 55-60% of our income. There will be excess again next week so nobody feels the need to “spend it quickly” before it’s gone. If we do spend on nonessentials one week, there is just less or even no excess on Friday to transfer out. No harm, no foul, no finger pointing. We both know the purchase was carefully considered by whichever of us made it. If we have a car replacement or major trip on the horizon, we just stop skimming off the excess and let it pile up for the required number of weeks/months and then make the purchase with cash. It’s tagged for a purpose and neither of us feels the need to spend any differently than if it wasn’t sitting there. Maybe we’re completely weird, but it works for us.

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14 D Roop August 9, 2011 at 11:20 pm

Great post! For dual breadwinners, I totally side with the agreed percentage or contribution into a joint account (to take care of househould expenses) while individual accounts for personal cash allowance. Great way to handle business while still remaining a financial individual in the relationship

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15 J. Money August 14, 2011 at 2:18 pm

Thanks for the guest post, Gene :) Obviously I agree 100% with your setup, haha… I hadn’t blogged about it in a while though so it was a great opportunity to continue sharing the ideas! Appreciate all the responses you’ve given too to everyone – that means a lot and really helps me out. Thanks man. You def. went into way better detail & explanation than I did back in the day :)

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16 Paula @ AffordAnything.org August 15, 2011 at 12:18 pm

I like your ideas. In my case, though, it wouldn’t work because my partner and I are prepetual “startup” people. Sometimes I’m working for money while he’s putting in long, unpaid hours at a startup that’s not yet producing any income, and sometimes those roles are reversed. We’d ideally like to split money in the way that you described, but through most of our relationship, only one of the two of us is making money, while the other one is taking on some risky entrepreneurial venture.

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17 J. Money August 15, 2011 at 9:26 pm

Haha, I love that though!! So cool that both of you are in the same shoes :) Usually it’s only one half of the relationship. I bet your lives are crazy interesting!

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