Setting Up a Financial System as a Couple

The following guest post is from Elle, who writes for Couple Money – a personal finance blog about building financial freedom together.

Each family has to deal with finances their own way, but there seems to be some common threads among all of us.   A successful marriage isn’t easy and it often involves learning to adjust to circumstances, including financial ones, as they come. With many people having their pay cut or losing their jobs all together, money has become a sensitive subject for some families.

One thing that may surprise people is how our finances have helped us draw closer together. While other factors like our faith, friends, and values have been major assets to us, our financial system has been a positive force in our marriage. Like many couples, we had to create it from scratch and learn what worked for us and what didn’t.

Focus on Goals Together

We learned from family and friends that open and honest communication is essential to reaching family goals, whether it’s money or otherwise. Being on the same page with our goals and values has made all the difference for us.

We have made a point to have financial meetings to discuss budgets, goals, and ideas. We did this more frequently the first year we were married as we had to figure out a system that was going to work for both of us. This is important because many times couples will have different ways of getting there.

Living on One Income

The first major decision we made as a couple was to plan to live on one income. It first started out of necessity, but once we got accustomed to it, we kept it. Besides going to school full-time, I had an internship that had a long commute. We weren’t sure if I should or could keep the job since we moved into an apartment way in a different city to be closer to my school.

We decided to keep all our living expenses based on my husband’s pay, which wasn’t much at the time with him being a new college graduate. Since I was still in school and working part time, we decided to do proportional budgeting for our joint accounts.

Our Budgeting System

Here’s an example of how it worked for us. (I’m using some hypothetical numbers to keep the math simple.)

Family Income

  • Person 1’s Monthly Net Income: $2100/month
  • Person 2 Monthly Net Income: $1400/month
  • Total Income:  $3500

Family Expenses

  • Bills: $2800/month
  • Person 1 brings in 60% of the income.
  • Person 2 brings in 40% of the income.
  • So here are the deposits:

Family Deposits

  • Person 1 deposits $1080. That’s just multiplying the bills by 60%
  • Person 2 deposits $720.

We feel like proportional deposits are a more fair way to handle the bills for us personally, but we understand that everyone has to build their own budgeting system. It’s fair for us because the bills don’t become a burden on one person.

We’ve automated much of our bill payments, savings, debt snowball, and retirement contributions. We’ve found that automating our budget keeps us on target.

Having visual reminders has been a big plus for us.  To help us focus on our monthly budget, we’ve used Google Docs and have shared a spreadsheet. This allows us to have an idea of what the plan is for cash flow. To keep track of actual spending habits, we use Mint for the weekly updates.

Postponed Big Purchases and Expenses

Our first apartment certainly wasn’t fancy, but it was by the beach, near the highway, and was well within our self-imposed budget.
Some friends thought we should’ve upgraded to a bigger apartment, but we didn’t want to live on a tight budget. Having an affordable apartment allowed us to tuck away some money and still have a bit to go out with friends for dinner and drinks.

It also provided a great lesson and reinforcement of this economic truth: we don’t have unlimited resources, so we should use what we have wisely.

Where did our little stash of leftover money go during the first few years?

  • Emergency Fund – Big priority for us as we wanted to have a financial cushion.
  • Paying Down the Car Loan – We sent in extra payments each month and even used our tax refund to get this eliminated.
  • Spending Money for Eating Out – We wanted to still have fun, so we included this in our budget.

We’re weren’t immune to wanting to make some big purchases. Postponing purchases usually meant analyzing the situation. For example, my husband really wanted a big flat screen TV.

There were two problems with that though:

  1. The money could be better spent on bigger goals, such as an emergency fund, debt reduction for our car loan, or house down payment.
  2. Having a really small apartment would make the TV look ridiculous.

Realizing that, we were able to meet our financial goals.  We did eventually get a new flat screen TV, so it worked out for my husband. He was glad because he was able to find a great deal at Costco and made the purchase with our debit card. No payments, just enjoying his TV free and clear.

Bought Cars (with Cash)

When we married, we both had cars. My husband owned his vehicle outright and I was making car payments. Even though my monthly payments were fairly low, I could see how they were negatively affecting out budget.

We decided to pay off the car loan early and hold off on getting another car loan. So far we have purchased 2 cars with cash.

  • Acura Integra – My brother had a friend of a friend who needed to sell his car. The guy had started doing upgrades to it, but he didn’t have the money. We bought the car for less than $2,500 and until our car accident, it ran fine. It had great gas mileage and relatively few mechanical problems.
  • Toyota Celica – We again put the word out and people gave us suggestions of cars to check out. One car had been for sale for a couple of months. It was in good condition and the owners had taken tremendous care of it. Their children had left the house, so they were downsizing the car collection. So far, it’s been running fine.

It does take much more legwork to hunt for a used car, but we believe it’s been worth it. Both car are at least 10 years old, but they have ran as good as newer cars. Ironically my newer car with the payments has been in the shop more times!

Once we paid off my car loan, we reallocated that money for various new goals, including a car replacement fund.

Do I sometimes want a nice, new car? Yes, it is tempting, but having a large car payment for a few years is not an appealing option for mw. When we go on road trip vacations, we rent a car and that has helped us curb our car appetite.

I completely understand that buying cars with cash isn’t an option for some people. You alone know the state of your family’s finances. I’m just suggesting that you consider holding off having car payments at least until you have a little cushion in your monthly cash flow. My husband suggests trying to buy cars outright unless you have excess money to burn.

Worth the Work?

We have found living a frugal lifestyle to be fun and enjoyable. We eat out with friends, go on vacations, and once in a blue moon, just blow money on things we love.  Our next debt to take down is some student loans. Once that’s done, we’ll try to increase our mortgage payments to pay our house off early.

Getting adjusted to living on income takes time, but it’s worth it. It’s been a wonderful few years together and we hope to have many more.

Thoughts on Couples and Money

How do you organize your finances as a family? What has been your family success story (big or small)?

Comments

  1. I think you meant to say “Bills: $1800/month”.

    My wife and I have joint finances; one joint checking account, one regularly used credit card account we both share (I forget which of us is the authorized user). We also live off one income. We literally save almost all of my wife’s income – she works for a government entity, so she has access to (and we take advantage of) so many tax-advantaged retirement/savings accounts that her take home pay is only a couple hundred bucks per month.

  2. Would be interesting to see comments from older folks, having been single a single independent income for a long time, and how they plan to work this all…

    In my case, my money has not been co-mingled for over 15 years now – so I am not so sure I want to turn loose of the control of any of it…. luckily we both are debt free, except for a small mortgage on one of our homes…. We’ll be combining 2 homes and all household goods and 4 vehicles for just 2 of us….. lotta stuff to deal with getting shed of…

    Gonna be interesting – and there is no hurry – …..

  3. We have lived off of one salary for expenses for our entire marriage. My salary (when I worked) was used for extras and saved. MY husband retired from the military and we changed a bit. We both saved the maximum that our business allowed and lived off the rest. It has worked out well. My husband is totally retired and I work very part time.
    I am glad we came to the understanding that all money was “ours” from the beginning. We chose to move for his work- which left me at the bottom or jobless.It helped when it was better for me to stay home and homeschool. It was difficult to give up my jobs- but it made it easier that I was never pressured to have the income. BTW- he did not work the entire time our children were in high school. He was much better with that age of person.

  4. Ok, I *think* I/we fall into the “older folks” category!! :) My husband is 69 & retired, I’m almost 50, yeah do the math, 19 years age diff!! So….I’m going to speak from 3 view points, ours, my parents & his parents (my dad is living & is 90) and his mom is living & is 99!! I’m intimately familiar with all 3 sets of finances & I think you may be suprised about how the $$ was handled.

    Both sets of parents came thru the Depression with little or no money so the value of the dollar reigned/reigns supreme!!

    Both fathers were college grads (as a result of working/payign to go to school) & both mothers worked outside of the home, long before it was fashionable. All children involved (my husband, my brother & myself), ALL had to work as soon as possible, not because the $$ was needed but because “that’s the way it was”. We did NOT get an allowance, we were expected to do our chores w/out pay. But back to the finances….BOTH sets of parents operated out of 2 accounts, 1 for family expenses (mortgage, bills, etc) & one for the “workin’ gals”. The Dad’s $$ paid for the bulk of the expenses & the Mom’s picked up the clothing & extras. All had retirement account because they squirreled away money like no buddy’s business. Their savings were/is diversified, cash, stocks, bonds & other investments. All investments were conservative & saw many “highs & lows” over the years. But both sets of parents were able to live independently (financially) from their investments/retirement/savings/SSI.

    Of note, absolutely NONE of them EVER received any financial “gifts” or inheritence from family. There were no hand outs or tax breaks or assistance with “higher” education or training.

    Fast forward to “our” finances. Well, the acorn doesn’t fall too far from the tree. My husband receives his retirement (military) & SSI into 1 acct & I continue to work “half time” with my funds going into “my” account. Our finances have been handled EXACTLY like our parents with the husband paying the expenses & the wife taking care of the extras. All 3 women (mother, mother in law & myself) have establshed & funded our own retirement plans. Please understand, the $$ earned by the women was not “fun money” i.e. good times, etc. It usually paid for MD bills, RX, clothing, shoes, extra food during the holidays or special times. The gals $$ took the “edge” off of the main account. There were/are clear division of financial responsibility and it was agreed upon from the start of each marriage. No major discussion….

    As far as expenditures (large), in all 3 marriages they were discussed & paid for in cash (exception: mortgage). All 3 households operated on some kind of a “budget” with expenses being recorded & tracked.

    I know the scenario’s presented don’t work for everyone & some may feel it is “inequitable” but it has worked thru 2 generations & we are still speaking to each other & all are debt free.

  5. This is great information! Each person in a relationship must be on board with a debt elimination plan or it will fail. No spending without notifying each other, no more loans, no more using credit cards absolutely no more using of credit at all.

    A definite plan must be written down and agreed upon with input from both parties and once it is signed they must keep their word and stick to the plan as much as possible.

  6. My thoughts are similar. I recently got engaged and our wedding is in March. But in the meantime, i’m trying to figure out a budget that will work for both of us. she will still be in school for another year after we get married so we will have to live off of one income. In our big purchases, i’m using as much cash as possible to keep our monthly payments as low as possible since our cashflow is not as high as we would like it to be. It’ll be a struggle for first couple years, but once she starts working, that’ll help us alot financially.

  7. Elle, this post came right on time, as I just got in an argument with my significant other regarding my (our) finances. Hopefully we can adopt a similar system and just really sit down and talk about it. Thanks for the encouragement.

  8. Thanks everyone for sharing your takes on family and finances. It’s always fascinating for me to see how other people handle it.

    Best wishes on the talk Briana!

  9. Woah, I must admit,
    You have really thought this one through. Team effort.

    This is the perfect plan. I don’t know what else to say really. But you’ve hit the nail on the head. Your clear precise structure for everything you have planned, down to a tee, is going to make your life financially stress free, im sure of it.

    In fact I’m more than sure of it, I’m kind of jealous. I’m going to try and give it a shot myself….and don’t worry I’ll be sure to let you know if manage to pull it off!! I’ll be letting everyone know. haha

    Cheers,
    Catie Cashhhhh

  10. I have trouble getting my partner on board with proactive personal finance. She was raised in a house where her parents always insisted they were poor, yet they always had money for things they really want. She never knew their financial situation (at 27 she still doesn’t) and never got any money lessons from her parents because they’d always guilt the hell out of her and then pay for whatever she needed.

    Now that we’re out of college and we’re broke (but not poor), she seems to think that it’s ok to spend all of her money because poor people always run out of money at the end of the pay cycle. She’s really smart but she has no money sense; she doesn’t understand that we’re broke (decent cash flow but lots of bills) and not poor. We have enough income to save if we massage the budget a little (by the way, she can’t stick to a budget either).

    I haven’t been able to figure out how to fix this. Part of it is that she doesn’t have the will to change, and part is that she doesn’t understand money and personal finance as well as she should. She wants to change but doesn’t ever take action, even with my help.

    For now I’ve decided to shoulder all of the burden of our “shared” financial goals and hope that my hard work and hustle inspire/guilt her into helping out.

  11. Both of our paychecks go into one pot and all the expenses come right back out. We tried to pull off a set amount for each to spend every month but that became too much of a bother. Now I run the finances through mint and if my wife wants something she checks the progress bar, if we are nearing the end of the month and are still in the green then she can go ahead. For the big things like a cruise she tells me; and I set the new budget and time schedule ($200 less per month for 24 months.)

  12. My husband and I have been married for 29 years and this is one subject we have yet to figure out well. We both handle money in different ways. We are not huge spenders in that we have to have the latest and greatest, but we do like some toys and we like to take decent vacations. We do have debt, which we have paid and reaccumulated again and again thru the years.
    We have had a major life change in that I will not be returning to a fulltime job, but hope to conrtibute some in the near future.
    I have heard good things about mint.com. I am a very visual person and it sounds like it may work for me. We’ll have to give it a look!
    I like the way you break it down, especially people who come into marriage with already some independence.
    Thanks for your tips, Elle!
    Bernice
    http://bernicewood.wordpress.com/2010/09/24/10-ways-to-stop-being-so-busy/

  13. I was just thinking about this topic before I read the post. I moved to a ‘cheap’ but safe neighborhood in MD. Some friends and people I hardly knew were against it. However, I knew what my goals were and did not listen to them. I was paying about half the amount in rent at the new place compared to the old one. The surprising thing is one of the people against my move was an elderly woman who lived in a better area but had no savings to her name and was always looking for ways to make ends meet. I just wondered how she could criticize me when she had zero in her account and I had about $10,000 saved at the time. Goes to show that at times you just close your ears to naysayers and do your own thing.

  14. Having each partner carry their weight, when it comes to money, is the best route indeed. Maybe they are not both earning the same, but it’s not normal to have one who’s keeping everything on their shoulders. If a spouse cannot work, that spouse will surely help in other areas, since all efforts are not to be made by one person only. With both partners working together for the same goal, it’s easy to solve any financial issues and of course, also be happier.

  15. Great post- my wife and I did the exact same plan when we were dating and living together.

    My salary was 66% and her salary was 34% and we split the bills up that way. Each check I would put in 66% of my salary to be used for bills. It was the absolute fairest way for both individuals, I believe.

    Once we married it was easier just to roll every deposit into one account, pay out of that one account and have a personal cash allowance out of that account for our own endeavors.

    The key to money and couples is, and always will be, communication! Sometimes money troubles is a symptom of a communication break down.

    Great content!

    EL
    http://www.minimize2elevate.com

  16. My wife and I have a joint account. I bring in the bulk of our income while she manages the kids. We just budget and discuss wants verse needs. It works out fine when you communicate often.

  17. Great Article. My wife and I follow dave ramseys system of envelope budgeting and are now debt free. We are saving for a house currently, and joined Team National http://www.bign.com/rbusby which is a service that we save money while earning a nice income at the same time, buying our regular household items. We are excited to be on the same page.

  18. Your idea of buying used cars and paying for them in full (or at least paying off a loan quickly) is great. Financial adviser and columnist Allan Roth did an analysis of how much a couple could save buying cars your way versus buying the latest and greatest vehicle every few years. The answer will surprise you, but the title will give you a hint: “Skimp or Splurge – Millionaire’s Car”
    http://moneywatch.bnet.com/investing/blog/irrational-investor/skimp-or-splurge-millionaires-car/1705/

    Just as important is your attitude towards money within the context of your marriage. Honesty and clear communication mean more than what you buy or how you divide your finances or even exactly how much you save.
    regards,
    Jerry

  19. Thank you so much for your effort posting this article. I love reading this and I’m pretty sure that it will help me make a wonderful output. God bless! I have also an article Abortion Articles Help that you might be interested too.

  20. Thanks for offering these tips on how married couples can save money together. Communication and a desire to save money are both essential to long-term goal keeping and success!

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