The Money Mustache Community
General Discussion => Welcome and General Discussion => Topic started by: WildernessDowntown on December 04, 2017, 10:28:53 AM
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I'm anonymizing genders just to focus on the question at hand (let me know if specifics are needed).
Spouse A makes 90% of the take home income, and Spouse B makes 10% (still a student but will make a high salary in a few years).
Spouse A pays about 90% of all bills and eating out, vacations, etc.
Spouse A also spends more on discretionary items (electronics, books, etc), while Spouse B is more frugal.
Is it unfair that Spouse A spends 3x the amount of Spouse B on discretionary items monthly?
Is the best path forward that both Spouse A and Spouse B get a discretionary budget of say $500 a month each, even though Spouse A makes 90% of income?
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Do Spouse A and Spouse B like the split?
When we first married my spouse was in school and I earned all the income. All spending was joint, including discretionary spending. We never really limited each other - we did check in if we were going to spend a significant amount of money (at the time that was like $40 - we didn't have a lot of money and we're both pretty frugal). It worked for us. But that might not work for the people in the above example.
The right answer is the answer that both partners are happy with. If both feel like they need a discretionary budget, then setting one should be done - if $500/mo works for you, great. If you want to keep all income/spending separate, then do that.
Edited to add: personally, I would be uncomfortable with having so much more discretionary spending than my spouse, so I wouldn't set it up the way you describe. (I'm the female half of a male/female relationship)
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Spouse B is used to being frugal, and Spouse A can definitely learn frugality lessons and is working on it.
Spouse B is worried about Spouse A's spending from a general sense, but only wants to not spend as much money and doesn't want to look at budgets or spreadsheets ("just spend less"!).
Spouse A isn't maxing out credit cards, but bought a laptop for the first time in 4 years and a toy or two which has Spouse B worried.
Spouse A and B both like the idea of a fixed discretionary amount monthly but haven't implemented it yet.
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This question gets much more interesting if we assume spouse B will never make more money, that this is a permanent thing. How will they spend now, and what is fair?
I am with KCM5 on whatever makes them happy. A marriage is supposed to be a partnership. Each contribute what they can, and spend what they need, kind of like communism. Communism doesn’t work on a large scale, because of freeriders etc etc. But in a marriage? Sure, it works! Would anyone really want to be in a marriage where one spouse travels and eats out frequently while the other one stays at home eating lentils?
This will of course only work if both want it to work. And if it doesn’t work, that is a clue about the state of that marriage....
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I don't think it's unfair. Different life choices lead to different income results. I think it would be extremely unfair and entitled for spouse B to expect to have their discretionary spending subsidized by anyone, including Spouse A. You could make an argument that Spouse A should pay a higher percentage of fixed expenses, but it seems like a bit of a stretch to expect full lifestyle subsidization, unless that was explicitly agreed to by both parties ahead of time.
I also think $1,000 discretionary spending is absolutely NUTS, unless it includes a TON of stuff that's more borderline-discretionary, like vehicle costs, some groceries, all personal care products, household items, cell phones, travel, etc.
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My wife and I have always had different incomes. The first two years of our marriage, I was making about double that she was. Next year, she very well could be making double what I am (thank you enterprise software sales).
We've always had the same fixed amount of personal spending budgeted, $100/each. I'm a big believer that if you are married, you are in it together. I'm not looking to "equality" or "fairness" in the way I spend my money because of an income.
I'm always surprised when I hear married couples talk about splitting up finances. Are you roommates? Or are you married? I couldn't imagine telling my daughter, "Daddy get's to buy more shit than mom because he makes more money".
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OK, I'm a coach and so am approaching this as a coach would- by showing the bias and judgement in your thought process. Your statement shows that b/c spouse A makes 90% of the income, Spouse A gets to make 90% of the decisions and control Spouse B's spending by doling out money (an allowance). Here's the bottom line question- is it Spouse A's money or "our money"? If it's "our" money, then you sit down together and agree on financial goals and how much to allocate on discretionary spending then together allocating that amount for each person per period.
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Do you care about the situation being fair, or do you care about the marriage lasting?
I have been both higher and lower earning spouse. When I was higher earning spouse, I couldn't imagine going out and doing fun, expensive things and just leaving spouse at home. When I was lower earning spouse, I couldn't imagine wanting to be married to someone who would just leave me at home because I couldn't pay my own way.
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Another vote for "whatever works."
However, I suspect that we have this question because it isn't working. In that case, it depends on whether spouse A is feeling guilty about their own spending or spouse B is jealous that they have to be more frugal.
We have separate accounts, but joint expenses. My entire income goes to my solo 401k and IRA (really bad year for what I do this year) and my spouse pays all living expenses and all the joint credit cards. He also transfers money to me when he sells ESPP or RSU so that I can pay my student loan and personal credit card. As long as I don't break the budget, I can do whatever I want with that personal card. Well, new rule since or last review: fast food must go on joint cards so that I am not hiding it from him. But that is more a health concern than a budget concern.
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My personal preference is a his/hers/ours setup. In this particular case, though, I would let them have equal discretionary monies, where spouse B can choose to save or spend as they prefer, the significant word there being save. Might decrease A' s spending a bit while bolstering B's need for security.
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And as far as what we personally do, we have separate accounts, each pay for our own stuff, and split joint stuff right down the middle. We've done that for our entire relationship, through many different income scenarios. For deciding on joint expenses like what apartment to rent, we just make sure it's an amount that we're both comfortable with paying half of.
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I've made more than my partner in the past, we make about the same right now, and next year she'll probably make more than me. We make pretty much all major and minor financial decisions together. She'll once in a while spend a little money on things I think are objectively stupid, and I do the same. We're not formal about it, and I would feel weird putting a cap of some sort on it (probably averages out to less than $50/mo each if we're generous), and honestly putting a cap on would probably mean we'd end up spending more (similar to my philosophy about formal budgeting).
If a "personal discretionary spending" cap would make a difference that could make sense for you. However, $500/mo each seems ludicrously high. I wouldn't want to be that out of sync with my partner's values.
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When we were still working, I made almost double what the husband made. Who made more was never even on the table. If you're married, it's all shared money. So one feeling they deserve to spend more because they earn more is a slippery slope and needs to be tossed out for the good of both the relationship and for FIRE plans if that's a goal (assuming it is since you're on this forum).
We had separate joint checking accounts, but they were shared (just made it easier for us - it was traffic control more than anything). In the last few years before FIRE, 100% of husband's income was funneled into investments, while my salary paid all bills, health insurance, maxed out the 401k and built up our savings.
We agreed upon a no questions asked amount ($100/month) and if one of us decided we needed/wanted something way more expensive, we either saved up the fun money or discussed up front the proposed purchase so the other could help check budgetary issues.
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Do you care about the situation being fair, or do you care about the marriage lasting?
I have been both higher and lower earning spouse. When I was higher earning spouse, I couldn't imagine going out and doing fun, expensive things and just leaving spouse at home. When I was lower earning spouse, I couldn't imagine wanting to be married to someone who would just leave me at home because I couldn't pay my own way.
this.
The only time I think it makes sense to have separate finances is when talking about a mature couple who have the bulk of their life savings behind them, and really this usually only makes sense if there are dependents from previous marriages to consider.
For a young, first marriage couple, like what I assume the OP is talking about, the healthiest thing to do is consider all funds to be joint funds. None of this "I pay 90%. you pay 10% nonsense". Marriage is about partnership, financial and otherwise. Financial goals and budgets should be shared, and that includes how much to allocate for restaurant dining, vacations and "mad money" in the budget each month. One spouse doesn't "gift" the other spouse with things like diners out and vacations, that is part of the budget.
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We also do shared finances. I make significantly more money that dh. We don't really have limits on our discretionary spending, but we are both frugal. If I want to spend a lot of money on say, a new laptop or he wants a table saw, we run it by each other. I can't think of a time when we argued about it. I can't imagine having one person have a much higher discretionary spend than the other if you are partners.
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Ditto on the shared.
For us, all the money goes to the budget. The budget gets dolled out based on needs/wants/goals. I pull in more than double his income, but that just means we get to FI faster!
When we first got married, I brought in a lot of student loan debt. Once we were married, DH started calling it our debt. We paid off our debt together.
Now since we budget to help hit our goals, each month each person gets some fun money to spend how they like. I use mine almost monthly. DH sits on his until he decides on something bigger.
I like big trips with family, friends, or just my bad self. DH doesn't like international travel. So I have a me specific travel budget. I can use it however I like. But since we aren't comparing against each other to win, it doesn't matter as long as we are both maximizing happiness while hitting our goals.
LV
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My wife currently earns twice what I do, but will eventually earn 10 times my salary. She's also spendier than I am. Our paychecks are deposited into a joint checking account and every week a small but equal amount is automatically moved to our respective savings accounts, earmarked for discretionary spending. Prior to marriage we discussed options for how the enormous disparity in our future income would be handled. The conversation took about five minutes because we both felt like "We're a team, why wouldn't it be equal?"
Her career is something that I help with in ways that are hard to calculate. She brought massive student loan debt into the relationship and has a job that consumes an extraordinary amount of her time (and our time together). I brought a house and substantial savings and investments into the relationship and take care of basically every practical and logistical detail of our life together, so it wouldn't make a lot of sense to categorize our contributions solely by income.
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My wife is a stay at home mom - but she clearly works harder than I do. We just agreed to discuss anything over $250 with each other although it is fair to say that we are tightly aligned on what we need and don't need so it rarely becomes an issue.
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Eating out and vacations don't sound discretionary, they sound like discretionary dollars that spouse A is okay paying 90%, whereas Spouse A would rather spend less money on electronics/books and therefore doesn't like that Spouse B spends more on these items.
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Eating out and vacations don't sound discretionary, they sound like discretionary dollars that spouse A is okay paying 90%, whereas Spouse A would rather spend less money on electronics/books and therefore doesn't like that Spouse B spends more on these items.
I didn't read the underlined section into the original post.
In our case, I always made more which is even more true now that DW is SAHM with a 10-ish hour/week consulting in her field (neuroscience) side gig. Throughout the time, we've always budgeted what we wanted to spend, but with a very clear understanding that it's all "ours", we just choose to manage it as "his", "hers", and "ours" out of convenience and friction-reduction.
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Frankie's Girls sums up exactly how my wife and I at things. You are a team. What is your common goal financially...what do you you want your life to look like together at various stages of life, and how much money will it take to make those things happen? Once you know that, then you can start making a game plan about discretionary spending.
*disclaimer...I'm a huge math nerd/spreadsheet geek, so if my train of thought seems to dorky to you just disregard it:)
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Eating out and vacations don't sound discretionary, they sound like discretionary dollars that spouse A is okay paying 90%, whereas Spouse A would rather spend less money on electronics/books and therefore doesn't like that Spouse B spends more on these items.
Just to clarify on that - it's Spouse A (90% income) that's spending the extra money on electronics and books (and also 90% of the eating out/vacations) - so those two are aligned.
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Thanks so much for the inputs everyone, definitely learning and getting some good feedback.
There are some slight differences in opinion, but the majority opinion seems to be:
- Married couple is a team, so big decisions should be made together, and Spouse A (90%) shouldn't necessarily go buy a large ticket item like a laptop without discussing with Spouse B
- It's generally a good idea that expenses are paid jointly, and income contribution % doesn't matter as much, as we're a team
- Naturally Spouse B defers to Spouse A on general spending limits/strategy, but more concerted efforts need to be made to plan
- Across all relationships, it's possible that income inequality roles can switch so it should just be fair no matter who makes more (plus it's just kind)
- It's fair to have (small) discretionary accounts to do what you want with - no questions asked within reason
Just to touch on more details that some alluded to: I don't think the specifics of salaries matter for the universal takeaways, but in this case - Spouse A has take home of about $150k and Spouse B about $13k, but in a few years Spouse B can be close to $150k as well, so it's not a permanent power imbalance, and means that actual hard numbers for budgeting and allocation will change drastically in a few years.
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Spouse A + Spouse B = Marital unit C
You should be on the same page, it's one bit pot of money.
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Woah, I did not see any consensus whereby spouse B naturally defers to spouse A! That isn't how teamwork works!!
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Spouse A + Spouse B = Marital unit C
You should be on the same page, it's one bit pot of money.
And that page doesn't need to look like the page anybody else is on.
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Just for clarification: I'm assuming the spouses are married. What's the legal side of things? Do you have a pre-nup? If not, how does the law of your state / country divide marital assets?
If all your assets are legally owned 50/50 by both of you, I think you have your answer.
If you have a pre-nup, please follow the arrangements made in your pre-nuptial agreement. In many jurisdictions, a pre-nup becomes invalid if the spouses do not actually practice what they've written down and I'm assuming you didn't sign it without good reason.
In our case: we keep our finances separate and pay half of our joint expenses from our joint account. My s/o has his career, I have my career, any money we make is our own money. This works for us, but we don't have a large income difference and probably never will have. He used to make a little bit more but I was too proud to accept any financial help. He did take me out for dinner every now and then, I can totally understand why and now I'm earning more than him I do it too. But that's a gift, whenever we like it, we are not entitled to it. It helps that both of us are naturally frugal and the partner that earns slightly more this year (it varies) will not go and spend it on gadgets and luxury holidays. Instead, we save our money because next year we might be the lesser earner.
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- Married couple is a team, so big decisions should be made together, and Spouse A (90%) shouldn't necessarily go buy a large ticket item like a laptop without discussing with Spouse B
Generally I agree with this, but that's not the system under which you've been operating, so spouse B has no excuse to be mad about spouse A buying the laptop. That's in the past. If you want to change the system that's perfectly fair, and I think you should because your current system sounds like crap to me (I know others will disagree, and that's fine, this is just my opinion), but forget about what has already happened and go forward from here (unless what happened in the past puts you in serious financial hardship and you can undo it by returning things).
My wife makes more than I do, we each have a bit of "spend it however you want" money, but other than that we discuss any purchases that are outside the normal budget. For awhile only she had it because I couldn't think what I would spend it on, now I have the same amount because there are some hobbies I'm thinking about getting into (again) that would cost some money. I haven't spent any of it yet though, so who knows.
I know that some couples keep things separate and have various ways of splitting shared expenses so they don't have to fight about money. I know this isn't always a popular opinion, and maybe I'm wrong, but personally I think that's a cop out. Have the fights, realize the more frugal one will have to accept higher spending than they would if they we king of the world (or marriage) and the less frugal one will have to accept lower spending, but things will work out and you'll reach a collectively agreeable level of spending/saving (or you won't). That might include some huge discretionary fund, and that fund might not be equal between spouses, but if you can't get to a mutually agreeable place then by definition you're incompatible.
The closer you can get to completely shared goals the closer you'll be able to get to the budget being ideal for both of you, but it's fine to have some independent goals that the other doesn't really agree with, but is willing to support.
Again, this is just my opinion, but the whole separate finances thing just strikes me as having a giant discretionary fund that's arbitrarily set based on how much the person earns rather than how much they want/need to spend based on their goals. I think its better to make sure everyone's goals are funded as best as they can be and if you discover that your goals are incompatible it's time to change the goals or decide you have irreconcilable differences.
Rereading my post I realize it could be read as overly flippant about the possibility of divorce. I don't mean it this way. At your level of income you should have plenty to fund everybody's goals including any reasonable level of spending as well as early retirement. If one of you is the "typical" frugal future early retiree and the other spends at a level that's incompatible with that at your income level, then there have to be other signs than some budget strife -- like some serious, super hard to miss differences in outlook on life. I've got to believe that if you're anything close to compatible in other ways then you can come to a mutually agreeable budget arrangement other than throwing up your hands and just spending whatever you each happen to earn.
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Having just been watching a programme about the problems of gender inequality, I just want to thank most of the respondents in this thread for restoring my faith in human nature. (I'm not saying the problems don't exist, it's just so nice to see some good examples of how it can work).
I totally agree with all those saying that once you are a married couple it should all be 'our' money not 'mine' and 'yours'. The only reason my wife and I still have at least one separate credit card each is to be able to preserve some secrecy when buying each other presents.
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Eating out and vacations don't sound discretionary, they sound like discretionary dollars that spouse A is okay paying 90%, whereas Spouse A would rather spend less money on electronics/books and therefore doesn't like that Spouse B spends more on these items.
I didn't read the underlined section into the original post.
In our case, I always made more which is even more true now that DW is SAHM with a 10-ish hour/week consulting in her field (neuroscience) side gig. Throughout the time, we've always budgeted what we wanted to spend, but with a very clear understanding that it's all "ours", we just choose to manage it as "his", "hers", and "ours" out of convenience and friction-reduction.
How did she manage that? Seriously, I'd love to know what she is doing.
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I can only say how this situation has worked in my 36 yr marriage:
All decisions we have made have boiled down to - what is best for the marriage? We both worked in the beginning, he made about 3x what I made.
I quit when the children came along because we both felt having a mother home until they were all in school meant better kids - better marriage.
Before they were all in school, he got a job with more promise and potential. Back in 1990 he started at ~40,000, then $135,000 for a few years, down a bit as our priorities changed. We knew I could never earn what he earned on overtime so we decided I would stay home. For us, this was better for the marriage.
I, for the most part take care of the money, how, when and where it is spent. We both spend on frivolous things, never to the extreme and the way we look at it, that's good for the marriage. There is no predetermined amount, just seems to be dependent on the situation at the time. It has NEVER caused either of us to mention to the other that there could possibly a problem.
It might have looked unfair to an outsider, but we have never let what outsiders think affect the way we run our marriage.
If spouse A and B are happy, I am happy for them
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In our case, I always made more which is even more true now that DW is SAHM with a 10-ish hour/week consulting in her field (neuroscience) side gig. Throughout the time, we've always budgeted what we wanted to spend, but with a very clear understanding that it's all "ours", we just choose to manage it as "his", "hers", and "ours" out of convenience and friction-reduction.
How did she manage that? Seriously, I'd love to know what she is doing.
Background: PhD in neurobiology, post-doc, ran her own lab, moved here to be an editor at a top neuroscience journal, left that a couple years ago to SAH, found side work helping other researchers edit their papers for submission to journals (or revision after being sent for review). She's now done all three of writing, judging, and now editing papers. Most of her work is by referrals from editors she knows (at the journals and/or ex-colleagues) and now word-of-mouth from other researchers. She has more work available than she cares to do, but that varies with the school, kids, travel, and other demands on our time.
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Woah, I did not see any consensus whereby spouse B naturally defers to spouse A! That isn't how teamwork works!!
Ooops - I guess that was worded badly. Not saying that's how it should be, just how it is based on Spouse B's preference/inclination.
Of course, should change and be an equal decision - teamwork!
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We approach as a team as well. Going into the marriage I owed her some debts from money borrowed when we were dating and I had a period of unemployment and bad credit handling etc. Paid that back to her before the wedding. Sometime within the year after we married we moved to all joint accounts.
It's changed a bit over the years, but I'm now about 75-80% of the income to her 20-25%. We do a lot of forced savings, with $100/mo going into individual accounts so we can make gifts or other purchases without need for consensus. That used to include any lunches bought out during the week, but to be honest we hardly use it and should redeploy that cash soon.
The details are the details, but ultimately it is a union and what is ours is ours.
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- Married couple is a team, so big decisions should be made together, and Spouse A (90%) shouldn't necessarily go buy a large ticket item like a laptop without discussing with Spouse B
I know that some couples keep things separate and have various ways of splitting shared expenses so they don't have to fight about money. I know this isn't always a popular opinion, and maybe I'm wrong, but personally I think that's a cop out. Have the fights, realize the more frugal one will have to accept higher spending than they would if they we king of the world (or marriage) and the less frugal one will have to accept lower spending, but things will work out and you'll reach a collectively agreeable level of spending/saving (or you won't). That might include some huge discretionary fund, and that fund might not be equal between spouses, but if you can't get to a mutually agreeable place then by definition you're incompatible.
The closer you can get to completely shared goals the closer you'll be able to get to the budget being ideal for both of you, but it's fine to have some independent goals that the other doesn't really agree with, but is willing to support.
Again, this is just my opinion, but the whole separate finances thing just strikes me as having a giant discretionary fund that's arbitrarily set based on how much the person earns rather than how much they want/need to spend based on their goals. I think its better to make sure everyone's goals are funded as best as they can be and if you discover that your goals are incompatible it's time to change the goals or decide you have irreconcilable differences.
Rereading my post I realize it could be read as overly flippant about the possibility of divorce. I don't mean it this way. At your level of income you should have plenty to fund everybody's goals including any reasonable level of spending as well as early retirement. If one of you is the "typical" frugal future early retiree and the other spends at a level that's incompatible with that at your income level, then there have to be other signs than some budget strife -- like some serious, super hard to miss differences in outlook on life. I've got to believe that if you're anything close to compatible in other ways then you can come to a mutually agreeable budget arrangement other than throwing up your hands and just spending whatever you each happen to earn.
I can't talk for other people, but my s/o and I have always had the same priorities, we've never argued about money and still we've always kept our finances separate. It just feel more comfortable to us. Maybe because we are both children of divorced parents who stayed together much longer than they should have because their finances were so intertwined. We know we're only together because we want to be, not because money forces us to be.
We know how much money we have in our bank accounts, we even have each other's pin codes and he often carries my credit card. He's partially self employed, so our prenup also requires that we keep things separate. The main reason we have that legal paperwork is not just divorce, but also to protect my assets in case his business would fail.
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Funny how these always go the same way.
Separate finances people: This is how we do it, and it works for us.
Joint finances people: This is how we do it, it works for us. Oh, and those separate-finances people are WRONG, don't understand marriage, have serious relationship issues, aren't a "team", and need to do things our way if they want any chance of a lasting marriage.
Like seriously, what's up with that? It happens like clockwork in these threads.
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Don't worry about it. Life is long, and over time these things tend to come and go.
When we were first married, my husband was an entry-level worker and I was a student. When I started working, he still earned more -- plus I took two lengthy maternity leaves. Today I earn more; plus it'll be my pension paying our everyday bills in retirement. If you looked at any one-year period, you might say one of us was "bringing more to the table", but if you look at our whole lifetimes, it'll probably be more like 60% him /40% me.
Marriage is a partnership, and finances is a pretty big part of that partnership.
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Another vote for trying to worry less about who earns what.
Currently I earn 5x what my DW earns. I have always earned at least double and I came into the relationship with far more assets to start with. In this context it makes no sense to me to keep score of who spends what.
If we were playing football and the score was 200-10 what would be the point if f continuing to keep score? What does it prove? We are meant to in the same team, not opponents. Maybe I a, the striker and DW is the goal keeper. As goal keeper she gets few opportunities to score, but her contribution is equally important.
We have always just thought of ourselves as a team. The team’s income is the contribution of all, and the expenditure is the combination of all.
From time to time I have blown big money on toys, and from time to time DW spends a lot of money on things that make no sense to me, but are important to her.
I work long hours in the office. DW works shorter office hours, but is generally doing far more of the jobs that we don’t get a salary for.
If we were really keeping track we’d see that every meal I eat more than DW. Where would the counting stop.
What is mine is hers and vice versa.
We just share a common goal of FIREing in 2019.
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If we were really keeping track we’d see that every meal I eat more than DW. Where would the counting stop.
Yeah that's my take on it too, as an uber-optimizer. My life would become a never-ending stream of financial modeling, trying to figure out the perfect way to split everything from rent to toothpaste. Much simpler to opt out of the whole thing.
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I have voiced this on previous threads, but I find it interesting that the pay as you go never have a caveat. Well, I earn more, but he spends more time on household chores, for instance.
Since many have been doing this for years, I assume some subset also has children. Are all of the kid's expenses out of the joint account? What if Dad takes the kid out for ice cream on the way home for flu shots?
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I'm anonymizing genders just to focus on the question at hand (let me know if specifics are needed).
Spouse A makes 90% of the take home income, and Spouse B makes 10% (still a student but will make a high salary in a few years).
Spouse A pays about 90% of all bills and eating out, vacations, etc.
Spouse A also spends more on discretionary items (electronics, books, etc), while Spouse B is more frugal.
Is it unfair that Spouse A spends 3x the amount of Spouse B on discretionary items monthly?
Is the best path forward that both Spouse A and Spouse B get a discretionary budget of say $500 a month each, even though Spouse A makes 90% of income?
HAHAHHAHAHA
In our house, it is Spouse B (thd 10% income) that spends 3x the discretionary income. (or spends or has decision / influence power on 95% of all discretionary spending)...
It's unfair no matter who makes the money, for one to spend the lions' share, leaving little for the other.
We went to monthly allowances (equal) and it made all the difference. Once can save it up for a year and spend it on something flamboyant, the other can buy lots of continuous little things.
ETA: We also had one spouse in school twice so far (different spouses)...
Is it possible that you may consider education tuition as personal "discretionary spending"? After all, if a person chooses to stop working to go back to school, to change careers or for interest, that could be considered a personal choice. Likewise, some couples consider paying off individual student loans to be individual responsibilities...etc.
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Funny how these always go the same way.
Separate finances people: This is how we do it, and it works for us.
Joint finances people: This is how we do it, it works for us. Oh, and those separate-finances people are WRONG, don't understand marriage, have serious relationship issues, aren't a "team", and need to do things our way if they want any chance of a lasting marriage.
Like seriously, what's up with that? It happens like clockwork in these threads.
Interesting point. I suspect that the fact that keeping separate finances is a relatively new concept so the anecdotal longevity data just isn’t there to really support belief in this concept. It is also an arrangement that requires significant contingency planning which is rarely hinted at. I am genuinely interested in knowing how it actually works. How does separate finances work when a spouse loses their job and can’t keep up with their portion of the mortgage or rent? What about kids and maternity/paternity leave? Does the working spouse pay the spouse on leave 1/2 day care fees? What about sickness? What about life insurance? Single life term on your pension? Separate finances in Canada would mean not taking tax breaks by taking out spousal RRPS’s, which seems silly. Not to mention marital propery laws in many places would negate any attempt to keep separate finances during a divorce unless a prenup was created.
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Interesting point. I suspect that the fact that keeping separate finances is a relatively new concept so the anecdotal longevity data just isn’t there to really support belief in this concept. It is also an arrangement that requires significant contingency planning which is rarely hinted at. I am genuinely interested in knowing how it actually works.
The scenarios don't all apply to us, but I'll take a stab at how we would manage them if they did.
How does separate finances work when a spouse loses their job and can’t keep up with their portion of the mortgage or rent?
We keep separate slush funds of a few months of expenses on hand, so the unemployed party could just use that. We also have extremely low expenses, where literally a part-time minimum wage job at the grocery store across the street could cover all our expenses in a pinch. We're also both highly employable and flexible about what types of work we'll do, pretty much guaranteeing extended unemployment would be a non-issue.
What about kids and maternity/paternity leave? Does the working spouse pay the spouse on leave 1/2 day care fees?
We don't have or want kids, but if one of us wanted to take off a chunk of time from work for some reason, that person would save up for that ahead of time. It would also seem reasonable to just reduce expenses to be in line with whatever maternity/paternity leave paid.
What about sickness?
Same as above - slush fund, plus adjustments down to whatever income level was there (disability payments or whatever).
What about life insurance? Single life term on your pension?
We don't have life insurance or pensions, and manage our own retirement funds (which obviously have each other as beneficiaries).
Separate finances in Canada would mean not taking tax breaks by taking out spousal RRPS’s, which seems silly.
We independently max out all tax-advantaged accounts, so that's a non-issue for us.
Not to mention marital property laws in many places would negate any attempt to keep separate finances during a divorce unless a prenup was created.
If a divorcing couple went before a judge and said "We've always kept everything 100% separate from day 1, and both want to keep things that way now", I would be very surprised if a judge said "No, you can't do that". And even if they did, you could always just go along with it and do a few money transfers afterwards to correct things back to the way you wanted it. (caveat: only works if both people are rational, decent people not out for blood)
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For us it's a shared amount as part of our yearly budget.
The same way we have a target for groceries, or for how much we spend on the rent, we have a target for "misc". It is shared. If we go above by the end of the year, that's when we would need to review and discuss. Otherwise, no need to discuss.
I think it's fair that for discretionary expenses, we would roughly be at 50/50 independently of income. Then again, as long as it fits our expected budget,I wouldn't care if one of us spends 70% and the other 30%.
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Before DH and I got married we had separate accounts and one shared account where DH contributed 60% and I contributed 40%, based on income. That money was used for shared purchases.
After few years we decided to have a single account. We both spent whatever we wanted (like books, food), but discussed the expensive things (like a TV). Now we are back into having 2 bank accounts, but we still have common money. We tend to discuss the big purchases, so that we agree on it. I pay a lot of bills automatically and DH often pays other stuff like holidays.
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The way his/hers/ours has worked in my household has spanned many different scenarios. DH and I married in our mid 30's, over a year of living in together and months after purchasing a home together. We already had our separate accounts, and just opened a joint after marriage for household stuff. We split bills according to income %, but I was the higher paid and the difference wasn't that great. Whoever bought the groceries on their CC's would pay for them, but if it seemed vastly uneven we'd give the other some money to even it up a bit. Neither of us is nearly organized enough to track everything, and who wants to nitpick that closely?
After children entered the picture, daycare expenses were split %wise, while other stuff was just paid by whoever bought it, like the groceries. The birthing costs I paid for, as I came in with significantly more assets and was still paid more. My father passed away in the middle of that time, and I inherited money which allowed me to finance some home renovations, a brief return to college, and a current hiatus from working in order to care for my mother. Most household bills are 100% on DH now, and he got a grocery store CC recently that is joint between us, which he pays for. I try to keep my own spending down, and I still completely pay for my own CC' s. (We have both always paid in full each month, BTW). We had very old cars that had to be replaced, the funds for which are coming out of my inherited stash.
So, I hope that the doubters here can see that separate does not mean we aren't a team and don't care about each other. I've just had bad experiences with spendthrifts, and I also don't want to scrutinize his purchases and have him do the same to me. It helps that we're both fairly frugal, so I don't think we need the added scrutiny of our spending from a spouse. I believe there is such a thing as being too tight when it comes to spending. Of course, ymmv on that, especially here in MMM country!
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FWIW, I have no issue with splitting expenses -- my mom and stepdad did that and were happily married for almost 40 years. My concern is that trying to split expenses "fairly" becomes more and more difficult when you are talking about a 10:1 income ratio. 60/40, sure; maybe even 70/30. But $150K:$13K?? Think about it: Are you as a couple living a $26K/yr lifestyle? I sincerely doubt it -- I suspect your housing, food, hobbies, entertainment, etc. are all based around having a higher combined income. As a result, even paying only 10% of those joint expenses is still a very high proportion of B's salary (oh, and B's income is taxed at a much higher rate than if B were single because it is combined with A's income for tax purposes). So B has very little left to cover any personal savings and fun money. Meanwhile, A is making $150K, and is living a fairly mustachian lifestyle (meaning: is not living up to that salary). So A has a buttload of money left over to play with, even after covering the bulk of the family's costs.
Totally hypothetical and non-mathy example (i.e., lots of rounding): Say your fixed expenses are about $30K/yr, you have decided as a couple to save $60K/yr, and you have about $40K in taxes (on the order of 25%), so there's about $30K left to play with. Splitting the taxes fairly evenly and rounding and such, you end up with A taking home about $110K and B taking home around $10K. A covers 90% of the $90K expenses + savings, meaning A pays about $81K/yr, and still has almost $30K/yr to play with. B then pays 10%, or $9K/yr, and has $1K left to play with. So in sum, A's "90%" really costs A only 70-75% of A's take-home, whereas B's "10%" really costs B 90% of B's take-home.
IOW, B legitimately feels like the family needs to be frugal and spend less money, because B has no damn money to spend. A, meanwhile, legitimately wonders what's the big deal about buying a computer, when we're paying our bills and hitting our savings targets and there is still so much more extra money floating around? This is not a recipe for long-term happiness (at best, you're racing for a hell of a lot of make-up "you got yours, now I get mine" when B graduates with that high-paying degree). I think when the salary disparity is this significant, you have to do something other than "eat what you kill" to make it both "fair" (whatever that means) and something both partners can actually be happy with with long-term. So the more the disparity in salary, the more you need to gravitate to some sort of equal fun money every month.
The added benefit is that this approach can also help manage the difference in spendiness. DH and I were very different in the amount of "stuff" we thought was necessary (not to mention what we thought were reasonable prices to pay for said stuff). Our first year-ish of marriage was a lot of snits when he'd spend some stupid amount of money on something I thought was totally unnecessary; I thought he was frittering away money we could have saved, and he thought I was being way too tight with the lifestyle given our salaries. We finally came up with the personal fun money concept, which allowed him to spend on stupid stuff with me not nagging. But -- and the real key here -- I also got to save my extra money, which made me feel more comfortable about the amount we were saving (and made me feel good by beating our "official" savings target every month). That kind of setup might help with the existing dynamic here. That way, if A wants a $4K computer and B doesn't, A can save up A's allowance for a few months to get it; meanwhile, B can sock away B's allowance and feel more comfortable about the family savings rate.
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Well if spouse X was a stay at home parent and spouse Y earned 100% of income, should that give spouse y 100% of the spending and 100% of the decision power? In my opinion, no. What is spouse x's is spouse y's and vice versa. I'm a big fan of sitting down, looking at the money as one giant (joint) pot, and deciding together where the money will be going. If both partners agree that Spouse Y should get more personal money than spouse X, than that's a choice that should be made together.
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FWIW, I have no issue with splitting expenses -- my mom and stepdad did that and were happily married for almost 40 years. My concern is that trying to split expenses "fairly" becomes more and more difficult when you are talking about a 10:1 income ratio. 60/40, sure; maybe even 70/30. But $150K:$13K?? Think about it: Are you as a couple living a $26K/yr lifestyle? I sincerely doubt it -- I suspect your housing, food, hobbies, entertainment, etc. are all based around having a higher combined income. As a result, even paying only 10% of those joint expenses is still a very high proportion of B's salary (oh, and B's income is taxed at a much higher rate than if B were single because it is combined with A's income for tax purposes). So B has very little left to cover any personal savings and fun money. Meanwhile, A is making $150K, and is living a fairly mustachian lifestyle (meaning: is not living up to that salary). So A has a buttload of money left over to play with, even after covering the bulk of the family's costs.
Totally hypothetical and non-mathy example (i.e., lots of rounding): Say your fixed expenses are about $30K/yr, you have decided as a couple to save $60K/yr, and you have about $40K in taxes (on the order of 25%), so there's about $30K left to play with. Splitting the taxes fairly evenly and rounding and such, you end up with A taking home about $110K and B taking home around $10K. A covers 90% of the $90K expenses + savings, meaning A pays about $81K/yr, and still has almost $30K/yr to play with. B then pays 10%, or $9K/yr, and has $1K left to play with. So in sum, A's "90%" really costs A only 70-75% of A's take-home, whereas B's "10%" really costs B 90% of B's take-home.
IOW, B legitimately feels like the family needs to be frugal and spend less money, because B has no damn money to spend. A, meanwhile, legitimately wonders what's the big deal about buying a computer, when we're paying our bills and hitting our savings targets and there is still so much more extra money floating around? This is not a recipe for long-term happiness (at best, you're racing for a hell of a lot of make-up "you got yours, now I get mine" when B graduates with that high-paying degree). I think when the salary disparity is this significant, you have to do something other than "eat what you kill" to make it both "fair" (whatever that means) and something both partners can actually be happy with with long-term. So the more the disparity in salary, the more you need to gravitate to some sort of equal fun money every month.
The added benefit is that this approach can also help manage the difference in spendiness. DH and I were very different in the amount of "stuff" we thought was necessary (not to mention what we thought were reasonable prices to pay for said stuff). Our first year-ish of marriage was a lot of snits when he'd spend some stupid amount of money on something I thought was totally unnecessary; I thought he was frittering away money we could have saved, and he thought I was being way too tight with the lifestyle given our salaries. We finally came up with the personal fun money concept, which allowed him to spend on stupid stuff with me not nagging. But -- and the real key here -- I also got to save my extra money, which made me feel more comfortable about the amount we were saving (and made me feel good by beating our "official" savings target every month). That kind of setup might help with the existing dynamic here. That way, if A wants a $4K computer and B doesn't, A can save up A's allowance for a few months to get it; meanwhile, B can sock away B's allowance and feel more comfortable about the family savings rate.
I believe this is exactly what I suggested upthread, but you explained it much, much better.
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Funny how these always go the same way.
Separate finances people: This is how we do it, and it works for us.
Joint finances people: This is how we do it, it works for us. Oh, and those separate-finances people are WRONG, don't understand marriage, have serious relationship issues, aren't a "team", and need to do things our way if they want any chance of a lasting marriage.
Like seriously, what's up with that? It happens like clockwork in these threads.
Interesting point. I suspect that the fact that keeping separate finances is a relatively new concept so the anecdotal longevity data just isn’t there to really support belief in this concept. It is also an arrangement that requires significant contingency planning which is rarely hinted at. I am genuinely interested in knowing how it actually works. How does separate finances work when a spouse loses their job and can’t keep up with their portion of the mortgage or rent? What about kids and maternity/paternity leave? Does the working spouse pay the spouse on leave 1/2 day care fees? What about sickness? What about life insurance? Single life term on your pension? Separate finances in Canada would mean not taking tax breaks by taking out spousal RRPS’s, which seems silly. Not to mention marital propery laws in many places would negate any attempt to keep separate finances during a divorce unless a prenup was created.
I don't think having separate finances is such a new invention. At least where I'm from (western Europe) prenuptial agreements have always been common among people with any kind of assets, ordinary farmers as well as the aristocracy.
I don't understand all your questions, but i'll try to answer a few of you questions.
Our joint expenses are very low, so if we had to take a pay cut it wouldn't be a problem. We each contribute about €350/400 a month to the joint account and this covers all our housing and food expenses (mortgage, water, electricity, heating, property taxes, insurance, internet + groceries). We haven't been in the situation where one of us wasn't able to pay this kind of money. In our country there are social security benefits if you are unemployed or too ill to work.
We don't have kids, but I imagine if we did we'd just pay the kid expenses from our joint account and maternity leave is paid in here.
I don't know how life insurance is a problem. I pay his and he pays mine like you're supposed to. I think mine is €5/month more expensive than his, but well, we're not greedy. As for our pension: I have arranged for my own pension and he is my sole heir, so if I die the money goes to him. He has a small company pension and I'm listed as his partner there so I'd receive the monthly payments if he died. In our country there are no tax breaks for married people. I'm not sure if I understand your question about not having a prenup. I'm not sure how you'd be able to have legally separate finances without having a prenup. Ours states that our own property is and remains our own and any joint property is only joint because we paid for it jointly.
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Funny how these always go the same way.
Separate finances people: This is how we do it, and it works for us.
Joint finances people: This is how we do it, it works for us. Oh, and those separate-finances people are WRONG, don't understand marriage, have serious relationship issues, aren't a "team", and need to do things our way if they want any chance of a lasting marriage.
Like seriously, what's up with that? It happens like clockwork in these threads.
This has been my observation here over the past 3 years as well.
We are in the separate finances camp. When we moved into together, she was a student and I was an entry level retail employee. Over the past 7 years we have both made choices that have lead to our respective incomes. I make ~2X as much over that time due to aggressive career advancement and a lot of personal time spent learning professional career skills and industries to do so. I am also more frugal, as well as more conservative with my investments.
We split fixed expenses such as rent/utilities/groceries 50/50. Pay our own car insurance, cell, personal expenses from our own accounts. For join entertainment, travel, etc I pick up more of the tab because I want to. We are both happy with this system.
In terms of unemployment or sickness, we each have at least 12 months of living expenses in an EF, and if things were so bad that that was not enough, I would happily pick up the slack and vica versa.
Me being the more frugal one, my SO never feels the need to spend money to do things together. She's able to max out a Roth IRA, do 30% of salary to 401k, and still have enough leftover to spend $20k/yr. I can see how she would be in a place of tremendous disadvantage if I wanted to live in a big house, take expensive vacations, split expensive meals out, etc 50/50.
We also don't have kids, so it's not like she earns less money because she is doing more chores or raising the family, in turn allowing me to earn more.
I can see both sides of the argument, but to me it sounds like the "one pot is the only way" crowd is MUCH more narrow minded.
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If we were really keeping track we’d see that every meal I eat more than DW. Where would the counting stop.
Yeah that's my take on it too, as an uber-optimizer. My life would become a never-ending stream of financial modeling, trying to figure out the perfect way to split everything from rent to toothpaste. Much simpler to opt out of the whole thing.
This is funny because I used to read a food blog of a woman who was constantly counting calories. She'd very carefully measure out her food and give her husband THE SAME AMOUNT, and he was a 6' tall skinny dude. Because that was "fair".
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Funny how these always go the same way.
Separate finances people: This is how we do it, and it works for us.
Joint finances people: This is how we do it, it works for us. Oh, and those separate-finances people are WRONG, don't understand marriage, have serious relationship issues, aren't a "team", and need to do things our way if they want any chance of a lasting marriage.
Like seriously, what's up with that? It happens like clockwork in these threads.
This has been my observation here over the past 3 years as well.
We are in the separate finances camp. When we moved into together, she was a student and I was an entry level retail employee. Over the past 7 years we have both made choices that have lead to our respective incomes. I make ~2X as much over that time due to aggressive career advancement and a lot of personal time spent learning professional career skills and industries to do so. I am also more frugal, as well as more conservative with my investments.
We split fixed expenses such as rent/utilities/groceries 50/50. Pay our own car insurance, cell, personal expenses from our own accounts. For join entertainment, travel, etc I pick up more of the tab because I want to. We are both happy with this system.
In terms of unemployment or sickness, we each have at least 12 months of living expenses in an EF, and if things were so bad that that was not enough, I would happily pick up the slack and vica versa.
Me being the more frugal one, my SO never feels the need to spend money to do things together. She's able to max out a Roth IRA, do 30% of salary to 401k, and still have enough leftover to spend $20k/yr. I can see how she would be in a place of tremendous disadvantage if I wanted to live in a big house, take expensive vacations, split expensive meals out, etc 50/50.
We also don't have kids, so it's not like she earns less money because she is doing more chores or raising the family, in turn allowing me to earn more.
I can see both sides of the argument, but to me it sounds like the "one pot is the only way" crowd is MUCH more narrow minded.
You sound like you have a relationship where it would work whichever way you arranged the finances which is great. I think what winds up the 'one pot' crowd much more is when someone has an entrenched 'I earn more so I should be allowed to spend more / have more of a say' attitude. I'd say someone with that attitude is much more likely to believe in separate pots, but just because you have separate pots doesn't mean you have that kind of attitude.
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I don't think having separate finances is such a new invention. At least where I'm from (western Europe) prenuptial agreements have always been common among people with any kind of assets, ordinary farmers as well as the aristocracy.
It may not be new for people who have inherited wealth, but for joe and jane average middle class worker, it really isn't any older than two income families, which only gained heavy traction post sexual revolution, and even then, salary discrepencies between partners has been huge due to gender pay gaps, expectation of women taking career gaps to raise kids etc., so the economics of separate finances didn't really work. Heck, it used to be women couldn't get credit cards without their husband's consent, having their own career or not.
It sounds like for many young couples who are doing the separate finance thing today, they tend to have similar earning potential and therefore things are pretty much equal anyway, and it also sounds like these couples tend to not have children as readily so division of labour is not a concern. (I am however surprised by the person who suggested that a career break for child rearing would be something the person who took the break would be expected to save up for. Sounds a little naive to me).
I have always agreed that older couples who have already earned and saved the bulk of their life assets independently should have pre-nups and keep most assets separate, especially if either partner comes into the relationship with children (adult or dependent age) from a previous marriage, the pre-nup protects their future inheritance as well as ensuring their new partner can maintain their shared living standard in old age after a partner dies. I know as a middle age SINK, who would hope to meet a partner to share my retirement with, I wouldn't likely enter into a partnership without a pre-nup.
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Just consider yourself lucky to have support from two spouses!
Love them the same no matter what income the have.
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We do a quasi-separate setup with the expenses divided up pro rata. We also had really, really good luck with a cash allowance, like real paper money. Since I don't spend as much I would often give her what I had left over so she could get something nice. A gift, my choice. Gifts are an act of kindness.
We kind of fell of the cash allowance wagon over time but I think we are going to start doing it again in the new year.
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Just consider yourself lucky to have support from two spouses!
Love them the same no matter what income they have.
Perfect advice. Thanks for my laugh for the day!
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Funny how these always go the same way.
Separate finances people: This is how we do it, and it works for us.
Joint finances people: This is how we do it, it works for us. Oh, and those separate-finances people are WRONG, don't understand marriage, have serious relationship issues, aren't a "team", and need to do things our way if they want any chance of a lasting marriage.
Like seriously, what's up with that? It happens like clockwork in these threads.
I don't get why people get so hung up on logistics. I understand that money can bring out a whole host of issues that have nothing to do with money itself, but if your marriage is good, it really doesn't matter which way you do things. I have my own accounts. What of it? I didn't stop being my own person when I got married, I joined a team. I manage myself and my own stuff. He manages his. We work together on the mutual stuff. Ideally, we split things 50/50, but in circumstances where there has been a big income disparity we talk it over and agree on a different plan. If something unexpected happens, you back each other up. You support each other and help each other achieve your goals and dreams. You put each other first. Marriage is marriage. Bookkeeping is just paperwork.
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I don't think having separate finances is such a new invention. At least where I'm from (western Europe) prenuptial agreements have always been common among people with any kind of assets, ordinary farmers as well as the aristocracy.
It may not be new for people who have inherited wealth, but for joe and jane average middle class worker, it really isn't any older than two income families, which only gained heavy traction post sexual revolution, and even then, salary discrepencies between partners has been huge due to gender pay gaps, expectation of women taking career gaps to raise kids etc., so the economics of separate finances didn't really work. Heck, it used to be women couldn't get credit cards without their husband's consent, having their own career or not.
It sounds like for many young couples who are doing the separate finance thing today, they tend to have similar earning potential and therefore things are pretty much equal anyway, and it also sounds like these couples tend to not have children as readily so division of labour is not a concern. (I am however surprised by the person who suggested that a career break for child rearing would be something the person who took the break would be expected to save up for. Sounds a little naive to
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I don't know about other places, but in the area my family were from (poor farmers who did own their own land) it was traditional to have a prenup. Generally fathers would gift their daughters some land when they married and that land was supposed to go back to her family if she died without issue. It would normally pass to her children and not her widower, because he was no blood relative and also expected to remarry. Sons would be able to work outside the home and earn their own money to start a family, daughters were given this as a reward for their work at home. It's also quite common to keep any inheritances out of the joint assets. Maybe this tradition is why prenuptial agreements are common and accepted in this country.
It is true that my s/o and I are financial equals. I don't think keeping incomes separate works when one spouse is really rich and the other one is poor, but I think joint finances will not completely solve all the problems caused by that huge income difference. We both have the same career prospects. We have the same life goals. I did come into the relationship with more savings and I gave him an (interest free) loan so we could both contribute to our home equally. We did write that down in case of divorce, but I don't really care about that money (5k) as long as we're together. I generally save/invests more, he invests in his business, I think we talk about money a lot more than many couples that have joint finances We don't have kids for medical reasons, but we'd pay the child costs 50/50 out of our joint account. We keep stuff separated but we're not penny pinchers.
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I've always earned ~50% more than my spouse, and that number was more like 2x when he was paying child support. But we're equally frugal, and most of the things we want to do or buy together are things we can both afford. I do buy more clothes than him, and spend on some activities that he's not interested in, but that's never an issue since it's my money. We have a joint checking account that we contribute to equally for household bills. All other accounts are separate, and we don't monitor or comment each other's expenses.