Author Topic: Living off of one spouse's income and saving the other.  (Read 7741 times)

Penny McSave

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Living off of one spouse's income and saving the other.
« on: December 21, 2015, 05:11:31 PM »
Hi all, my husband and I have decided to start saving for a house and we are looking for strategies to increase our savings rate.

Currently we have separate bank accounts and split all living costs 50/50. Our take home pay is almost identical so this has worked perfectly for the past 8 years.

However, I've been running numbers lately and our savings rate isn't where it could be and I'm wondering if a change is in order.

Our current expenses are almost exactly 50% of our yearly take home pay so I'm thinking if we use 100% of my husband's income for bills and then throw 100% of my income into savings it will help keep us accountable.  Plus it will be easier to track all expenses if they are coming out if one account,  further optimizing spending.
 
Has anyone else noticed an increase in their savings rate using this method?
Any negative thoughts?
Should we still keep our own accounts for personal "allowances"?

Looking forward to the responses. Thanks. :)
« Last Edit: December 21, 2015, 05:15:09 PM by Penny McSave »

lizzzi

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Re: Living off of one spouse's income and saving the other.
« Reply #1 on: December 21, 2015, 05:23:25 PM »
I've done this with my husband, as has one of my cousins and her husband. It works great, although it's probably easiest when, like you describe, the incomes are fairly equal. Just save and invest one person's check, and just share and share alike with the other check, using it to support yourselves. Done.

Helvegen

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Re: Living off of one spouse's income and saving the other.
« Reply #2 on: December 21, 2015, 05:24:30 PM »
This is basically how it works in my household. I was a SAHM for awhile and we lived on my husband's income only. When I went back to work, we both agreed that we would not inflate our lifestyle in any way, so we bank the vast majority of my check. Half of it is gone before it ever hits the account with various payroll deductions and the rest is put into savings buckets and Roth IRAs.

Results?

We paid off all $18k of my student loan debt in 11 months and are debt free. We finally have a FFEF with 6 months of expenses. We finally have net worth worth protecting and are filling up our travel and retirement buckets at a good clip, making up for a lot of lost time.

arebelspy

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Re: Living off of one spouse's income and saving the other.
« Reply #3 on: December 21, 2015, 05:37:18 PM »
It's six of one, half a dozen of the other.

If your salaries are essentially the same, saving 100% of one or saving 50% of each is the exact same.

If the underlying spending doesn't change, nothing will change.

It may seem like a clever trick, but that's all it is. Focus on getting your spending as optimized as possible, and if that means saving just most of your salary, but spending some, okay. If it means saving all your salary plus some of his, cool.

But if your savings rate isn't where you want it, just changing where the savings and spending is coming from won't change the savings rate.

Underlying spending is what needs to be addressed.

I don't mean to be negative, but realistic. You should certainly try it, but implement spending changes at the same time to support it. :)
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Rural

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Re: Living off of one spouse's income and saving the other.
« Reply #4 on: December 21, 2015, 06:01:50 PM »
When we both are working, we make a point of saving whichever paycheck is larger and living on the smaller; this gets the savings rate higher and assures we both have FU money if we need it.

lizzzi

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Re: Living off of one spouse's income and saving the other.
« Reply #5 on: December 21, 2015, 06:02:08 PM »
Right, ARS. It is just a clever trick... a mind game...but it's just one way to handle the personal finance. We  found it kept the process ultra-simple, and all the accounts  were joint, with neither of us keeping anything separate...everything was shared.  But we had plenty to go around, and pretty much the same financial philosophy. (Mustachians before we ever heard of the word.) We also saved from the "spending" income if we wanted to, but the "savings and investment" income was sacrosanct. Again, we had a rough financial equivalency--neither one of us was a poor relation to the other.

little_brown_dog

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Re: Living off of one spouse's income and saving the other.
« Reply #6 on: December 21, 2015, 06:28:40 PM »
This is a great strategy. Not only does it boost your savings, but it forces you to live on 1 income and adjust your expenses accordingly, effectively creating an automatic safety net should one of you lose a job, become ill, etc.

Goldielocks

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Re: Living off of one spouse's income and saving the other.
« Reply #7 on: December 21, 2015, 06:45:46 PM »
It's not really different from an automatic transfer from both your salaries / accounts into a third dedicated savings account, is it?  The trick is to not see the savings $ in your checking accounts, make it automatix, and know that it is hands off.

Penny McSave

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Re: Living off of one spouse's income and saving the other.
« Reply #8 on: December 21, 2015, 06:55:25 PM »
It's six of one, half a dozen of the other.

If your salaries are essentially the same, saving 100% of one or saving 50% of each is the exact same.

If the underlying spending doesn't change, nothing will change.

It may seem like a clever trick, but that's all it is. Focus on getting your spending as optimized as possible, and if that means saving just most of your salary, but spending some, okay. If it means saving all your salary plus some of his, cool.

But if your savings rate isn't where you want it, just changing where the savings and spending is coming from won't change the savings rate.

Underlying spending is what needs to be addressed.

I don't mean to be negative, but realistic. You should certainly try it, but implement spending changes at the same time to support it. :)


100% agree with this. Mostly I'm trying to think of little ways to make us more accountable. To me it seems like a version of the envelope method.

I think we both could benefit from a little more transparency in our spending.



arebelspy

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Re: Living off of one spouse's income and saving the other.
« Reply #9 on: December 22, 2015, 01:23:30 AM »
100% agree with this. Mostly I'm trying to think of little ways to make us more accountable. To me it seems like a version of the envelope method.

I think we both could benefit from a little more transparency in our spending.

That's cool--like I said, didn't mean to be negative, and it certainly can work.  It's a trick, but tricks can be useful.  As long as you understanding the underlying math and what needs to be enacted for real, substantial change, it can't hurt to give a shot.  :)
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
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soccerluvof4

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Re: Living off of one spouse's income and saving the other.
« Reply #10 on: December 22, 2015, 06:25:32 AM »
^Totally agree. At the end of the day it comes down to the discipline of making the necessary changes to save so if this trickery works then good. I liked the other posters comments living off the smaller check of the two as well.

powersuitrecall

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Re: Living off of one spouse's income and saving the other.
« Reply #11 on: December 22, 2015, 10:22:17 AM »
Yep. We do this, in theory (we don't separate one paycheck for savings - everything is done automatically on a weekly basis).  All financial inputs and outputs are viewable in one account so it's easy to track.  We tailored our lifestyle to be supported on one salary.  In our minds, it would be irresponsible not to!  What would happen if one of us suddenly became unable to work?

Lizzy B.

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Re: Living off of one spouse's income and saving the other.
« Reply #12 on: December 22, 2015, 10:35:11 AM »
This is the way we do it and have done it for several years. Make sure, though that you're both contributing to  any 401 k/403b options you may have if there's an employer match. If you're only having that taken out of the "saved" salary, you might be missing out.

Same is true if you're maxing out your contributions.

For several years, we saved all of my salary (in the 401k up to the limit and in taxable accounts for the remainder) but didn't max out my husbands 401k because that wouldn't have left us enough to cover our expenses. We would have been better served by maxing both, and spending a little of my salary because of the tax breaks. Live and learn, right? (And teach, so others don't make the same  mistake.).


Scandium

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Re: Living off of one spouse's income and saving the other.
« Reply #13 on: December 22, 2015, 10:54:45 AM »
How does this work with 401k contributions? Maxing two of those is a large part of our savings. After all, with matches that's nearly $50k/year. You wouldn't want to set one to zero. So really you'd be spending 80-ish % of one salary (or whatever max out is) and saving the same of the other? Is that the plan?

Etihwdivadnai

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Re: Living off of one spouse's income and saving the other.
« Reply #14 on: December 22, 2015, 11:05:26 AM »
If your salaries are essentially the same, saving 100% of one or saving 50% of each is the exact same.

I'd beg to differ.
Saving 100% of one salary is not necessarily the same as saving 50% of each, even when both salaries are the same.
In which person's name(s) personal pension contributions are held / accumulated
can siginificantly affect your combined tax liability when it comes time to draw upon your (defined-contribution) pension(s).

My spouse and I both had very similar salaries for 30+ years.
We both saved approximately 25% of each gross / pre-tax salary directly into our personal defined-contribution pension funds (i.e. tax-deferred).
And then we each saved a further 25% of each net / post-tax take-home pay into tax-exempt savings funds (maxing out each of our yearly allowances here too).
(Actually, early on we used some of this net post-tax take-home pay to pay off the mortgage relatively early.)

When we are able to access our accumulated pension funds,
because these funds are split 50% / 50% between the two of us,
we are able to minimize our individual tax liabilities by using both personal tax allowances
without either of us having to make withdrawals that cause us to pay any higher rate tax.

V

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Re: Living off of one spouse's income and saving the other.
« Reply #15 on: December 22, 2015, 11:41:47 AM »
My husband and I did this when we started saving for a downpayment for our second home.  Our first home purchase was before we got married and I was still in school, so it was all him basically.  We sold the first house and made enough off of it to pay his car, student loans, credit cards, and a loan I took out to pay for stuff for the house.  We still had a little left over and immediately put it into savings.  It was once we were debt free that I found this website and I brought the idea to my now husband.  We first saved up enough to pay for our honeymoon (about $6K which we had been working on for years) and then everything went for a down payment.  We were able to save up the downpayment in a year because we treated my bank account and our savings account as if it didn't exist.  Having the focus on one account helped us so much and helped me convince my husband on the importance of savings.  He didn't like feeling like we were living paycheck to paycheck, but he loved seeing the number in the account go up.  It took us 2 years to finally find our home and we still have a good amount in our savings account after the 20% downpayment.  We still do this today and I have gotten him to almost max out his 401k because of everything I have learned here and because he doesn't feel as burdened.  My check is used for savings, home improvements/updates, vacations, and investing.  Living off of one paycheck has helped us to live below our means and enjoy what we have.

arebelspy

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Re: Living off of one spouse's income and saving the other.
« Reply #16 on: December 22, 2015, 12:11:10 PM »
I'd beg to differ.

Naturally how you save it makes a difference.  My point was money is fungible.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

Rural

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Re: Living off of one spouse's income and saving the other.
« Reply #17 on: December 22, 2015, 05:02:53 PM »
How does this work with 401k contributions? Maxing two of those is a large part of our savings. After all, with matches that's nearly $50k/year. You wouldn't want to set one to zero. So really you'd be spending 80-ish % of one salary (or whatever max out is) and saving the same of the other? Is that the plan?


In our case, it was my base salary which was larger, and I carried our health insurance, so between the insurance, mandatory pension contributions, HSA at the family rate, 403(b), and 457, it was more than all gone (low COLA). I did get some summer supplement money which I wasn't allowed to have withheld into pretax accounts, so we put some into his 457, but my fund choices and fees were much better, so we did as much as possible with them.


Now, he's going back to school, so we're paying tuition out of pocket and living on my salary, so the savings rate is down. We've cut out a lot of fat, though, so we're still saving more than I thought we could.

lizzzi

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Re: Living off of one spouse's income and saving the other.
« Reply #18 on: December 23, 2015, 06:52:40 AM »
Forgot to say that pre-MMM, we contributed to our retirements, but did not maximize. Saving one paycheck and living on the other was on the amounts after the automatic retirement was taken out of the checks. Should have been maximizing the 457 etc., but oh well...live and learn.

Frugalman19

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Re: Living off of one spouse's income and saving the other.
« Reply #19 on: December 23, 2015, 08:11:21 AM »
Since you both have never combined finances, this might be a bad idea. I have a friend who was in a similar situation. They had different checking accounts and no joint accounts for bills, they just paid 50% of the bills. They started saving ones salary and trying to live off another. The salary they tried to save was the husbands. The wife started feeling like she was paying for everything, and he wasn't contributing because all of the bills were coming out of her account now. Irrational, but that's what money does to people.

I would highly suggest just getting a joint savings account and having 50%, or more if you can, of your paycheck deposited into that, pay all the bills and save the rest. It comes out mathematically the same, but BOTH are saving and BOTH are paying bills, not one or the other. There is a reason you haven't joined finances in the past, and to have you save just one salary would add aggravation I fear.