yay, tacos!

One of the biggest hurdles in a lot of relationships is money and budgeting. A lot of our friends are younger than us and we see/overhear the same conversations over and over again:

“I paid for dinner last night, you should pay tonight.”
“Yeah, but I bought groceries today.”
“You only bought $20 worth of groceries. I paid $50 for dinner.”

or

“I can’t believe he spent $50 on that. We need that money for new tile.”

Emily and I have been together for 10 years as of this year, and we’ve never had those discussions or arguments. It’s not really anything special. There’s no magic trick. It’s actually an idea I gleamed from one of my ex’s and took to the next step. It was probably the best thing to come out of that relationship, but that’s a story for another day.

It’s very simple. We have joint accounts and personal accounts. My ex was supposed to be moving into an apartment with two other people. They designated a drawer that everyone was supposed to dump rent, grocery and utility money into. Groceries paid out of there were communal and no one was allowed to say “you ate my crackers” if they were bought with that money. Some stuff happened, and those people never really moved in and the idea was never put to the test – but I used it as the basis for our money management when Emily moved in. We were working very different schedules and she did a lot of shopping and errands while I was at work. She needed access to money when I was working, but I still wanted to have money I could play with.

We set up a total of six accounts at the time:

1. Joint Checking
2. Joint Savings
3. Personal Checking (his)
4. Personal Savings (his)
5. Personal Checking (hers)
6. Personal Saving (hers)

With this setup, we established that we have “our money”, “my money” and “your money”.

We then sat down and agreed on who would pay how much of out each paycheck. For the sake of ease, let’s assume that we estimated $1500 for mortgage and various bills like electric, water and insurance. Budget another $500 for groceries, eating out and fun. So we budgeted $2000 per month that needed to go into our joint checking and savings accounts.

At this point, we decided that we would put all of our bill-money into savings (though, this could and probably should be a second checking account to avoid excessive transaction fees). All our joint food/fun money went into the joint checking account. In our case, I made more than Emily, so I put more money into these accounts than she did, but that’s something you would need to decide on yourselves. Whatever is left goes into each person’s personal accounts as they see fit. Of course, the priority is the money that goes into the joint accounts. Money is transferred into there before it goes anywhere else.

Any time we make a purchase for “us” – be it groceries, dinner out or movie tickets – we pay for it out of the joint checking. Money in this account is never spent on personal purchases.

Personal purchases are made from personal accounts – and the other person has no say in what this money is used for. Want to buy a video game or a new camera? Pay for it from your personal account. Of course, depending on your situation, those might be joint-account purchases, that’s entirely up to you. The real point here is that you have “our money” and “my money”.

There are also personal bills to account for. At the time, we had separate car insurance and cell phone bills. School loans, car payments and things like that also needed to be taken into account in the budget. Those are paid out of personal accounts as they are personal bills.

Like any budget, you sometimes go over. Maybe we ate out too often one week and we need a little extra cash. In such an event, we might transfer a little out of the joint savings – or one of us will donate a bit extra out of our personal accounts. There are other times where I’ll just pay out of my pocket just because I feel like treating. But I never pay or pull out of the joint account without first getting approval from Emily or at least mentioning it to her. That way, she’s aware that there may be less money in the account than she thought there was.

Of course, there have been things that Emily has done with her money that I didn’t totally agree with – and I’m sure that I’ve done things with mine that she did not totally agree with – but what she does with her money is her business. What she does with our money is our business.

We have added more joint accounts over the years: an emergency fund, a travel fund and a fund just for household purchases. The mortgage is paid out of the original joint checking and food and entertainment. At this point, we often pay certain joint bills directly out of our personal accounts, but we’ve adjusted our budgets of how much money goes into which accounts accordingly.

Of course, following exactly as we did may not work out for you. You need to adjust for your own situations. Maybe you have a large amount of personal debt and need to funnel most of your money into your personal accounts. Regardless, the real key here is to establish that there are three types of money: “our money”, “my money” and “not my money”. Once you do that, you’ll learn to respect your partner and their financial choices while they respect your apparent need to spend $100 of your money on gummi bears.