Firstly, let me say that I’m a very lucky man. My wife and I have never fought over our finances, not once! This may be partially because as I said, I’m a very lucky man to have married such a woman (she’s watching me write this right now!!) but not all of it is down to luck.
For a lot of couples, their finances are a hot topic for arguments. After all, it is your money that funds the life you lead today and, in the future. If either of you deviate from the other expectations in how the money should be spent, you are deviating from their expectations of how your life should be. Financial matters can be stressful too, and this stress can spill over into arguments.
So how have we managed to avoid arguing over our finances?
When we first moved in together, some years ago now, we decided to open a joint bank account. The idea was that we would pay our rent and any of our bills, eg the ESB and the Cable TV, from this account. Our rent was €1,200 and the bills came out to be another €250 per month. So, we agreed that we needed to fund the account with €1,500 per month, €750 each. So, we both set up our standing orders to come out 1 day after we were paid, into our joint account. Ok no big deal, but now we knew that our rent and basics were covered, and we were both funding it equally.
A few months later we talked about booking a holiday for the summer. We found a lovely spot in Portugal, and the flights were reasonable. All in all, after flights, accommodation, and spending money for the 2 weeks, we figured we’d need €2,500. With 4 months to go until the holiday, we both put in an extra €300 per month from our own accounts. With the first instalment, we booked our flights, and then the following month secured our accommodation. The extra 300 per month was a little painful at the time but not too big a stretch, and we had a lovely holiday that was fully funded from our joint account.
The success of saving this way, and not feeling stressed on the run up to the holiday about making rent and having enough spending money to relax and enjoy the holiday was a huge positive. So much so that when we got back, we decided to have a look at some of the other things we could fund in this way that used to hurt, e.g. the car tax and insurance, the excess of Christmas, a weekend break. We added up all of those costs over the year and then worked out what we would both need to put into the joint account every month.
None of that was rocket science and we’re not about to get the Nobel prize but now we never sweat when it comes to our holidays, our xmas, when our car insurance is due, anything.
Even better than all of that, is that we always know that whatever is in our own individual accounts, is money that we can spend on whatever we want. Because we have set up standing orders out of our accounts the day after pay-day, we know our rent, bills, holidays, insurance are all covered. What’s left in our own accounts is gravy. It’s new clothes, nice lunches, pints on a Friday, it doesn’t matter, because all of the big stuff is taken care of.
Now anytime we are faced with a new expense, this is how we tackle the issue. We work out how much we need to fund from our own accounts every month to cover the new expense. So, by being proactive rather than reactive to our finances, we take the stress out of it. Furthermore, by going about things in this way, we are coming to a consensus on how our pooled money should be spent. We have agreed that whatever is in our own accounts is ours to spend as we wish, and so we both enjoy that bit of independence in how we spend our money. We do have an agreement though that as a courtesy to each other, we will check with each other if we plan on spending more than €500 on something. The beauty of this is how simplistic it is, and the reduction in stress and the feeling of independence and the confidence that all the important things are taken care of is a great peace of mind.
Depending on your own circumstances, you may decide that one of you needs to do more of the funding because they earn more and that’s fine. If you have both sat down and agreed what’s fair and what works, while leaving both of you with enough money of your own to have some independence then that’s all that matters. And if you do something similar, you will reduce the scope to fight over money, you will have reduced the stress in funding life’s essentials, and you will have effectively budgeted together.
Those who budget together, stay together!
This is a great first step in mastering your finances. If you have done this successfully, then you have mastered budgeting for your present and immediate future needs.
The next step is to fund your medium- and long-term needs. This is where a good financial advisor (cough cough) is invaluable. They will help you identify risks and demands on your finances and help put a financial plan in place to meet those needs and manage those risks.
Have you any unique or interesting ways that have helped you manage your finances? If so, leave a comment and let us know.
If you would like to book a free consultation to discuss your finances, email Info@jmoorefinancial.com