Household Budgets

Thursday, 24th January 2008
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Couples don’t need to fight about money. Assuming you live within your means, here’s how to budget things properly.

Household Budgets: Do you agree with the solution? (If not, please leave a comment)

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12 Comments to “Household Budgets”

  1. Jeff AdamsNo Gravatar says:
    25 January 2008 at 9:38 am

    My wife and I much prefer one joint checking account. All the money goes into and out of there without worry of who makes what.

    We each have an equal blow fund every month that we can spend on whatever we like. The rest of the money in the account goes to bills and agreed upon household goals. Nothing other then the blow fund gets spent without consulting the spouse.

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  2. BryanNo Gravatar says:
    25 January 2008 at 9:53 am

    Thanks for the input, Jeff. How do you figure how much goes into each person’s blow fund?

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  3. JaredNo Gravatar says:
    25 January 2008 at 10:11 am

    I’m with Jeff: all money in one account. It promotes equality in the relationship. What I haven’t figured out is what Jeff refers to as the “blow” fund. We just play that part by ear, and it seems to be working out alright — though some structure would be nice.

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  4. EricaLucciNo Gravatar says:
    25 January 2008 at 10:43 am

    I kinda struggle with the percentages. If you use the house equally, why does the person who make less money pay less for the house?

    But this is certainly an interesting topic. Since Chris and I plan to get married his year, I know we’ll be facing this issue in our lives. Thanks for sharing how you do it!

    (And I’m really glad to hear you two don’t fight about money…that gives me hope!)

    Reply
  5. Jeff AdamsNo Gravatar says:
    6 February 2008 at 1:22 pm

    Bryan and Jared, The blow fund works quite well for us. Right before the month starts I do the budget for the upcoming month and account for regular bills and household goals (e.g. Saving for vacation, 401k savings, etc…). The wife and I then get together and decide what we want to do with the money that is left.

    For example, say we have $400 dollars left in the budget. We could split that evenly and each have $200 for our blow fund to buy anything we want. Or we could decide we want to put an extra $100 toward our summer vacation and split the resulting $300 evenly for our blow fund. This works quite nicely.

    There are a few key points here:

    * We plan the upcoming month before the month starts so we know where our money is going and what it is doing for us. It keeps us from being victims of the disappearing money syndrome.

    * We each review the plan and discuss it together. This keeps us both happy and involved, minimizing future conflicts regarding finances.

    * We split the blow fund equally so there are no hard feelings that one person is getting more than the other.

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  6. Rick MillerNo Gravatar says:
    17 February 2008 at 10:30 pm

    The percentage arrangement certainly isn’t fair unless the arrangement is 50-50.

    An burger flipper lives with a lawyer, for example. He earns $20k/yr, she earns $120k/yr. Is it fair that the lawyer pays six times as much for their condo as the burger flipper? I don’t think so. The burger flipper is living beyond his means.

    I earn an income and my partner doesn’t. So I pay 100% of the expenses and she pays nothing. How is this fair?

    What you really should have is a balance of “contributions” and “benefits”. The portion which each person benefits should be close to the same portion which they contribute.

    A difference in salary isn’t arbitrary. It means that what one person does for a living is worth more than what another person does. There’s no crime in admitting that.

    If you both live in roughly equal portions of a house, then you should be contributing equally for it.

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  7. Jeremy DunckNo Gravatar says:
    12 March 2008 at 5:36 pm

    Erica,
    The person who makes the smaller percentage pays a smaller percentage because fundamentally, each person is valued as an equal in the relationship and, assuming both people are ethical and interested in the common good, it is an accident that one person makes less. I’d argue that it should actually be asymptotic based on subsistence requirements plus differential between pay, but then no one would understand it. :)

    Rick,
    That’s terrible logic.

    Suppose it takes $X to subsist, where $X is more than $20K, but substantially less than $120K. The utility of a single dollar to the person making $120K is clearly smaller. $5 to a starving person is much more important than it is to me. It’s been quite a while since I missed a meal unwillingly. This is also why it’s easier for a person with very small monthly expenses to take much greater risks– and why I, a partner in a dual-income arrangement with no children, can take risks that my single-income friend with 5 children can not.

    Further, “a difference in salary … means that what one person does for a living is worth more than what another person does”. Ah, you seem to be a free-marketer. Go read up on your economics some more– the perfect valley in supply and demand depends upon: full knowledge of both parties, zero barriers to entry, and perfect substitution. Statistically, women doing the same job typically are paid only 70-80% of men’s pay. Is what *all* those women do “worth less”, or are you arguing that there are some women who are worth negative?

    I don’t think either of these premises are defensible.

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  8. MitchNo Gravatar says:
    19 June 2008 at 3:38 pm

    I realize I’m late to the discussion, but I think I should point out my opinion on a few things here and there.

    #1) in the template I notice that the savings contributions are taken out after calculating expenses. I’m a firm believer in “Pay yourself first” and therefore I would suggest that this calculation be done first. In the example given in the template I’d suggest that person A contribute $200 to savings, and Person B contribute $300. The savings account will get a large boost out of this extra income. Trust me, this will make a HUGE difference in the future.

    After taking 10% out for the savings account this leaves $4500 to go towards everything else. Paying the expenses brings you down to $1364 for discretionary spending.

    #2) My wife and I use the same 10% before expenses numbers for our personal spending. In the example, person A gets $200 a month, and Person B gets $300. This is for completely veto free, no questions asked spending.

    #3) Any remaining money goes towards veto-able discretionary spending. We both must agree that we can spend the money before any of it is spent. If we want to use the remaining money to pay for joint goods great! If I want to use the money to supplement my own personal spending, I need to ask and she has every right to veto or approve the use of that money. If I want something bad enough though I either need to save my personal funds or compromise and allow her to spend the joint fun money next month.

    This system works well for us. We feel that we are contributing a significant portion of our earnings towards a savings account, but we each get the same amount of completely no-strings attached money to spend as we see fit. We also feel that we have some say over the fun money that we spend. This has the added benefit that there’s no arguing about who’s paying for a movie or dinner, since that money is coming from the joint discretionary fund.

    Logistically, all of these distinctions are made in our heads, and reviewed periodically since we only have one checking account. We had three when we were married, but that became too much hassle. We’d deposit the money in the joint account and then transfer it all around, and it just wasn’t worth the hassle.

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  9. Podcast 5: Pursuing Your Passion and a Dual-Income Budget - Consumerism Commentary, personal finance since 2003 says:
    24 May 2009 at 12:00 pm

    [...] experience is the budget, and in this interview, Bryan explains what works for him and his wife. Here is the video and Excel spreadsheet mentioned in the interview.   AudioPlayer.embed(”pod_audio_1″, {soundFile: [...]

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  10. Podcast 5: Pursuing Your Passion and a Dual-Income Budget says:
    24 May 2009 at 12:20 pm

    [...] experience is the budget, and in this interview, Bryan explains what works for him and his wife. Here is the video and Excel spreadsheet mentioned in the [...]

    Reply
  11. Jeff LNo Gravatar says:
    25 May 2009 at 10:28 am

    My wife and I used to use a percentage based approach as well, but we were using an equal percentage. I think your approach is a bit more fair.

    However, we’ve recently switched our approach. Now, all money goes into the joint account and we both take out the same amount each payday to go into our personal accounts. This way we’re both getting the same amount of our own ‘play’ money.

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  12. pari sportifNo Gravatar says:
    20 October 2009 at 4:24 am

    I think there isn’t “A best solution” ! Everyone have to built his own model, it depends of the income, of the habits, you just have to be careful ! that’s my opinion, this is really interesting to share with others about that, feelings and opinions are welcome !

    Reply

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