Relationships and Money, Couple 3: Billy and Lilly

Subjects:

Billy, 28 and Lilly, 25. Billy and Lilly are newlyweds who married last May. They rent a house, share one car and have a good looking cat.

photo-2
Meow!

Billy makes about twice what Lilly makes. Billy and Lilly have a few financial goals that they are working towards. They want to buy a house. In a few years they want to have kids. They want to have enough so that one of them can stay home with the kids. To meet these goals, they live off of Billy’s salary and save Lilly’s.

Billy and Lilly have all of their finances in joint accounts. They put everything in Mint so that they can stick to their joint budget. Billy is responsible for paying the bills (and by “paying the bills” I mean licking stamps and addressing envelopes (or setting up automatic payments), not being the sole breadwinner). Both Billy and Lilly have the passwords and access to all of their accounts.

They have a generous “Newlywed fund” that they set aside for themselves each month for date nights, vacations, new furniture- basically anything that they will both be involved in that is outside of their normal budget. They also have separate personal budgets (which totals about 1/3 of the newlywed fund for each) that they can spend on whatever they want- clothes, movies, books, games. They don’t have separate accounts for these funds, but they have the money factored into their budgets in Mint and they just tag the purchases appropriately.

They both had savings (emergency funds) all set up before they got engaged, so when they got engaged they reverted back to their old ways of aggressively saving. They were able to save enough to maintain their emergency funds and also save enough for a lovely wedding. Because of that (and with some family help) they were able to get married debt-free (which is a feat!)

The only problem they have encountered is that it is very difficult to buy surprise gifts for each other because there is total transparency in their financial system. In Lilly’s words: “Our method of keeping gifts secret is to say ‘Hey, don’t look at the Amazon order history for a few days.’ ”

Billy’s and Lilly’s system works for them because they are both savers and have agreed to the same financial and life goals. They were able to start off their marriage debt free, which laid the groundwork for a solid financial future. Now if only they could stop spoiling the cat…

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Relationships and Money, Couple 1: Juan y Catalina

Subjects:

Juan (37) and Catalina (29)

Juan has two children from a previous marriage and makes twice what Catalina makes.

Juan pays child support and alimony directly from his paycheck. After that, Juan and Catalina put all of their money into a joint checking account. From that account, they pay their bills, save for mid-term goals and they save for retirement. They have a  budget that they have planned out together. They are aggressive savers and they are both on the same page about their long term goals of early retirement.

To deal with buying things they each want but don’t want to have to discuss, Juan and Catalina give themselves equal “allowances” each month from the joint checking account to their own private checking accounts. The amount is enough for both Juan and Catalina to feel like they can take care of their personal purchases. If Juan wants to buy one of these for every day of the week, he totally can without even talking to Catalina about it. But Catalina might pretend she doesn’t know him anymore. Such is life, Juan.

This system seems to work for them because:

  1. Juan and Catalina have agreed upon long term savings goals and both spend their money according to their shared goals. Neither of them have run out to buy a new road bike or a pair of Jimmy Choos just because they felt like it. They are committed to their goals and follow the rules they have made for themselves.
  2. Juan and Catalina have mutually decided on their “allowance” amount, and they both agree it is sufficient for their personal needs. Neither of them are forced to buy work clothes at Goodwill to stick to their allowance (although they can if they want).
  3. Juan and Catalina never have to have arguments over whether they spend too much on clothes, or haircuts, or stupid crap*
  4. Juan and Catalina pay their bills before they pay themselves their allowance. If they stray from their budget on a joint purchase or want to go on a joint vacation- they just lower their allowance and they are still on track for their savings targets.
  5. Mainly, Juan and Catalina are an example of a successful financial couple because they have taken the time to figure out a system that works for them. They have agreed on goals, budgets, and how to deal with personal purchases- but they had to sit down and have discussions about it before they could get to la felicidad financiera (financial happiness, it sounds nicer in Spanish, eh?)

* Is it worrisome that I actually own one of the items on this list of stupid crap? Maybe. But I also happen to think item #10 (baby mop outfit) and item #1 (send poop anonymously in the mail) are brilliant ideas.

Love and Money

Firstly, I want the world to know that when I was googling “How do couples manage their finances” to do a little background research, one of the suggested searches was “How do couples hold hands”. That is sad. Let’s stop googling it, people, and just give it a whirl. The worst that can happen is a little clamminess.

In my life, I hope to have a happy, functional relationship with clear communication and expectations. I am sure you all hope for the same. However, a major reason for divorce is trouble with money….and no wonder! Money is complicated, it comes with a lot of feelings attached, and people have differing values and strategies and goals for dealing with money. Dealing with finances as individuals is tricky enough, let alone letting someone else into the mix.

Here is an example from just yesterday when my boyfriend and I were in the car and had this conversation:

BF: My free subscription to XM radio should have ended yesterday [but the car still is playing XM]

Me: Make sure you aren’t being autobilled for it. How much is it?

BF: About $6 a month.

Me: That is $72 a year! Are you going to cancel it?

BF: No.

Me: Seriously? You would pay $72 a year for XM radio? We don’t even like any of the stations.

[Silence]

Me: Ok, I don’t like any of the stations.

BF: Plus, there are no commercials. I think that is worth $72 a year.

(Later in the day the XM radio actually did get cancelled and we learned that XM also provides live traffic updates to the navigation system. In our traffic-jam-filled city, that is well worth $72 a year to me, too!)

See what happened there? We have different values and opinions when it comes to money and music and radio commercials. This was a tiny conversation, but every time we buy something out of the ordinary we are going to have to have a similar conversation (provided, of course, we are consulting our partners on our purchases). That is a lot of navigation to do! $72 a year really isn’t a big deal, but one day bigger purchases will come into the picture.

Since I started writing this blog, I have been asking many of the couples I know how they manage their finances. The answers I have been getting back have varied quite a bit- as have the structures of their relationships. As I am only in one relationship, I can’t address how other relationships deal with finances. After my initial worrisome google search, I discovered that the internet also thinks this is a complicated topic (I read quite a few depressing stories, which is why I am even more convinced that writing about this is important!) I am interested to hear (as are my readers, hopefully!) how some of you deal with your finances as couples. Do you think your system works? Are there any tips or pitfalls? Would you be interested in writing a guest post (or just telling me the deets and I’ll write it up for you)? Comment below or email me at twentiesinyourpocket(at)gmail.com if you want to share.

Here are some of the things that can add complexity to financial planning as a couple (mind boggling, really):

  • One or both of you have kids. Maybe you have kids separately, maybe you have kids together. Maybe one of you has a kid from a former marriage. Who pays for what? Does your new spouse pay for the stepkids? Even if it’s the simplest situation (you each made half of each kid) it’s still complicated.
  • You might be committed but not married. How do you deal with buying property when you don’t have the legal protection of marriage?
  • One of you might make significantly more than the other.
  • One of you might feel like it is your role to “provide,” while the other partner may or may not agree.
  • One of you might have huge amounts of debt. Is your partner expected to pay for the debt left over from your shoe splurge? Is that what partners do for each other when they love each other? Or is that your responsibility?
  • One of you might stay home with the kids instead of working.
  • You might think your partner buys stupid crap.
  • One of you might come from money (please send me information on how you got that trust fund).
  • One of you might want to go to school instead of continuing to work. Along those lines, one of you might want to switch careers to a more fulfilling but lower paying job.
  • You might be a saver, your squeeze might be a spender.
  • One of you might be much closer to retirement than the other (this could be particularly contentious in May-December romances).

You get the idea. Lots of pitfalls. But my general philosophy regarding finances is “Make a plan and try to stick to it.” The only thing that makes couples finances different is that it should be “Agree to a plan and try to stick to it and then communicate with each other.”

My boyfriend and I are moving in together next month and we began the conversation about how we want to handle joint expenses. We are dealing with a few of the complications I listed above (sadly, no trust funds) and we are going to have to work out a system that works for us. As soon as we come up with a system we feel awesome about, I will let you know! Until then, I look forward to hearing from you about how you deal with love and money.

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