An Interesting Way to Combine Finances
My fiancé and I have lived together for a little more than a year now. We are both engineers and are well paid for our work. I end up bringing home slightly more than she does. It is never an issue for us because we have a system that we follow that makes sure all of the bills are paid and our money is combined constructively without actually combining everything.
We both have our own checking accounts where we deposit our paychecks. We have our own separate credit cards for spending and ING Direct accounts for saving. We have one joint checking account at ING. This account is where all of our bills are paid.
We conservatively estimated all of our bills and joint expenses. These include rent, utilities, cell phone etcetera. Instead of dividing these expenses equally between us we split them according to the ratio of our salaries. I make more than she does and thus, I contribute more money out of my paycheck towards the joint expenses. It is in our view, a more fair way of dividing expenses since we each contribute the same percentage of our salaries instead of the same dollar amount.
For example:
Assume a couple has joint expense of $1,000 (make for easy math). Let’s say one partner makes $50K and the other makes $100K. The higher earner would contribute 2/3 of the joint expenses because he/she earns 2/3 of their combined income. The lower earner would contribute the other 1/3.
The added benefit, for both my fiancé and myself is what happens to the excess each month. When we estimated our expenses, we were careful to add an additional 15% just in case. That money goes into our joint checking each month and stays there. If we happen to not spend as much money on groceries, we don’t take money back. Any and all surplus is earmarked for vacations and apartment purchases.
I normally don’t see all the fuss in buying things like salad spinners or photo frames. If not for my fiancé, I probably wouldn’t buy them at all. That’s at least once instance where I cross the line between frugal living and just plain cheap.
In my monthly budget I have a line item for joint expenses. It is very simply labeled Orange Checking Account Deposit. As far as I am concerned that money is gone each month and I mean that in a good way. It is allocated for joint and apartment spending which I acknowledge is a very necessary budget item.
So when my most beautiful and smart fiancé goes out and buys that lovely OXO salad spinner or a new set of kitchen towels I never knew we needed, I don’t feel the pain because the money doesn’t come out of my own account. My fiancé has the freedom to make necessary purchases without having to convince me every time.
I trust my future wife and she trusts me to make good financial decisions. Together we have made this system work. We actually made a first attempt at combining our finances in a more traditional way but ended up arguing and debating long into the night. We decided to keep things the way they are and revisit the issue after we get ourselves past the wedding.
For the time being, it isn’t broke, so we have no intention of fixing it.