4 Phases of Money Merging
By Saver | June 26, 2008
I have a feeling most couples go through a couple phases of finance-mingling as their relationships develop. They are probably slightly different for each couple, and different couples will end up settling on whatever works for them. For Spender and I, there have been at least 3 distinct phases of “Money Merging”, and I’m hoping we’ll eventually settle in on a 4th.
Phase 1: Splitting Expenses
When we started dating, I was a student and Spender was in his first staff position as a photographer. Neither of us had a lot of money. Our only “joint” expenses were going out for dinners or dates. I think Spender probably paid more than half, since he was working and I wasn’t, but I’m sure he didn’t pay for everything. The decision of who would pay was never much of an issue, and usually was driven by which of us had cash or which of us was the one deciding what we’d do that night.
Phase 2: Sharing Expenses
After I graduated, Spender was back in school and I was working, but not making very much money. We each still had our own bills and bank accounts, but we started paying a bit more attention to who was paying for what. We took turns at the grocery store and generally tried to make sure our spending balanced out. We had a lot of “Did you pay for X? I’ll pay for Y” conversations. I call it “Sharing Expenses” because the amount we paid was becoming less based on how much each of us used, and more likely to be split down the middle regardless. This is also when our “Shared” expenses started to be more than dates and going out: Groceries, Gas, Travel and even I think even cable.
Phase 3: Sharing Income
A couple years down the road, (and 2 states later, but that’s another post), we were both working and now living together. We opened a joint bank account, and we each contributed the same percentage of our income to the join account, keeping the rest in our personal accounts. I was earning quite a bit more than Spender, so I was contributing 2-3 times his share to our joint account.
It’s even more extreme now. Spender isn’t making any money. (We came to Europe when I decided to accept a transfer within my company). My paycheck (in Euros, thankfully) is deposited into our European bank account from which we pay all of our living expenses. We’re each using US savings accounts for things like paying our student loans or funding our Roth IRAs.
This is also the stage where conflict started arising for us. “She’s a Saver, He’s a Spender” isn’t just a catchy name for our blog. It’s also the biggest source of arguments in our relationship. Once one partner starts carrying more than her “fair share” of expenses, it gets very complicated. On one hand, we were each contributing our agreed upon share and we were supposed to be free to do what we wanted for the rest. On the other hand, I felt that I was making a certain level of sacrifice and in return Spender owed it to me to be responsible with the rest of his finances, including paying down debt and trying to save. Many arguments included something along the lines of “I’m not mad that you’re paying less rent. I’m mad that you’re paying less rent and also going out and buying an iPhone.”
We’re still working this phase out, but I think we’re getting better. We’ll post more about it as we continue to improve, and I hope we’ll eventually move on to:
Phase 4: Merging Finances Completely
The ultimate goal is to function as a single unit. I think we’ll always have a mechanism for us to be able to spend some money individually, but we would also take a more holistic view.
I’ll know that we’ve arrived to this phase when I am psychologically ready to take on Spender’s student loans. We actually both have a similar level of loans, but mine are at 3.25% and Spender’s are between 6-7%. If we were really operating as a single unit, extra money would go into his loans before mine and possibly before my savings/investment accounts. I’m not there yet - I still prioritize my accounts over his. I’m actually interested to see which happens first: my rational mind convinces itself to do the best thing financially (i.e., pay off high interest loans) or my heart deciding it would rather be half of a partnership than hold on to its current independence. Stay tuned.
Topics: Money Stories, Relationship, Saver's Posts | Related Posts: None
Budgeting: Early Returns
By Saver | June 24, 2008
We’re approaching the end of our first month of our attempt to track our expenses.
The good News:
1) We’ve successfully tracked all expenses so far this month. We’ve never actually accomplished that before. The web entry form has been working really well.
2) We’re significantly under budget. One of our biggest budgeted expenses is “travel”, and tomorrow we will spend that on plane tickets to Finland, for a wedding. After that, we’ll be closer to our budgeted amount but I think we’ll still be under. Yay! Now the question is whether or not we decrease our budget next month to put more money in savings and debt payoff….
The not so great news:
3) We’ve spent a lot of money on going out this month. And Spender could barely believe that more than half of it was actually times when he went out without me. After a bit of defensiveness and some attempts at justification, he admitted that he should probably be more careful about spending in those situations. This is exactly the point of having a budget and tracing expenses, so that makes me happy. I’ll be happier next month if the spending really does come down, but I’m not going to get worked up over one category when we’re doing pretty well over all.
To be honest, just the fact that we have a functioning budget on which we can base these discussions is huge progress for us. Maybe this blog really is working some magic on Spender!
Topics: Budgets/Expense tracking, Relationship, Saver's Posts | Related Posts: Expense Tracking: Using Google Spreadsheets, Free Money!, The beginnings of all things are small
The Dull Assignment
By Spender | June 23, 2008
I never expected J.K. Rowling to cast a spell on me.
Saver and I have been butting heads about where we should be using the money that I made before we moved here. I’d really like to buy some new camera equipment. Treating money as “my” money and “your” money is still kind of second nature but we’re making a conscious effort to make it “our” money and I know it would not be fair to buy expensive camera equipment with out her consensus.
I’ve mostly worked for companies that provide my photographic gear but now that I’ve gone in the freelance direction I feel a need to build up my own equipment. I have many of the essential elements a professional photographer needs but I’d still like to get a second DSLR camera body. I recently sold a couple of my personal items and planned to use that money to buy a Canon 5D, which I’ve had my eye on for quite a while.
Saver, on the other hand, feels differently. As she supports me while I seek avenues to make a living as a freelance photographer in a foreign country, she thinks it would be wiser to put this money into paying off my student loans. I’ve never been very good at paying more than the minimum and she thinks I need to change my habits. Saver believes spending money on another camera body does not make sense if I haven’t made any money since our move and loans and interest are not going away. I agree that I should be putting more money than the minimum toward my loans but I’m not quite sure why all the money should go to the loans when I feel it’s important to buy a second camera body.
Why do I think a 5D is a good purchase right now? 1.) It’s good to have a back-up camera 2.) It has a larger sensor than the Canon 1D mkII I currently own. The 1D mkII was at its best when I was shooting sports and spot news, however, now I find myself making travel and landscape type images where resolution and wide angles are more useful. The 5D offers a higher quality image file and a wider perspective which both seem significant for the work I’m creating now.
I came across this year’s Harvard commencement speech by J.K. Rowling; “The Fringe Benefits of Failure and the Importance of Imagination.” On this freelance adventure I’ve embarked upon, fear of failure seizes me nearly everyday. Sign me up if there are any kind of benefits. In her frank and steadfast British accent, Rowling reveals from her own lessons of failure that, “Personal happiness lies in knowing that life is no longer a checklist of acquisition or achievement.” So now I wonder if dwelling on things I think I “have to have” is a distraction to achieving my goals. I am not going to pretend that I’m not planning to buy more camera equipment. I’m a photographer and crave new ways of looking at things. Yet this speech was kind of an intervention, allowing me to stop and examine my priorities while “magically” outside of my photographer mindset.
It reminds me of a valuable lesson I learned as a newspaper photographer but hadn’t considered applying it to other uses in living responsibly. Do not underestimate what you can do with a dull assignment. I often saw co-workers complain about covering the check signings and city meetings. At first I thought it was lame to work on the boring stories. But I somehow learned to love returning from these challenges with the unexpected. It didn’t always happen but more often than not, because of the few distractions, I had the time to focus on the situation and create memorable images.
It’s hard to admit but maybe I agree with Saver’s argument, encouraging me to first be aggressive about paying my debt down and when the gear I have is earning income then I can consider purchasing more equipment. It’s like the dull assignment. Despite my longing to use new cameras and lenses for a fresh perspective, more mega pixels and wider angles do not necessarily guarantee success. Responsibility will be my new perspective and hopefully a better bet for prosperity.
Topics: Money Stories, Relationship, Spender's Posts | Related Posts: None
Friday Night Links
By Saver | June 20, 2008
My post on budgeting was featured in the Carnival of Personal Finance this week.
Other posts from the carnival that I like include:
Written Goals Beat Mental Goals Everytime at Harvesting Dollars
5 Avoidable Obstacles on the Road to Financial Recovery at The Red Stapler Chronicles
5 Reasons Why Money Is Like Sex at Broke Grad Student
Topics: Carnivals and Links, Saver's Posts | Related Posts: Friday Night Links, Friday Night Links, June 27th, Links
Personal Finance Meets Personal Fitness
By Saver | June 18, 2008
As someone who reads a lot of personal finance blogs, one thing that surprised me was the degree of connection between personal finance and personal fitness. Not only the analogies (e.g., spending more money than you earn is a lot like eating more calories than you burn — both give short term pleasure but are bad in the long term), but the number of people interested in or working to improve both. J.D. writes at Get Rich Slowly and Get Fit Slowly. Lazy Man has Lazy Man and Money and Lazy Man and Health. NCN at No Credit Needed also runs No Calories Needed. Nickel writes at Five Cent Nickel as well as Fit36. (sorry, no cute wordplay connection for that one).
Now, Spender and I are not planning to create “He’s a Soccer Player, She’s a Yogi”, although we do share the desire to get into shape. Last year, we were both working out regularly and even completed a triathlon together. This year, not so much. We haven’t found a work-out rhythm since we’ve moved to Europe, although we have found a gym (wonderfully subsidized by my employer).
We have decided to join a couple of the guys above (led by Nickel, I believe) and many others in the blogosphere in the 100 Pushup Challenge. We’re starting a couple days late, but that’s ok. I’m hoping it will be a bit of a kick start for the rest of our “Get Back in Shape” plan.
Topics: Goals, Saver's Posts | Related Posts: Carnival of Personal Finance, Friday Night Links, Welcome to my (pf) life
Someone’s Not Paying For Their Electricity
By Saver | June 17, 2008
We moved out of our old apartment on March 12th. We did not turn off the electricity, because it was still cold at that point and a different apartment in our building had already had a problem with pipe freezing. Rather, we asked our landlord to call the electricity company and switch it back to his name. I also think we were doing him a favor because it’s free to switch names but if you turn it off and then back on there is an additional fee. In any case, he said he would. We shortly got our regular monthly bill, which was for Feb 20-March 20 and was due April 15th. We paid it (without minding the 5 extra days) and thought we were good to go. Not so much.
We got another bill a few weeks ago, for electricity usage March 20-April 20. Spender called the electric company to see if anything had been done. Nope, nothing. We canceled the service, but could only make it effective April 20th. Grrr. We were left with a bill for $163.78!
Spender called our landlord and was told everything would be taken care of. The landlord had asked the new tenant to switch it over, but they never did, but the landlord would make sure it got fixed. Last week, Spender got a phone call from the electricity, saying that our bill was now past due. It was actually in danger of becoming 30 days past due, which means it could show up on our credit reports.
Now, I really really don’t want to pay for this bill. However, our landlord isn’t the most responsive one ever. He’s an older man, who bought a condo as an investment property. He was always very nice, but things were often a bit of a negotiation with him. It’s probably typical of an owner-landlord vs. a property management company landlord: decent guy, doesn’t really know how to handle the different issues that come up.
Spender considered giving him a second chance (although in my opinion it would have been a third chance), but we decided the best plan was to pay the bill ourselves, and to be sure it wouldn’t do any damage to our credit. The next step is to get our landlord to pay us back directly. In the end, I do trust the landlord to do what’s right, so I think this is the best plan. We are going to send a stamped, self-addressed envelope so all he has to do is write a check.
There is a small chance that we’ll be out $163.78. Which sucks, but it is probably worth that to keep our credit clean. But with any luck, we’ll get our money back and we’ll have learned not to rely on other people to do anything when it’s your money that’s on the line.
Topics: Money Stories, Saver's Posts | Related Posts: 4 Phases of Money Merging, The Dull Assignment, July Net Worth Update
How to Make a Budget
By Saver | June 15, 2008
When Spender and I started to discuss the idea of a budget, we ran into a little bit of a chicken-and-the-egg problem. It’s hard to create a budget when you’re not sure how much you spend or need to spend in certain categories. At the same time, a budget needs to say more about how much you should be spending rather than how much you are spending. In the end, we decided to create a budget even before we tracked a full month of data.
With those thoughts in mind, here are a few easy steps to create a budget:
Step 1: Start tracking every expense. This is the most important part of having a budget — it’s also the hardest to implement. Find a way that works, and start today. We’re using google spreadsheets. You can also try your own spreadsheet, Pear Budget (an online system) or something like Microsoft Money or Quicken.
Step 2: First, take a look at your last couple of paychecks and write down your monthly income. Even if you get paid every two weeks, use twice your paycheck. This the amount coming in most months, and when you get a 3 paycheck month, it’ll be like a little bonus. Much more fun than trying to figure out calculate 13/12 of your paycheck and budgeting to the very last cent.
Step 3: Write down all your fixed expenses: rent, car payment, cell phone bills, loan/debt payments. Anything for which you pay the same amount each month. You can also include things you pay once or twice a year or quarterly (like car insurance), but just divide to get a monthly amount. Do a quick check: ideally this amount is in the 50-60% (or less!) range. If it’s much more, you probably want to work on reducing come of these expenses.
Step 4: Pay your self first! Set aside as much as you can each month. Start with an emergency fund in a savings account, but then move into Roth IRAs and other investments. A good goal is at least 10% of your income. Again, if it seems like you can swing this, then try to figure out what you can trim from the expenses in step 3.
Step 5: Take what’s left of your income after you subtract your fixed expenses and your savings, and divide it up into your spending categories. Save some for irregular expenses, like health care expenses or birthday gifts. You can call this category “other”. Be as honest as you can, because you want to create a budget/spending plan that is reasonably reflective of your lifestyle, but stay within the amount you have to spend.
Step 6: After a month of tracking your spending (see step 1), compare it to your budget. Where the two don’t match, adjust your budget by moving money from one category to another (just don’t touch your savings!), or focus on adjusting your spending on that category for the next month.
Step 7: Repeat step 6! Every month, compare your actual spending to your budget. Adjust both as necessary — see where to focus your attention on your spending, and see which budget categories you can reduce in order to save more or pay off debt faster.
It’s that simple. We have created our budget, and we are tracking our expenses this month to see if we can make it. The first month is mostly about understanding where we are spending our money, but our budget will give us a good clue if we are way out of line anywhere.
Topics: Budgets/Expense tracking, Saver's Posts | Related Posts: Budgeting: Early Returns, Time to get serious, Milestones