Recently I wrote about our rough draft plans for our tax refund. I got some nice feedback and some interesting thoughts on it. The post also sparked another conversation between my husband and I.
I decided to share some information about how our accounts are set up and the idea behind our budgeting.
Curious to see what’s under our hood? Here are the accounts by ownership:
How we organize our joint accounts:
- ING Checking: This is the account where we pay our ‘joint’ bills like rent, groceries, light, Internet, etc. We prefer this account as it has no minimum balances, no fees, and it earns interest. This has deposits from both of us. I deposit on a weekly basis and my husband deposits bi-weekly. It goes with our paycheck schedule and it works well. We have a buffer built in just in case something crazy comes up.
- ING Savings: This is our emergency fund/sinking fund/housing fund account. We like to keep the money together in the bank and then we ‘separate’ it on a budgeting spreadsheet. I like to see a larger number, as it gives me motivation to make it grow. The interest rate is more than 10x higher than out previous Bank of America savings account. As of today, though, it is now 3.65%. (*sighs I loved my 4.1%) Any leftovers we have from the checking are sent here. Our tax refund was going to go in here, but my husband is persuading me to use it to severely pay down my car loan. If we do that, then after it’s paid off, I’ll redirect the money to the savings account as payment. With the Fed expected to cut down the interest rate within a month, paying debt seems to be the financially smart choice. This is by far my favorite account and we’re strict about the one way traffic: money only comes into it.
My individual accounts:
- Local Credit Union Checking: (It’s so local, that if I mentioned it, you’d know where I live and I’m not cool with that.) I have my job direct deposit come into this account and then I transfer everything out from here. I’ve had good customer service from them in the past and a branch is only 5 minutes away from our apartment.
- Local Credit Union Savings: It’s slightly higher than average, but not by much. This is just a buffer if something is need for checking like extra gas money. This is the least active of my bank accounts.
- ING Savings: I have my emergency fund over at ING Direct to have it grow faster than it would in my credit union account.
His individual accounts:
- Wachovia Checking: It’s where he pays his bills like eating out, computer upgrades, gasoline, etc. I open the mail, so I have an idea of the balance and what not, but I kind of ignore this account. It’s his personal account, so what he does with it is fine by me for the most part. If he buys a flat panel TV from this account great, if it came from the joint, then I’d be concerned.
- Wachovia Savings: Same as above. I have a general idea of what he has, but I don’t stress over it. He’s an adult and he’s financially responsible.
How We Budget Our Accounts:
I think the key for us is keeping it easy to use and easy to change. We use a Google Spreadsheet for our joint budgeting. It lists our deposits and expenses for the month. We also add a buffer in case we go over. Using Google for our spreadsheet is great as we sharethis free spreadsheet and it notifies the other one of any changes.
We review this on an as needed basis, if someone gets a raise or works more hours, etc. To determine how much each deposits, we go by monthly income and come up with a percentage and then use that to calculate deposits. Here’s an example:
- Person 1: $5000/month
- Person 2: $3000month
- Total Income: $8000
- Bills: $6000/month
- Person 1 brings in 62.5% of the income. That’s 5000/8000.
- Person 2 brings in 37.5% of the income. That’s 3000/8000.
So here are the deposits:
- Person 1 deposits $3,750. That’s just multiplying the bills by 62.5%
- Person 2 deposits $2250. “”
It is a system that is a bit more fair then just splitting it 50/50. People do it differently. This is what works for us,so we’ll continue with it for now. Any other ways of managing deposits that you found work?
As for my personal accounts, I use spreadsheets mainly and I’m trying out Wesabe’s community feature and using Mint to keep track of my eating out spending (I’m trying to be more efficient in this area).
My husband has spreadsheets and GnuCash. He likes it (I thinkJ, I’m not a mind reader, I just see him using it). I find if you do what works for you, then it actually sticks. I don’t like to use GnuCash, but I’m addicted to spreadsheets.
Our bills are automated with the exception of the cell phone bill, which will change next month. When a bill is off, like when our power bill was higher than normal, I just log in and change the amount. It takes less than 5 minutes.
We like our little system and it’s working for us. It’s by no means perfect, but perfection is the enemy of good. It’s better to do something and improve it bit by bit.
How do you set up your account? Any tips, suggestions, thoughts?
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Photo Credit: massdistraction
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I really think proportional contributions are the best way to go if you have separate finances. It just seems more fair. I prefer combined finances simply because we don’t have to worry as much about fair. We may do some kind of “allowance” private accounts once we actually have money for that kind of thing.
I wanted to ask because I’m a bit curious to see how other do it. Our came about smoothly, but we’re tweaking it as we see fit. Thanks for sharing Mrs. Micah.
We’ve never really split our finances, but that’s because of the “It’s not his/hers anymore, it’s ours” mentality.
But that’s hard to move to when you’ve been managing your own finances for a long time.
I’ve been married for a long time, and it took a lot of back-and-forth before everything was comfortable. We had separate finances at first, but it was difficult from a logistics point of view (a la. MrsMicah’s statement).
It was also easier when the wife went from worker to stay-at-home mother. The transition was seamless and no one complained about having to ‘pick up the slack’.
Could you please elaborate on why proportional contributions are more fair than splitting 50/50 when it comes to rent, groceries, electricity, water, internet? Aren’t both persons in the relationship roughly consuming the same amount of those?
@Mr Trend: That’s a common question and deserves a thorogh explanation, soI’m going to write about it in detail tomorrow. Here’s a quick rundown, though:
Technically my husband consumes more resources than I do, but it’s not too big of a deal. What if there is a big difference in income? If you split it 50-50, one side may pay 20% your pay, but the other one pays 60% percent of their pay. That’s not completely fair.
Another situation to consider is if one spouse says at home with children. 50/50 of the bills isn’t fair.
The main idea is to have both parties agree to a payment plan.
I like your system! My fiance and I have a similar system that has worked well for the year we have been living together. When we get married next year we might open a joint checking account, but I don’t think anything will change. I earn a little more than 2x what he earns, however, he has a nice savings account for a house and no debt. I have little savings and a fair amount in my student and car loans. The way we have it set up is a 60/40 split on bills, 55/45 split on rent, and 50/50 on groceries and entertainment. I keep track of who pays what and occasionally we trade money back and forth depending on who has paid more recently (main reason for a joint checking account). I really like your system, but with my debt I couldn’t handle the loan payments if it were the true percentages – 67/33.
@ Crystina: Thanks for pointing out another situation to consider. The amount of debt one has is another factor in working things out. Your system seems a bit cumbersome with the three splits, but if i works, good for you!
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