Joint Accounts: How We Budget Deposits and Withdrawls

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Note: Now that Wachovia has been bought by Citigroup Wells Fargo (update Oct 10, 2008), I’m waiting to see how the transition happens.

I’m writing this post based on two readers’ feedback:

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?

LOL, they don’t know how much my husband eats. If both partners make the same amount it’ll be 50/50. The reality is that one usually mas more than the other even if they both work full time. What if a spouse lived closer to their job than the other, should you split bills to compensate for more as money for the other?

Another reader added:

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.

Wow, they have got a fairly complicated system! We try to simplify and automate it as much as we can. The less time we stress over where the money is going, the better.  The key point, though, is that it works for them. I’m glad they have a program that they can stick to.

Overview of Our Budgeting System

We use two banks with 6 accounts (checking & savings for joint and each of us): Wachovia and ING Direct.

How We Budget:

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 share the spreadsheet and it notifies the other of 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 based on past budgets:

• Person 1: $2100/month
• Person 2: $1400/month
• Total Income:  $3500
• Bills: $1800/month

• Person 1 brings in 60% of the income.
• Person 2 brings in 40% of the income.

So here are the deposits:

• Person 1 deposits $1080. That’s just multiplying the bills by 60%
• Person 2 deposits $720. “”

Person 1has $1020 leftover and Person 2 has $680.

Now let’s look at the 50/50 split:

• Person 1: $2100/month
• Person 2: $1400/month
• Total Income:  $3500
• Bills: $1800/month

• Person 1 deposits $900.
• Person 2 deposits $900.

Person 1has $1200 leftover and Person 2 has $500.

Why Proportional Deposits Work For Us

While we have some leeway with our pay, for the most part, certain careers just pay more. More pay isn’t necessarily due to more work.

For us personally, we don’t blow the ‘leftover money’. My husband is a saver by nature and in general, he sets aside a portion of his money for joint savings. I came into he marriage with some debt. A portion of left over money goes towards paying it off.

The leftover money is ‘our’ money; it just allows us to spend without worrying about going over budget. I’m not stressing over how he spends and he doesn’t stress over how I spend.

Other Thoughts and Perspectives

Everyone is different and I asked some other bloggers how they go about their finances. Please check them out if you want to get more ideas.

Blueprint has two posts on joint finances:

• How We Handle Our Coupled Finances
• Alternative Ways to Coupled Finances

Paid Twice also made a great observation about marriage and fairness:

..in the “before time” long ago when we had separate accounts (a long time ago now lol) we deposited proportional amounts to our paycheck into our joint account. So if I made 25% and he made 75% we deposited 25% and 75% of the total bills amounts.

Why not even? Because life isn’t even. Before I lived with my spouse, I lived in cheap CHEAP student housing where my total bills for the month as far as rent and all utilities (even phone and internet) were $400/month and I walked to work (grad school research assistant). When I moved in with him we lived off campus, about 30 miles away from campus in fact because his job was an hour away from campus. My expenses went way way up because I compromised with him on where to live etc. And he could afford us to do so, but I couldn’t pay half of everything on my grad school stipend. He compromised, I compromised, and life went on.

My Two Dollars shares:

We have one checking account - all our money goes into it. There is no “my money” and “your money” - in our opinion it’s “our money”.

Being Frugal works her finances this way:

Right now we have two accounts, but both are joint accounts. One is for his income, and one is for my income.

There you have it: each couple ha to figure it out for themselves. If your system works, then keep it. If not, then change it. By the way, I define ‘works’ as both parties whole-heartily agreeing and covering your financial needs.

How do you handle your joint finances?

If this post was helpful, please buy me a cup of coffee. :D