I do this because I believe that it’s imperative to know exactly where all of your money comes from and where it’s going if you have any hope to become financially independent. After all, if you don’t know where your money is going, how can you possibly know where to cut expenses and save?
So the budgets that you see here are my half of the picture. That’s what I earn and what I spend. My significant other, Claudia, earns and spends her own money. We split most household expenses – rent, utilities, internet, groceries – but we also have our own personal expenditures. For instance, her son Aaron accounts for a substantial portion of her expenses, including clothing, school supplies, and hobbies for him. And anything that I want or need comes out of my pocket. Meanwhile, I usually pay when we hit the town and go out to eat or otherwise entertain ourselves.
This has worked incredibly well for us. It’s allowed us both a lot of latitude as far as how we go about spending our money and it’s also given me the freedom and time necessary to focus on investing and building up the passive dividend income.
But now that we’re engaged, we had to sit down and have a discussion on whether we were going to continue this system or not. We’ll go over the pros and cons of sharing one budget or continuing on with separate budgets and then conclude with what we decided to do.
- Complete freedom of spending with minimal/ no interference or input from the other partner.
- Easier to track income and expenses for just one person for each person.
- Avoids fighting or drama, especially if one partner is a spender and the other is a saver.
- Each partner is on equal footing when it comes to household decisions/spending.
- It requires a heightened level of personal responsibility, especially if one partner is a spender. They have to make sure they can continue to contribute their designated amount of income to the shared household expenses.
- There may be feelings of jealousy/inadequacy if one person makes substantially more income and is thus able to spend much more money with impunity.
- The relationship may lack financial cohesiveness because there’s a sense of individualism there.
- If there’s a significant difference in income between the two partners, there’s no hierarchy because the money is completely pooled.
- One person can adopt a “CFO” title to run the household budget, which allows everything financially related to flow through that one person.
- There’s a sense of togetherness because everything is shared.
- If there is a saver and spender in the relationship, a shared budget can even the two out.
- There’s a lack of independence, which could present feelings of resentment if either partner craves that.
- There could be more input from one partner than is really wanted.
- Fighting could present itself if the two partners aren’t on the same page in regards to spending/saving.
What We Decided To Do
So we had a few discussions on what we would do and how we’d go about it. To be honest, I actually implored Claudia to just go ahead and share her budget with me. But after some back and forth on it, we mutually agreed to keep our budgets separate for the foreseeable future.
For a little background on this, Claudia works in early education. As you can probably imagine, the amount of income one can make in this field is somewhat limited. So she’s never had a high savings rate and that’s never really concerned her very much. She loves what she does and plans to do it for as long as she possibly can.
Now, we may differ a bit in regards to our views on financial independence and the value of what we do. However, we do not differ much when it comes to spending and frugality. Although Claudia has never had a high income, or perhaps because of this fact, she’s always been fairly frugal. And since meeting me this behavior has probably exacerbated itself. She takes the bus to work, packs a can of tuna or soup for lunch, and spends very little money. In fact, I had her sign up for a Mint account a while back to help her with tracking her budget and it’s become obvious that most of her limited spending is on rent, food, and her son.
While we mutually agreed to keep our income and spending separate, Claudia really preferred this outcome more than I did. And the reasoning behind this is simply because Claudia has different priorities. Her son is by far and away her first priority and any spending related to her son is really non-negotiable in her mind. So she basically doesn’t want any input from me in that department. If she can save, then that’s great. But it’s simply not a priority for her. My priority is obviously achieving financial independence and so my spending (and saving) is prioritized toward that. Whereas I “spend” a lot of my disposable income on stocks, Claudia spends a good portion of her disposable income on her son. For instance, her son needed braces a while back. That was expensive. He also has field trips, opera, and events with friends that all cost money.
We have, however, had some discussions on where we see ourselves a few years from now. I obviously see myself as living completely off of passive dividend income by the time I’m 40. Claudia will be 57 at this time. Now she’s more of a day-to-day type of person, but she’s entertained the possibility of scaling back work a few years from now, which would involve teaching part-time or perhaps just tutoring a few children on a freelance/contract basis. This would lead to reduced income, although her son will almost certainly be independent and no longer living with us by this time. We’ve agreed that if her income is reduced below what she needs to cover her half of the bills, I’ll cover her. So I would either develop a new budget line titled “Claudia”, which would require some additional spending on my part, or we would perhaps just combine budgets at that point in time since her son will no longer be with us.
I don’t think there’s any right or wrong way to go about household budgeting. Some people find it natural to share everything. For others, splitting household expenses 50/50 while allowing each other a lot of freedom in regards to personal spending is easier. I don’t think it really matters how a couple goes about it as long as it works for them and leads to the least amount of friction possible. It’s common knowledge that financial disagreements can lead to relationship problems, so minimizing these financial differences can make for a much happier partnership with one another.
It should go without saying that it’s extremely important to seek out a partner that is on the same page financially right from the start. This means that it probably won’t matter much if you combine or split budgets. If you’re a hardcore saver and you marry a spendthrift, you have an uphill battle regardless of the way you each budget. So although Claudia and I aren’t both seeking financial independence, our views on happiness, frugality, minimalism, and life are largely aligned. However, we do have different priorities with where our money goes, and so we both agreed that it would be better if we continue operating separate budgets. If it’s worked for five years, we see no reason to change things now.
What are your thoughts? Do you combine budgets? Operate separately? Why?
Thanks for reading.
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