Setting Up a Financial System as a Couple

By Staff

The following guest post is from Elle, who writes for Couple Money – a personal finance blog about building financial freedom together.

Each family has to deal with finances their own way, but there seems to be some common threads among all of us.   A successful marriage isn’t easy and it often involves learning to adjust to circumstances, including financial ones, as they come. With many people having their pay cut or losing their jobs all together, money has become a sensitive subject for some families.

One thing that may surprise people is how our finances have helped us draw closer together. While other factors like our faith, friends, and values have been major assets to us, our financial system has been a positive force in our marriage. Like many couples, we had to create it from scratch and learn what worked for us and what didn’t.

Focus on Goals Together

We learned from family and friends that open and honest communication is essential to reaching family goals, whether it’s money or otherwise. Being on the same page with our goals and values has made all the difference for us.

We have made a point to have financial meetings to discuss budgets, goals, and ideas. We did this more frequently the first year we were married as we had to figure out a system that was going to work for both of us. This is important because many times couples will have different ways of getting there.

Living on One Income

The first major decision we made as a couple was to plan to live on one income. It first started out of necessity, but once we got accustomed to it, we kept it. Besides going to school full-time, I had an internship that had a long commute. We weren’t sure if I should or could keep the job since we moved into an apartment way in a different city to be closer to my school.

We decided to keep all our living expenses based on my husband’s pay, which wasn’t much at the time with him being a new college graduate. Since I was still in school and working part time, we decided to do proportional budgeting for our joint accounts.

Our Budgeting System

Here’s an example of how it worked for us. (I’m using some hypothetical numbers to keep the math simple.)

Family Income

  • Person 1’s Monthly Net Income: $2100/month
  • Person 2 Monthly Net Income: $1400/month
  • Total Income:  $3500

Family Expenses

  • Bills: $2800/month
  • Person 1 brings in 60% of the income.
  • Person 2 brings in 40% of the income.
  • So here are the deposits:

Family Deposits

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

We feel like proportional deposits are a more fair way to handle the bills for us personally, but we understand that everyone has to build their own budgeting system. It’s fair for us because the bills don’t become a burden on one person.

We’ve automated much of our bill payments, savings, debt snowball, and retirement contributions. We’ve found that automating our budget keeps us on target.

Having visual reminders has been a big plus for us.  To help us focus on our monthly budget, we’ve used Google Docs and have shared a spreadsheet. This allows us to have an idea of what the plan is for cash flow. To keep track of actual spending habits, we use Mint for the weekly updates.

Postponed Big Purchases and Expenses

Our first apartment certainly wasn’t fancy, but it was by the beach, near the highway, and was well within our self-imposed budget.
Some friends thought we should’ve upgraded to a bigger apartment, but we didn’t want to live on a tight budget. Having an affordable apartment allowed us to tuck away some money and still have a bit to go out with friends for dinner and drinks.

It also provided a great lesson and reinforcement of this economic truth: we don’t have unlimited resources, so we should use what we have wisely.

Where did our little stash of leftover money go during the first few years?

  • Emergency Fund – Big priority for us as we wanted to have a financial cushion.
  • Paying Down the Car Loan – We sent in extra payments each month and even used our tax refund to get this eliminated.
  • Spending Money for Eating Out – We wanted to still have fun, so we included this in our budget.

We’re weren’t immune to wanting to make some big purchases. Postponing purchases usually meant analyzing the situation. For example, my husband really wanted a big flat screen TV.

There were two problems with that though:

  1. The money could be better spent on bigger goals, such as an emergency fund, debt reduction for our car loan, or house down payment.
  2. Having a really small apartment would make the TV look ridiculous.

Realizing that, we were able to meet our financial goals.  We did eventually get a new flat screen TV, so it worked out for my husband. He was glad because he was able to find a great deal at Costco and made the purchase with our debit card. No payments, just enjoying his TV free and clear.

Bought Cars (with Cash)

When we married, we both had cars. My husband owned his vehicle outright and I was making car payments. Even though my monthly payments were fairly low, I could see how they were negatively affecting out budget.

We decided to pay off the car loan early and hold off on getting another car loan. So far we have purchased 2 cars with cash.

  • Acura Integra – My brother had a friend of a friend who needed to sell his car. The guy had started doing upgrades to it, but he didn’t have the money. We bought the car for less than $2,500 and until our car accident, it ran fine. It had great gas mileage and relatively few mechanical problems.
  • Toyota Celica – We again put the word out and people gave us suggestions of cars to check out. One car had been for sale for a couple of months. It was in good condition and the owners had taken tremendous care of it. Their children had left the house, so they were downsizing the car collection. So far, it’s been running fine.

It does take much more legwork to hunt for a used car, but we believe it’s been worth it. Both car are at least 10 years old, but they have ran as good as newer cars. Ironically my newer car with the payments has been in the shop more times!

Once we paid off my car loan, we reallocated that money for various new goals, including a car replacement fund.

Do I sometimes want a nice, new car? Yes, it is tempting, but having a large car payment for a few years is not an appealing option for mw. When we go on road trip vacations, we rent a car and that has helped us curb our car appetite.

I completely understand that buying cars with cash isn’t an option for some people. You alone know the state of your family’s finances. I’m just suggesting that you consider holding off having car payments at least until you have a little cushion in your monthly cash flow. My husband suggests trying to buy cars outright unless you have excess money to burn.

Worth the Work?

We have found living a frugal lifestyle to be fun and enjoyable. We eat out with friends, go on vacations, and once in a blue moon, just blow money on things we love.  Our next debt to take down is some student loans. Once that’s done, we’ll try to increase our mortgage payments to pay our house off early.

Getting adjusted to living on income takes time, but it’s worth it. It’s been a wonderful few years together and we hope to have many more.

Thoughts on Couples and Money

How do you organize your finances as a family? What has been your family success story (big or small)?