Household Financials
So I have been designated the money person of my family. I know right? Me; a money person? My mom would beg to differ. But I am in fact our family's money man and I think that we are doing pretty well if I do say so myself.
Either way, in my research of the best way to manage the finances I have had quite a few conversations with different couples about how they manage their family's expenses. The majority of couples do one of two things: they either pool their money and live by the saying "what's theirs and mine, and what's mine is theirs. The other scenario is that the couples keep their monies completely separate. The song I like to think of here is Bobby Brown's My Prerogative. There are benefits and draw backs to both of these methods. Let's talk about that for a second.
Pooling
In this scenario, there are generally two accounts: a joint checking account and a joint savings account. The entire house hold income goes into the one account and then savings are taken from there. This provides loads of simplicity and visibility. You don't have to worry about how much each person contributes to a bill and there is no need to manage unknown amounts of money in either person's personal account. The draw back here is that every unplanned expense needs to be discussed. You may even feel like a prisoner to the veto power of your partner. This is aside from the fact that trust level needs to be sky high in order to not end up in a situation where one person spent all the money on a whim and now you have a late bill because of it.
It's Myyyy Prerogative...
In this scenario, there are generally 3 to 4 accounts; each person has a personal checking and/or a savings account. The way these couples manage bills is through one of two methods:
- Envelope system: this is when the bill comes and put their portion of the bill in an envelope and send it off.
- Bill Ownership: this is when one person is responsible for certain bills and the other is responsible for the others. This is a simpler system than envelope but makes it more difficult to be fair in the distribution of expenses.
This scenario is cool if you want to have control of all of "your" money and not have to worry about the other person spending it. But I do feel that this complicates the task of taking on new expenses. Who pays for it? How much? And I think you can end up in the same situation when you may not have your portion of the expense.
Our Way... The Best Way
Our method is a hybrid of the two above. It allows for adequate visibility and tons of control. We have a total of five different accounts. We both have individual checkings and savings accounts and a joint account between the two of us. All of these accounts are through Chase Bank, which allows for a seamless flow of money from one account to the next.
What we do is then tally ALL of our family expenses. This includes the car note, rent, life insurance payments, 529 contributions, groceries, baby products (clothes, food, etc.), cell phones, hospital bills, etc. We then take this entire household expense and split it based on the weight of our individual contributions and transfer that into our joint account. More on that in the next paragraph.
So my wife and I do not make the same amount of money. In fact, she makes more than me. Ayeee! Sugar Momma! So what means is that she has more spending potential than I do. If we were to split bills in half then I may not be able to build my own savings or buy the things I'd like to have. At the same time, she would be living in the lap of luxury with Gucci bags and walking around on red bottoms, in those "bloody shoes." By weighting the expense contributions, things may not be "equal" but they are definitely "equitable" and thus fair. Check the image below for an example of what I am talking about. Oh and should I mention all of this is don't trough automatic transfers and payments, so the on going management is minimal. Please note that the actual amounts are false but the ratios are true.
Please note that the numbers are fake and do not represent our income.