When it comes to handling money as a couple, there are as many approaches as there are types of relationships. Some people maintain their independance, while others essentially evolve into the same person, becoming so similar that you’re sure one day they’ll show up as a single blob, having totally morphed into one another. Neither is necessarily happier or better off, and both strategies work.
It’s the same story when it comes to how couples manage money. Some keep their finances totally separate, while others completely combine everything, 100% of the time.
These are opposite ends of the spectrum, but the reality is that most couples fall somewhere in the middle, sharing most of their money, setting goals together, and working towards them together.
My husband and I are one such couple. We take a hybrid approach to managing money. Our monthly budget, savings goals, and RRSP contributions are planned for together. We shop for groceries, buy furniture, pay off debt and renovate, all with money that is funneled into our joint savings accounts.
But our finances aren’t 100% combined. When it comes to spending money on ourselves, we still prefer to have some autonomy. I don’t want to have to consult my husband if I want to purchase a new pair of jeans, I want to just do it.
That’s where allowances come in. Spending allowances have allowed us to combine our finances while keeping a little bit of financial autonomy.
How Personal Spending Allowances Work
It’s pretty simple: we each get $100 per month that we spend on whatever we want, no questions asked. We use this money for personal spending, like clothing, grooming, or drinks out with friends solo. The money is literally kept separate from our other finances. I keep mine in a chequing account, and my husband has an account at our local credit union. We can save up the money for something special (I’ve been eyeing a new chair for my office) or spend it every week on useless purchases like takeout. It’s entirely up to the individual.
Extra Paycheques are Fair Game
On top of the regular $100 per month, we also get to keep our individual “extra paycheques”. Extra paycheques are based on the concept that we are both paid weekly, and our budget is based on four paycheques per month. Every once in awhile we’ll have five paychques in a month.
When this happens, each party gets to keep whatever portion of the paycheque is not needed for bills, which usually adds up to a few hundred extra dollars every few months.
Incentivizing Extra Earnings
Finally, on top of the $100 per month, plus the extra few hundred every few months, we also get to keep whatever we earn over and above our full time employment. That means when my husband works overtime or picks up a shift working on a landscaping crew, he gets do whatever he wants with that money. Usually we both choose to split our extra earnings between personal spending and reaching our financial goals.
On my end, that means every dollar I earn from my side hustle is mine to do with as I see fit. This wasn’t a big deal when I was earning only a few dollars here and there, but last year I earned almost $25,000 from my side hustle, so that is a lot of earning power that I have exclusive authority over.
Freedom Dampens Resentment
Our decision to give each other complete control over what happens to our extra earnings stems from the idea that extreme restriction breeds resentment. Essentially, what’s the point of working extra hours and earning extra money if every cent of it is snapped up and sent to our financial goals. Instead, we have control over our money and can choose to use it for good.
For example, I have complete control over what happens to my freelance income, which amounts to an average of $2,000 per month. While I could blow that money on a bomb office setup or a solo trip to Paris, here’s what I actually do with it:
- 30% goes to taxes
- 10% goes into my TFSA
- 10% goes to into my personal spending account
- 50% goes towards our financial goals
Last year, a huge portion of my freelance income went towards our big joint financial goal: pay off our car. Because of my contributions, we were able to do that in just one year. That was my choice, and I’m happy to send my hard earned money towards our financial goals. Nine times out of ten, my husband also dedicates a portion of his extra earnings towards our financial goals, even though he is not obligated to do so.
This type of voluntary commitment to our goals helps us both feel that we are proactively working towards our goals, instead of just having our budget dictate where all of our money goes. Plus, we each get to keep some money for ourselves, to spend how we want, when we want.
A Long Period of Adjustment
It wasn’t always this way. When we first combined our finances, there was a painful period of adjustment. After years of having exclusive control over my money (besides bills), I had to deal with someone else’s imput on where my money should go.
When we combined finances, suddenly both of our paycheques were being funneled into a joint chequing account, where it was divied up and poof, just a few days after it appeared, it was gone to various bills and goals. It was easy to feel like we were working towards nothing, and having to ask each other about every extra dollar spent became tiresome and restrictive.
Using personal spending allowances gives us freedom with our extra income, and it’s is a much better fit. We both work towards mutually agreed upon goals, but the personal spending allowances give us freedom to control some money ourselves. It’s a good compromise for us, and it encourages us to jointly stretch and achieve our goals.
How do you handle money in your family? Does everything you earn go into the communal pot? Do you only contribute enough to cover bills and the rest stays separate? I want to know!