Personal Finance Snapshot

Photo credit: newsroom.unl.edu

Photo credit: newsroom.unl.edu

Rom and I have been married almost 4 years, and since the beginning, we have kept our finances separate. This seems to be an unusual arrangement, so I thought I would post about how we do it.

The reasons we decided to keep our own finances were:

  • Both of us had significant assets in our own names at the time we got married
  • Neither of us had any debts, so we didn’t need a combined effort to pay them down
  • I had a child of high school age at that time, and wanted to finish saving for university education, without obliging Rom to contribute (it just wasn’t necessary)
  • Although our earnings are unequal, neither of us feels strongly about getting exactly the same amount of money as a spending allowance, as explained more below

Both of us work full-time. I am in city government (I am a library manager) and Rom is in private business (he is an IT specialist for a law firm). Based on take-home pay, I earn 59% of the household income and Rom earns 41%. One of the first decisions that we made was that we would pay an equal amount toward household bills, instead of going 60/40. I do two things to “compensate:” our workplaces are near each other, so we take my car to work daily and I pay the travel expenses; and whenever small household repairs come up or items need to be replaced, I usually cover them. The net effect is about 60/40.

Rom gives me his payment toward household expenses monthly, and I add it to mine and pay all the regular bills from the total. Our regular bills are:

  • Groceries – includes cleaning products, personal care, and paper goods, but these costs are minimal. Does not include dining out or any lunches/snacks we buy for ourselves during the work day – which are also minimal.
  • Utilities – includes heat, electricity, water, and our Internet/phone/cable bundle
  • Property tax
  • Entertainment – this year we are putting an equal amount into a fund each month, and agreeing on how we’ll spend it for entertainment

Although we pay the same amount for these expenses, they account for 25% of my total income and 35% of Rom’s.

Whatever money is left over after we each pay our share of the household expenses, we keep.

Household Income Pie Charts  (I attest that I personally created and uploaded this PDF file which is free of viruses and malware)

From mine, I pay for:

  • Accelerated retirement savings – 25% of take-home pay
  • Vacation/travel savings – 18% of take-home pay
  • My car expenses – insurance, gas, bridge tolls, maintenance/repairs, registration and driver’s license fees
  • Minor medical expenses (dentist, eye exams, glasses, Rx – all reimbursed 80%)
  • Minor work expenses
  • Miscellaneous fees – Costco membership, bank charges, postage
  • Clothes
  • Haircuts
  • Gifts (a major expense category)
  • And completely discretionary items such as vacation souvenirs, collectibles, jewellery & iTunes music.
  • I have a cell phone from work with limited personal use, but unlimited texting, so I don’t pay for a personal cell phone.

Rom pays for:

  • Personal savings – 40% of take-home pay, includes travel/vacation and gifts
  • His car expenses
  • Bus fares for days when we don’t drive to work together (this saves him parking and bridge fares)
  • Cell phone (inexpensive prepaid plan, no smart phone)
  • Subscriptions to Netflix and Spotify
  • $20/week personal allowance that he gives himself for magazines, apps and snacks

After all of this, Rom has about $100/month more than I do with no strings attached.

You will see from our savings rate that we are living on about 60% of our combined income, or approx. one salary.

For anyone not living in Canada, here is a little rundown of what gets taken off each pay cheque.

  • Taxes – federal and provincial – 22% of my gross salary and 17% of Rom’s
  • Employer retirement plan – 10.36% for me and 3% for Rom (with employer matching another 3%)
  • CPP (government retirement plan) – 4.6%
  • EI (employment/unemployment insurance) – 1.8%
  • LTD (long term disability insurance) – 0.3% for me and 1.9% for Rom
  • Flex Benefits (supplementary medical, dental, Rx, life insurance, + AD&D) – 1.8% for me and free for Rom

So I am losing 41% of my salary up-front and Rom has 29% taken off, with the main differences being our tax brackets and employer pensions. (In Canada, married couples cannot file “joint tax returns.”)

The big question you might have is how we decide on joint purchases. First of all, if any repairs are necessary for the house, they get done – non-negotiable. However, this does not include cosmetic renovations. If I wanted to replace the kitchen counter top, for example, I would probably pay for it myself. Most of our vacations, at this point, have an obligatory side to them. We visit our kid Link in Toronto, and Rom’s parents in the UK. Last year I paid for the Toronto trip and Rom paid for the UK trip. I am currently saving for a trip for the two of us to NYC in 2013/14, which I will be funding because it was my idea and I would like to treat Rom. Similarly, if he wants to attend a major music festival that’s beyond my budget, he can just offer to pay for it and we will both go. We both have enough of our own money that we can buy “toys” like a camera, a tablet or a guitar from time to time without impacting the household budget.

My only concern is that I have a generous retirement plan and my own savings as well. Rom’s work plan will be minimal and he will need to rely far more on his own savings. He jokes that he will keep working well past 65, but realistically, many people don’t have the energy or good health to make that choice. If that is the case, I expect we will simply scale back our lifestyle. Although we are fairly frugal right now so that we can save more, our lifestyle still feels quite grand to me and there is room to tighten up. Meanwhile, I have a goal to examine and balance my retirement portfolio by next February, so we’ll see if spousal RRSPs are in order.

When we were discussing this today, Rom said the reason why it works for us is that we are completely transparent about our finances, and that is true. We never hide purchases from each other or sulk about things we can’t buy or do. We both like spending a lot of time at home, and we enjoy most of the same activities (except for, you know, MTG cards and playing guitar!) I think another factor is that we were both more mature adults when we met (40s) and a lot of our financial mistakes are far behind us. I also believe it has been good for us to have our own money and not criticize each other for purchases made with our own funds.

What works for you?

I have posted about why I don’t do personal finance posts on a regular basis here.

10 comments

  1. I don’t know about other people, but I do believe each spouse should have their own money to spend without questions. I’m glad to see you aren’t bothered by your husband earning less than you do, so many couples around here have issues with that. For me, I don’t understand why it’s such a big issue to them, but then money has never been very important to me after meeting my basic needs.

    I did learn something today, I had never heard of Spotify and had to look it up. I use the free Pandora and realize they are pretty similar.

    • Despite having separate accounts, I look at what we can do with our combined resources, so I don’t think much about who earns what. Rom brought his Spotify account with him from the UK. Hardly any music subscription sites work in Canada – we can’t get Pandora.

  2. Thanks for sharing, I’d never really heard of married couples having separate finances, but it sounds like it works for you, and there were no issues with one parent staying home while the other works.

    We are not married, so we also have separate finances but share rent and bills as well as a car. I pay more towards food because I eat more of the food (by bringing my lunch to work) and also eat some expensive foods like almond butter and coconut oil. Mr Omnivore pays for the internet and petrol because he earns quite a bit more than me, and we take turns paying when we go out to dinner or to the movies.

    • I would say our system is like yours – we just did what made sense at the time based on our incomes and assets. I think that as long as couples cooperate and have a system, it doesn’t matter if the money is all in a joint account.

  3. Thanks – I know this may have been inspired by my comment! Really interesting too. My parents are all pooled money, all managed by Dad (who is coincidently a banker). This works well given their v different spending personalities, but it does cause some friction at times. In my ‘new’ relationship, things are pretty separate, though we both seem pretty relaxed about who pays joint expenses. It’s important to me not to ‘take, take, take’ in a dollars and cents way, so I like to pay for activities on occasional – I wouldn’t say the value or frequency is 50:50 but it’s not concerning either of us (though my recent b’day dinner was expensive, so it was ‘pay our own way’ – it was with friends too, and then the next night I felt I should pay for things to cover the ‘expensive’ dinner the night prior…)

  4. Really interesting to see the break-down of what comes out of salary – probably not too different to Australia, but I imagine it’s quite different to other parts of the world. Also great to read the “backstory” from that link to your earlier post!

  5. Pingback: Where the Money Goes | An Exacting Life

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: