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
- 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.