Money often comes between couples.
If we do not smooth things out, the relationship becomes toxic and eventually crumbles.
I always tell people managing money for myself is far simpler because I only have to manage one often misbehaving person in a relationship: Me.
For many of you, the challenge is for both of you and your children to see eye to eye on wealth matters. If everyone is on the same page on wealth matters, there should be fewer conflicts, and eventually, relationships may be able to flourish.
We try to bring you some innovative and interesting ideas that you can implement between your spouse and yourself.
Jillian Johnsrud became financially independent at the age of 32.
In the last 15 years, her family paid off all our debt, travelled to 27 counties, lived abroad for 4 years, took 5 mini-retirements, adopted 4 kids (plus had 2 biological kids!).
On her podcast Everyday Courage, she is on a mission to help others build a life that perfectly lines up with their values, passion, and purpose.
In this episode, Jillian shares with us a simple money management technique that her husband and herself adopted to balance between
- fulfilling their long term financial goals
- living in the present
- respecting each other’s personal space
The Seeds of Financial Resentment
When Jillian and her husband first got married, it seems that they were never on the same page at the same time.
They have long term goals such as paying down debt and investing. Yet at the same time, there are things that they needed to do now.
The couple ended up arguing a lot of times.
For example, being financially conscious, she might wish to fully maximize her employee retirement account, while he wishes to buy a new set of skis. Or she wants to buy lunch and he would want to spend the money on a going-away party.
The Fun Money Account
In the end, Jillian decided to set up the Fun Money account.
- Each of the couples set up a savings/checking account for themselves
- Each month, upon receiving the paycheck, they will transfer an amount to these two accounts.
- Each of the couples can spend the money in their own account as they deem fit. There will be no judgment from the other party
- The accounts automatically rollover if you do not spend the money
Till date, they still have this account.
Jillian explained that she typically has US$2,000 in her account while her husband has US200 because he tends to really dig into his fun money account more than she does.
When they first started budgeting, the couple has too many categories of spending.
This complicates things and when things are complicated, the execution tends to fall off on the wayside.
The Fun Money Account greatly simplify things for the couple so that they have
- Core/Essential Expenses Account: These are joint accounts that are used to fund the essential expenses for the family’s needs or common family goals. It also funds their longer-term goals such as pay down mortgage, children’s education, and financial independence. This can also be shared essential values such as family vacations.
- The Fun Money Account. Anything that is personal, what they want that is not a need, will come out of their Fun Money Account. Here are some examples of things that go into this
- Haircut, face creams
- Seasonal stuff
- Fun personal trips
- Eating at coffee shops
In this way, the couple does not need to have a budgeting plan with 50 different accounts.
They can spend money on things each value the most. It makes sense because each of the couples is a unique person with personalized tastes and likes.
By rolling over the accounts, the individual does not get penalized for not spending what was allocated.
This was an area of conflict between her husband and herself initially because she is naturally frugal and values her long term goals. However, her husband was naturally more playful and would spend more.
This made her even more frugal because she feels she had to compensate for her husband’s more spendthrift ways. Eventually, it made her more resentful because she was doing all the sacrificing and he had all the fun.
The Fun Money account rewards you for your frugality.
If you managed to get a discount on something you want, you get to have more money in your Fun Money account.
It makes you become more mindful and creative.
For example, Jillian learned to watch YouTube videos on how to cut her long mane herself. So she has been doing that for the past 12 years. By doing that, she gets to have more money in her Fun Money account to spend in other areas she values more.
One Person Might Need a Bonus Occasionally
When Jillian’s husband first got out of the army to transit to a civilian career, they realize that he does not have many civilian working clothes.
So they decide to give his Fun Money account more money to kick start.
This helps to rationalize things and does not penalize him.
Overall, the couple has to decide together what are some of the spending categories that go into the Fun Money category and what gets a bonus bump. If this is not addressed over time, there might be some resentment.
For example, the couple does not include a family vacation in this because this is a core essential family values that both shared.
There is No Judgement to Their Own Spending
If a person buys something, or spend on a service that is new to the spouse, the spouse only checks if this thing is funded by the Fun Money account.
Funding in Your Fun Money Account Change Over Time
Couples should note that too much of fun money as a percentage of their income deprive themselves of their essential expenses and also their long term goals.
Over time, household income will also change over time.
The Fun Money account may increase or decrease accordingly.
For example, if the couple identifies that they have the potential to be financially independent much earlier if they prioritize funding their investments, they can deliberately attempt to tune down their Fun Money account a little by little.
This allows the couple to attempt to see if they can maintain their life satisfaction with less, and be creative with their spending versus the joy that they get.
This is an original article written by Kyith Ng, Senior Solutions Specialist at Providend, Singapore’s First Fee-only Wealth Advisory Firm.
We do not charge a fee at the first consultation meeting. If you would like an honest second opinion on your current investment portfolio, financial and/or retirement plan, make an appointment with us today.