The Wall Street Journal-20080124-Fiscally Fit- The --36-500 Rule- Managing His- Mine and Our Money
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Fiscally Fit: The $500 Rule: Managing His, Mine and Our Money
Like most couples, my husband and I check with each other before making big purchases. I call it my "$500 rule" -- if it costs more than $500, I check with Gerry before buying it. Gerry's rule has always been roughly double mine -- he feels comfortable spending up to $1,000 without checking with me first.
Why two rules? Our situation may sound like a double standard, but it's actually the product of our past experiences with money. When Gerry and I met 17 years ago, he was a conservative saver who never owned a credit card, while I was a spendthrift with a wallet full of credit cards and more than $20,000 in debt (mostly in student and auto loans). After Gerry proposed, I realized that our marriage was doomed unless I got my spending habits under control.
After we married, I introduced the "check with Gerry" rule to help myself curtail the urge to splurge. When I wanted to buy something costly, Gerry would ask me the kind of simple questions he asked himself before making an expensive purchase: Do I really need it? Can I buy it for less somewhere else? Can I upgrade what I already have for less money? (Two recent purchases we've mulled: a $799 TV cabinet and a $1,000 laptop. We decided we didn't really need the cabinet and could upgrade our existing computer instead.)
Typically, Gerry and I both agree quickly on whether a potential purchase is a good decision. On the rare occasions we've butted heads, we put off making a decision to see if either of us feels differently after a little time to think things over. (I've often found this cooling-off period also cools my desire to spend.)
Setting a spending rule helped me become a more careful shopper. After a few years, I started to run Gerry's questions through my own mind before making purchases -- no matter the size. It helped even with something as mundane as grocery shopping: The no-name paper towels are just as good as the pricey ones I once would have tossed in the cart without a thought.
What's more, my spending rule helped build Gerry's confidence in me. After we were engaged and I finally revealed the extent of my debt -- which I'd kept from him out of sheer embarrassment -- my staunch saver of a fiance was understandably worried about what he'd gotten himself into. But my efforts to pay down my debt before we walked down the aisle, and my willingness to check with him on major spending decisions, helped him learn to trust me.
Trusting me also helped Gerry develop his own "$1,000 rule." Until we married, his conservative parents were his sounding boards on whether big purchases made sense. But as we grew together as a couple, he turned to me.
Gerry rarely makes impulse purchases, and I'm confident he gives plenty of thought to any major purchase before he talks it over with me (even with his one shopping weakness: big-screen TVs). Because of that, I don't mind that his spending boundary is twice mine.
Over the years, our limits have kept up with our cost of living. When we married 13 years ago, I'd check with Gerry before spending more than $150. These days, that wouldn't cover our cable bill. But while our spending limits may seem quaint to couples with more-lavish lifestyles, we've found it's about right for a middle-class household like ours.
Setting financial boundaries and being honest about our finances has helped us steer clear of the arguments over money that often tear couples apart. Checking in with each other on spending decisions also helps keep the lines of communication open when it comes to our overall finances.
Rather than combine our finances when we married, Gerry and I took the "yours, mine and ours" approach. We have separate checking accounts, credit cards and retirement savings, and both contribute to a joint savings account from which big-ticket items are purchased -- vacations, cars and those big-screen TVs. We also jointly contribute to a 529 college-savings account for our 8-year-old son, Gerald. We split up our household bills based on what we earn.
This system gives both of us a sense of control over what we earn, yet forces us to set savings goals and make big-money decisions together. Because our accounts are separate, Gerry and I don't regularly monitor each other's day-to-day spending habits. But because of our spending rules, we don't need to -- setting limits on big items reminds us that we're responsible to each other for the financial decisions we make, both large and small.
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