As a self-identified personal finance nerd, I've always taken my money management very seriously. I build budgets the way others would build a birdhouse, and I stress test my finances the way someone lifts weights at a gym. To me, there's no better hobby, because money intersects with almost every part of our lives. And in consciously deciding how to spend my hard earned pounds, I'm living with intention, stating outright what's important to me and what's not.
Because of this, people often ask me for advice in budgeting their money. I'm happy to help, but I sense a frustration as I step them through their options. In most cases, my friends want me to tell them the way, a perfect and surefire system for anyone to handle their finances. But such a system doesn't exist. I know, because I change up my methods constantly based on life circumstances. Here is a short listing of all the different ways I've handled my money and why:
Post University Single Life – No plans, No problems – At this point in my life, I'm out of university and making a small salary which is still the most money I've ever seen in my life. I split a flat with three other friends. My money strategy is as simple as my life: I have a current account and a savings account. The current account is for day-to-day expenses, and the savings account gets weekly injections of money for medium-term expenses and long-term savings. I sense early on that money sitting in my current account will be quickly spent, and I use the savings account as a little pigeonhole to hide money from myself.
Dating My Future Wife – Things Get Complicated – A few years into this simple life, I meet the woman who will become my wife. In a flash, we move in together and for the first time, I begin to combine finances with another. Early on there are issues. She makes less than me and has some debt. Splitting everything 50/50 isn't fair to her, and I'm also not quite ready to fully combine our finances. The system we come up with, which I'm still proud of, is what I call "the limited joint account". We set up a joint checking account and only transfer enough in to cover joint expenses - the rest of our money is ours to handle separately. Each person "owes" money into this joint account proportional to their salary.
Marriage Doesn't Change Things – Does it? In 2010 we get married and move into our first house together. Suddenly, it seems silly for both of us to be handling our money separately. After all, why would we be investing for retirement like we're single people when we're trying to plan a future together? More and more categories migrate into our joint account until it doesn't seem so limited anymore. By 2012, we switch to a new system: our paychecks get deposited into the joint account first. From there, smaller sums transfer out to our personal accounts.
Now Throw a Couple Children At It – My kids were born fourteen months apart, which means life has been a bit of a blur ever since 2014. But I still set aside time to look at our finances, and when I do I realize that I'm practically running a small company. This company's mission statement: meet the current and future needs of four humans, whatever those needs may be. Because of this, nearly all of our money stays in joint accounts, where it's moved to university savings accounts, retirement accounts, accounts to pay for ballet or swim lessons. My wife and I still have our old solo accounts, but they are vanishingly small, just enough to give us some fun money for Christmas presents or nights out with friends. So I guess that's what it's come to: I am a man with an allowance.
This is just one man's journey, but there are lessons in it. While there is no one right way to manage money, there are some general rules. The more goals you share with someone, the more it makes sense to combine your finances. And at any given time, your method of handling finances should flow from your goals, and not the other way around. Otherwise, you're in a perfectly nice car driving in the wrong direction.
Photo: Sergei Pesterev