Part 3 – Creating a Money System That Works
This is the third instalment of our 4-part series on How to Improve as A Money Couple. If you haven’t had a chance yet you should read the first two article. Part 1 is Talking about it, Part 2, is Picking a money system. Once you have started to talk about money and picked your money system it’s time to cover the details of your money system
Work out a System
Once you have picked your money system (Combined, Pooled or Separate) you need to get into the nuts and bolts (or “details” as normal people say) of how your system is going to work. A few things to cover are:
This is often the most overlooked part of a money system. When will you be putting money in to the combined or joined account? When do you get paid? Are you paid monthly? Weekly? Semi-Monthly? You will need to figure out when money is coming in. It won’t help you if rent is due on the 1st of the month, but neither of you are paid until the 5th of the month.
When is the money coming in? When will you both be contributing to the joint account (if you are going that route)?
You need to know what is coming in and out of that account and when. Timing is often overlooked but it’s the most crucial part of creating a money system.
Come up with a Minimum Account Amount
Your main account should have a safety level. An amount that if the account drops below it needs to be refilled up to that level or more. This will save a lot of headaches and worries over time. Ours used to be $4000 now it’s $2000, thanks to being mortgage (which you can check out here if you want more details). A good rule of thumb is the amount of expenses for a month or two so that you always have access to funds in case something unexpected comes up. This isn’t part of an emergency fund it’s just part of the day to day living expenses
Chart out your expenses
When are your expenses coming out? It’s a good idea to have a financial calendar. Something that shows what dates the expenses come out, and when money is coming in. I use a grid system and in the past had a “mock calendar” done up to be a little more visual.
Here’s the details you want to have:
- What is the payment?
- How much is it for?
- Where does it come out of (Bank Account, Credit Card)?
- What day of the month does it come out?
- How often (Monthly, Quarterly, Annually)
- Any other details that are relevant
Here is an example of what my worksheet looks like:
|How much||From Where?||What day?||How Often||Other details|
|Cell Phone||$60||Visa||12th||Monthly||Pre Authorized. Comes out automatically|
|Water bill||$70||Chequing||1st||Quarterly||Must Pay with Cheque, no credit card|
Figure out your bank accounts
This is a key one. How many accounts will you have? Just the one main account? Are you each going to have your own account for spending purposes. Will you have savings in a separate account? Who will be responsible for paying the bills? Who will look after the day to day of the bank accounts? This is an important piece. It’s a good idea to each have some input and access to the accounts.
Some Other Tips
Give each other play money
This is an important part for us. As a couple, your money system will be however you decide it to be. If you want to have a good relationship with your significant other and money, make sure you each have a little bit of play money every month. Especially if the two of you are starting out as a newly joined financial couple. Everyone is different. Some couples do $20, some go a lot higher. Your financial situation will determine what you can use as play money.
This money is designed for YOU. YOU get to do with it whatever YOU want. Feel like saving up and buying a new phone?Go for it! It’s yours! Want to use it to go on a weekend shopping trip with the girls? YOU got it.
There is no need for the others approval with this amount. It’s just play money and IT’S YOURS to do with it whatever you want. So if you feel like buying every Taylor Swift song ever go ahead, it’s your money to do what you want with.
Make everything automatic
The only way the system will work is if it’s automatic. Set it up so that the money from each of your accounts is transferred to a joint account (or however you have decided to set it up) after payday. That way it’s done and there is nothing else that can be left to chance. There will be some bumps in the road. That’s normal for every new system.
Start Saving For An Emergency Fund
Part of your savings for your life as a couple should cover an emergency fund. The usual recommendation is to have 4-6 months of expenses saved up in case there is an emergency that needs to be covered. This money should be easily accessible. I’ll go more into emergency funds in a later post but for now, know that you should start saving towards this.
Expect Things To Change
When new things come up with your money system, like unexpected expenses, it’s usually not in a one-time thing. If the car breaks down and you need a new one, start thinking what else could break at some point? Vacuum? Dishwasher? Refrigerator?
Revisit the money system and make up some new rules for these things as the come up. Maybe you need to put more into a separate account for these big ticket items. Maybe there is a better money system that the two of you need to figure out together and start using that method going forward.
In our next post, I’ll explain the one thing that has been the key to our financial success as a couple. This one thing has taken us from month to month living to growing wealth systematically over the past 8 years. Make sure you sign up for our newsletter so you don’t miss out!
If you are looking to start becoming a better money couple I would recommend you check out our eGuide “A Couple Guide To Money”. It’s will walk you through the steps that you need to cover to be better with your finances as a couple.