I thought I’d take a break from racking my brain for fitness/nutrition-related babble to write here and discuss a personal finance strategy for couples that I got from Suze Orman’s Money Book for the Young, Fabulous, and Broke. (As an aside, if you are YFnB yourself or know someone who is graduating from college soon, this book is a great practical introduction and guide to managing your money, getting out of debt, saving for retirement, improving your credit score, and making large purchases like a car or home.)
To summarize, Suze says:
– Co-habitating couples need to be open about their finances, good or bad.
– Each person should keep their own credit cards and checking accounts in their own names, but a separate shared checking account should also be opened in both names.
– This shared account is used only for shared expenses such as housing, utiltities, food (groceries and dining out), home repairs and maintenance, and entertainment.
– The amount that each person contributes to the shared account is based on equal percentage share vs. equal dollar amount.
– Each person’s contribution needs to be transferred into the shared account several days before the bills are due.
– The couple sits down and pays their shared bills together so there won’t be any surprises.
Now let’s get down to the specifics of “Equal Shares.”
1. To calculate how much each person should contribute, add together your monthly take-home pay. This is the amount after taxes, personal and school loans, insurance premiums, retirement contributions, and other fixed personal expenses are taken out.
2. Next, add up your total shared monthly expenses: Rent or mortgage, insurance, utilities, groceries, dining out, home maintenance, entertainment, pet food and supplies for any shared furry kids, and anything else you use or do together.
3. Add an additional 10% (shortcut: Multiply the amount in Step 2 by 1.10) to your expenses for unexpected expenses.
4. Divide your amount in Step 3 by your total take-home pay (Step 1). Unless you are living way above your means, this number should be less than one. What you are basically doing is determining what percent of your take home pay needs to go towards shared living expenses.
5. Multiply each of your take home pay amounts individually by the result of Step 4. This is the amount each of you needs to contribute to the shared account.
Let’s apply this to some actual numbers:
Step 1: Sue takes home $2500 each month. Her boyfriend Tom takes home $2000, giving them a total take-home of $4500 each month.
Their shared expenses are as follows:
Natural Gas: $75
Dining Out: $50
Home Maintenance: $100
Total + 10% = $2395 * 1.10 = $2634.50
2634.50/4500 = 0.585
Sue’s share = $2500 * 0.585 = $1462.50
Tom’s share = $2000 * 0.585 = $1170.00
Chris and I are giving this system a shot starting this month. We’ve already done the calculations and set up the shared checking account. We’ll both have our contributions automatically transferred into the shared account each month to streamline the process. Certain bills which are the same amount each month will also be automatically paid from the account without any action on our parts. Everything else will be paid using the free online billpay feature that comes with the Wachovia Free Checking accounts or with our Visa check cards in the case of groceries, restaurant meals, and other brick and mortar purchases.
I will report on how well it works out over the next few months.
(*Diet and workout details omitted by agreement with trainer)
Meals – On plan
Water – 16 cups
Supplements – On plan
Regular (Non-Plan) Daily Supplements – multivitamin with iron, calcium 600 + D
34 days down, 50 more to go!
Weights – Shoulders/Abs – Done
Cardio – Elliptical – Done
The Awful Truth:
1. Only got 5 hours of sleep. 😯
1. Prepped lots of rice and chicken for company potluck.
1. Work on paper doll sketches.
2. Sew Issey Miyake dress.
3. Upgrade WordPress to 2.0.
4. Transplant two tomato vines and plant Swiss Chard.
5. Finish taxes.
6. Sew new workout shirts.
7. Create new logo for PDB shirts.