After FM and I got married back in 2010 we quickly moved to marry our finances as well. We did the typical thing and set up joint bank accounts, automated our bill payments by linking them to our joint accounts, and signed up for a joint credit card so any joint financial purchases – from groceries to vacations, home renovations to entertainment – could all be centralized.
One thing we did differently than many couples that we know however, was to maintain our personal credit cards and set up an ‘adult allowances’ system.
I referenced our ‘adult allowances’ in my recent post about my personal finance guiding principles, but didn’t get into any detail about it, so I figured I’d go over it in a separate post today.
The idea of using the ‘adult allowances’ system came about at the same time as we were taking the steps to combine our finances.
We both agreed long ago that while combining our finances certainly made sense, we’d like to have the ability to pursue our own interests without having any feelings of guilt about how ‘our money’ is being spent.
For example, I collect sports cards and memorabilia, like to attend live sports events, and enjoy drinking craft beers. FM has no interest in these things. FM is an avid reader of fiction books and likes to do crafts such as scrapbooking and sewing, none of which get any attention from me.
These interests come with an expense, of course. But those expenses can vary from interest to interest and from timeframe to timeframe.
To avoid discrepancies in how ‘our money’ is being spent, we decided early in our marriage that it would be easiest to give each of us a set amount of money each month to spend however we see fit, with no need for the other to know what that money is being spent on.
A recent article on Boomer & Echo (one of my favourite personal finance blogs) outlined a similar process, which the author refers to as a “No Questions Asked spending account” that his wife uses for her personal spending use.
Our ‘adult allowances’ follow the same philosophy; we’re free to make purchases on things that are of personal interest, with no questions asked by the other.
And what a great situation it has turned out to be for us!
While I regularly hear friends and coworkers griping or expressing frustration about their significant other’s spending, I can safely say that more than 8 years after we got married and put this system in place, FM and I have never once argued about money and spending on our personal interests has never once put a strain on our marriage.
I attribute this, at least in part, to putting this ‘adult allowance’ system in place from the get-go.
In keeping with the process of implementing the guiding principles for our finances, our allowances are put on autopilot at the beginning of each year.
When developing our cashflow forecast for the coming year each December, I start by figuring our how much we’ll (most likely) need to cover our regular expenses, some debt pre-payments, and some savings for our rainy day account.
FM and I then sit down to review the numbers, settle on a figure for our allowances that we’re comfortable with and plug in that number to finalize the forecast spreadsheet.
Once the number has been determined and the cashflow spreadsheet is complete, we log into our personal bank accounts (which have been linked to our joint account) and set up a monthly transfer of “$X” for the first of each month.
It’s as simple as that.
The amount has varied from year to year since we first implemented the process. Better paying jobs and career advancement has allowed us to increase our allowances some years. Other years we’ve prioritized planned home renovation projects over personal spending and decreased the amount.
And then came the kids and all the expenses associated with raising them!
Needles to say, a pair of babies and the reduced income that comes with maternity leaves has forced us to be flexible and accept the fact that we won’t have as much money to spend on our personal interests at times.
What’s been interesting to me (though in hindsight it really shouldn’t be surprising) is that even as our allowances have decreased in recent years, our personal spending has decreased to an even greater degree. Since we don’t have as much time to pursue our personal interests, we don’t end up spending nearly as much on those interests as we once did.
That flexibility I mentioned will continue to be a key consideration for the foreseeable future as the kids and our family continue to grow.
Thanks for reading!