Beware of Overspending When Using a Spouse’s Income for Non-Essential
Double income couples usually use one partner’s earnings as they see fit. One salary goes to meet basic needs and living expenses, while the other goes to recreational, discretionary things like restaurants or vacations. This is an easy budgeting option, but if you’re not careful, it can also lead to cost overruns.
This budget tactic can be even more common when one of the partners is a freelancer. Freelancing usually means that you are dealing with a variety of income. It is easier to use stable income for important expenses and variable income for everything else. But in the Wall Street Journal, certified financial planner Daniel Schultz warns:
Over time, she says, it makes it easier for a freelancer to work. And, if the freelancer has some unexpected luck (book deal, big contract), that means the household may habitually use the extra income for larger toys, she adds.
Of course, all pairs are different and this may not apply to your situation. But this should be borne in mind, because the danger of cost overruns here seems insignificant. Especially when the income is variable, if you devote this income only to luxury, you may not be aware of how much you are spending on wants and needs. Perhaps this is more than you think.
To combat this, Schultz recommends investing the same percentage of each partner’s earnings on all expenses, pension contributions, and savings. The percentage is better than the stated dollar amount, she said, because each person saves in proportion to how much they earn.
To find out more on this topic, follow the link below.
How to Plan Your Finances When One Spouse Is Freelance | Wall street journal