How Dual-Income Couples Should Manage Their Cash Flow
Each Monday, we address one of your pressing personal finance questions by seeking advice from several financial experts. If you have a general question or money issue, or just want to talk about something PeFi-related, leave it in the comments or email me at alicia.adamczyk@lifehacker.com.
This week’s question came via email from Benjamin Brunig:
How can two income pairs manage their cash flow without lumping everything together? It seems to me that everyone I talk to has some kind of convoluted system of accounts and credit cards or complete chaos. Either way, they probably leave too much money in an account that is very little profitable, they overdraft that account, or they have to spend hours and hours keeping track of individual expenses. There should be a better way to use apps and automation, but big budget apps don’t really have this feature.
This is what individual experts usually say about a problem that affects each person differently: if you need personalized advice, you should see a financial planner.
All different
According to Eugene Pak, creator of Honeydue , an app that helps couples budget, managing a dual-income family can be daunting, especially when you consider that, on average, a couple has 16 different financial accounts. But as this reader has pointed out, there are many technical possibilities to help streamline the process, and each couple has different needs.
The most important part of couples budgeting is transparency: everyone needs to know what’s going on with their finances, and one person doesn’t have to take full financial responsibility. This does not mean that you need to know what your partner is doing with every cent, but you need to have an understanding of their balance sheet and be honest about billing and who pays for what.
“Decide how to separate tasks such as paying bills, managing investments, or arranging meetings with your finance professional,” said Marcy Keckler, vice president of financial advisory strategy at Ameriprise Financial. “Consider setting up a joint bank account for general expenses and individual accounts for personal purchases. This approach makes it easy to pay bills, giving everyone the freedom to spend money on their own terms. “
Read this post for more information on this:
It is true that Mint (and most personal money apps) are not suitable for multiple users. This is why Park advises each member of the relationship to manage their finances with their preferred app (like Mint or Clarity Money) and then use an app like Honeydue to view joint accounts and set account reminders. Once you decide how to allocate invoices, automate as much as possible.
An additional advantage of Honeydue is that each person shares only the information that is convenient for him to share. You select accounts (such as a joint account or individual checking or savings accounts) and whether you want to split only the balance or actual transactions. You can also ask your partner about individual costs.
Another option is the good old budget spreadsheet, which is useful because it is collaborative and easily accessible to all parties. Peter Paulson, founder of Tiller Money , a paid service that provides out-of-the-box budget statements, offers this setup to couples who are not familiar with collaborative budgeting:
- Partner 1 income
- Partner 2 income
- Partner expenses 1
- Partner expenses 2
- General expenses paid by partner 1
- General expenses paid by partner 2
“Both partners see everything,” says Paulson. “When they talk about money periodically, they can focus on total spending: Are we doing total spending right? Is the balance right between the two of us? “
You can create your own using the diagram above as a model, or try a product like Tiller. Just like a budget app, it downloads your financial data every day, so you can get an idea of your habits, not just your budget and your partner’s. Here’s an example of a budget that Tiller created:
And a more detailed analysis:
The thing is, it’s flexible: you can create your own budget sheets or use Tiller templates. How you structure them and what categories you define is up to you and your partner.
After you’ve spent a few months keeping a spreadsheet or using an app to track your spending patterns and paying bills, you can spot opportunities to save or invest some money. Again, talk honestly with your partner (maybe a little wine) and discuss your options.
“If a couple finds they have too much money in a joint account with an anemic interest rate, this is an opportunity to open an emergency savings account to save enough money to cover three to six months of spending if they haven’t. already, ”says Paul Bennett, a certified financial planner and author of The Money Navigator. “Once this is established, it will be possible to start a long-term investment program. Otherwise, you are sitting on money and your purchasing power falls. “
If you’re working towards a common financial goal (for example, saving money for a vacation or getting a new couch), try apps like Digit or Simple – they are for individuals but share a common login and will be easy to track.
You can use an app, tables, or any combination of both – whatever you think works best for you.