I’m no Suzie Orman (thank God), but I do ok in the financial planning area. I have a simple system to manage money. It’s called compartmentalization and it’s partly a benefit obtained from my wife who wanted her “own money.” I have no problem with that and for forty-three years the system has worked quite well … we are not on food stamps and my bills are paid on time, plus now that we are definitely over age 65, we get to travel frequently, but only because we have stuck with this system for our entire married life, even during the college years.
Here’s the deal, take savings for retirement and other purposes from your pay before anything else, use no credit cards and spend the rest. That is your standard of living. Sounds like a plan right, but here is the other part, the compartmentalization part. My wife has a checking account and a back up savings account. I have a checking account and a back up savings account (actually they are all joint accounts).
Then there is a third savings account dedicated to travel expenses only (you may have a different purpose), when there is money in that account we travel, when its gone we don’t. When I earn extra money from a part-time job or get a tax refund or a dividend, it goes into my savings account so there is always emergency money and on occasion extra money for gifts, a night out or as the case is currently, a new windshield thanks to an errant stone.
When I get paid a set amount goes to my wife; she then allocates it between her savings and checking accounts. That money is used for food, clothing, family gifts, charity and anything else she wants to spend it on…don’t know, don’t care. The balance of my pay goes to my checking account and is used to pay all the fixed monthly bills; mortgage, phone, cable, and all the rest. If there is anything left at the end of the month (a rare occurance).
All this must drive the bank nuts, but using this method we always know what we have to spend for each major expense item. Funds are never transferred between the accounts and money is not spent unless the funds are in the designated account. I don’t take from my wife’s accounts and she doesn’t take from mine. It’s not that it is her money and my money, but rather money designated for a specific purpose.occurrence) it is transferred to my savings account.
Simple right, but the key is not so much the accounts, it’s the definition of standard of living and no credit cards. I’ve been called a few names over the years for sticking to this system, but it has paid dividends and I get to sleep at night at least as far as money concerns go.
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