Yours, Mine, Ours Cash Flow System [video]

transcript

Combining all of their money the day after they say "I do" doesn't make sense to everyone. Perhaps they have significant assets prior to marriage. Maybe they come from a divorced family. It really doesn't matter the reason. More and more people are opting to do things differently than their parents did.

Yours, Mine, Ours Cash Flow System

Instead, they feel more comfortable maintaining separate accounts - and we're talking banking here, so checking and savings accounts, for example - and having one joint account where they both contribute a certain amount to the joint account and joint expenses are paid from there. That's the yours, mine, ours strategy.

The concept is simple, but when it comes to implementing it, questions do come up and there can be confusion. We want to avoid it being a source of tension. So you need to just get ahead of it and have a system in place. There can be disagreements about what a joint expense actually is, who contributes what to the account. Certain people could be paying for a joint expense from their payroll deduction. So how do we account for that?

So here's a quick yours, mine, ours strategy that I would set up.

#1 Document your total expenses.

This is probably everyone's least favorite part of the process, but we have to do it. We need good numbers to be able to come up with good recommendations. I recommend people go back at least 3 months, if you can, looking at credit card statements, all of your banking information, and documenting the best you can, the average over those 3 months. If that's overwhelming, then 1 month will be fine. It's not going to be great, but it will at least be a good starting point and you can update that in the future.

#2 Determine your joint expenses.

After you have your expenses written down, the next column over, you want to note "J" next to joint expenses. This is the time to have that discussion and agreement on what a ‘joint expense’ is. Be as detailed as possible. For example, I've seen it where people will have a golf expense, but there is golfing together, which they would consider joint, but then golfing with separate friends or by themselves, which they do not consider joint. So I thought that was a great way to drill down and get at the heart of what they consider joint expense.

Once you have all of your "J"s, now you want to go back and see which ones are from payroll. So for example, if one person is paying the medical expenses from their payroll deduction, that would be a joint payroll expense. So change that "J" to "JP", all the other J's, change them to "JN" non-payroll. So now you've got all of your expenses. The next column over, you've noted which are joint either joint payroll "JP" or joint non-payroll "JN".

#3 Calculate each partner’s income percentage.

Next, we list each person's gross income and determine their percentage of total income. So let's say it's 60/40 for this example.

A common question is how do we handle RSUs and bonuses? Add them in. I consider RSUs a bonus in stock form. That's what they are. So we want to include that as well. I know that these numbers vary. I know that the bonus can vary. But that's why we're doing this in Excel. We're setting up the template and the system so we can update it as needed.

And notice I recommend using gross income, not net income. Net income doesn't make sense to me because people could have different withholding amounts. Gross income is more apples-to-apples.

#4 Determine how much each person needs to contribute to the joint account.

Now we have everything that we need. So the "JN" expenses, joint non-payroll, we could just divide that 60/40 and assign how much each person needs to contribute to the joint account for those.

For the joint payroll, it can be a little more complicated. This just requires 2 calculations. So we're still going to add up all the joint payroll and calculate the 60/40 split. So we've calculated what they should be contributing for the joint payroll. Now we just need to compare that with what they're actually contributing. Because remember, one person might just have the better benefits, so they are contributing more than their 60/40 split requirement and we just need to true it up there. We'll have all those numbers. If you do this in Excel, it will become clear that yes, they're over - over-contributing or under-contributing and we can kind of true that up with regards to what they have to contribute to the joint account.

This is not the only method. Here are the 3 Different Methods for Managing Household Expenses with your Spouse.

Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.

Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.