Today I read this post on how an allowance saved our marriage and it reminded me I had not finished my post detailing how to have more fun and less fighting about money and chores!
My credit cards were stolen but I am not going to report it. The guy who stole it spends less than she does.” Henny Youngman This is an old trope, how men make money and women spend it. In today’s world its more likely the other way around as more than 60% of college graduates are women. Either way, the real problem is one partner using money to control the balance of power in a relationship.
I recently saw this article on Penny Horder and it reminded me all of the times I had heard stories about splitting finances in a relationship damaging the relationship. And today I found another from The Moneyist. I have not always been the higher earner in relationships but usually. It was never a problem until dating after divorce. After divorce despite having a high income spousal and child support meant I had negative cash flow. So what to do when you get engaged and you have to figure out how to divide money equitably? After lots of reading and thinking my partner and I landed on what I think is a truly equitable system, Equal Spending Money.
The basic idea of ESM is each person in a relationship should have equal money to spend after paying *shared expenses*.
Too often people use the Proportional Contribution Model, this generally does not work in situations where partners have significantly disparate incomes. The common issue is where one partner works at a non-profit and earns $36k / year or about $2650 / month after taxes and the other makes $100k/year or about $6k / month after taxes, proportionally partner A contributes 30% and partner B contributes 70% to common expenses (A=2650/(2650+6000) and B=6000/8650). Sounds great right? Might sound like the communist manifesto, from each as they can provide to each as they need…
In a simple model where the couple then has rent $2k, bills $600, food $400, transportation $800 (assumes 2 cars) then how does this work out using the proportional contribution model? Total shared expenses are then 3800 so partner A owes 1165 (3800*.3) and partner B owes 2635 (3800*.7) but what is more important is free spending cash. Partner A has 1485 to spend on going out, clothing, gas, travel, gifts, etc while partner B has 3365 to spend as they will and we have not even taken out retirement savings. This is where it gets tough to use the proportional spending model, partner B wants to go to the nice evening out, say a show and a nice dinner but partner a cannot afford it. Over time resentment builds up because either partner A is over spending or partner B is under spending. That is the crux, life is about fun so in a partnership, equal fun is what it is all about so how do you make that happen?
It works like this, first combine incomes, then remove shared expenses, finally divide what is left evenly you get ESM. Lets revisit the above model, $3800 in shared expenses and $8650 total income. Start by subtracting shared expenses from total income or $4850 in spending cash. Divide by 2, 2425 free spending cash for each. Now execute this by having partner A contribute $210 (income 2650 – free spending cash 2425) to the shared expense account and partner B contribute $3590. Pay shared expenses out of this and have fun with the rest. Well you *might* want to save some of that for a rainy day!
I have been sharing this advice for 15 years and here is what I observed:
1: partner B says this is not fair and keeps more of the cash then in 7ish years they get divorced and Partner A gets all of that cash back and more in the divorce
2: partners keep money completely separate and neither has a real idea what is going on with the other. In this case they usually split everything, dinner, movies, travel, everything. They stay married for 5 years and find they just are not that close and separate. Partner A finds out all about the finances anyway and Partner B pays all of that cash back and more in the divorce.
3: partner b does not share the spending cash and partner A simply runs up the credit cards and in 3 years the credit situation comes to a head and they get divorced. In the divorce the debt is split and partner A is awarded spousal that more than pays the debt and difference that would not have existed using ESM.
When couples have used the ESM money did not become an issue. Here is the deal, if you are not a partnership that transcends money, sex, friends, family, et al then don’t get married as marriage is about partnership. Regardless if you are partner A and resenting partner B for using money to control you or you are partner B resenting partner A for not contributing as much as you, just don’t get married it wont work.
Remember, you can modify any way you want as long as both agree it is fair, go dutch on dates or add date expenses to the shared expenses, exclude a car because one partner uses mass transit, what ever just make it fair but creating equal fun. Note this same process works for chores. partner A works part time and partner B full time, they have 2 kids so what happens when partner B comes home from work? In this case you are splitting free time evenly not time spent on different activities. So add up work, 60 hours, commuting 10 hours, childcare, 30 hours, chores and errands 30 hours, 30 hours of personal care totaling 160 hours a week in busy time out of 210 total hours, 15 hours a day waking times 7 days, so there are 50 hours a week for fun. Divide by 2 and you each get 25 hours a week to have fun. Remember, spend some together and some as individuals!
Here is the thing, share in the good things and the bad is what make marriage a partnership which makes it last. Lording over someone through money, nagging, or sex just leads to the end.