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Family budgeting for people who LOVE spreadsheets.
September 12, 2012 6:48 AM   Subscribe

Household finances: My SO and I have started to give ourselves "allowances" to put an outer limit on our discretionary spending. Have you done something similar? What did and didn't work? Any thoughts on the specific questions inside?

SO and I are big savers, and live well within our means. We fully fund our available retirement plans, have living expenses set aside, etc. We are thankful for our good fortune.

We have given ourselves a weekly allowance of $X each, which covers all personal discretionary expenses (e.g., a weekday lunch, or a book, or a cab ride). However, it would not, generally speaking, cover something like shampoo, shoe repair, dry cleaning, etc.--just the "fun" stuff you could do without.

We also have a shared dining out budget of $Y (i.e., for dinners out together, not workday lunches).

Any unused amounts in either category carry over to later weeks. If our dining out expenses exceed $Y, one half of the excess is deducted from each of our allowance "accounts." So far, this has worked pretty well--and puts an outside limit on this part of discretionary spending of $104X and $52Y.

We're still figuring this all out. If you use a similar system, do you have any thoughts on the following?

Vacations: How do you budget for vacations? Do you treat that as part of your allowance you should save up for? Or is it a separate budget item? If you were setting a budget of $3000 for travel for the calendar year, would you view that full amount as being available in January, or would you treat it as "accruing" over the course of the year?

Advances: Do you allow advances to make purchases that are more than the amounts you've set aside from your allowance? If so, do you "charge" yourself interest or otherwise disincentivize advances to ensure you're not always in the red?

Miscellaneous inflows/income: If you have an allowance, how do you deal with miscellaneous income--into the general fund, or into one person's allowance fund? For instance, if you sell your old banjo that you originally bought with your allowance, do you keep that money (i.e., as a return on your allowance), or does it go back into the general fund? Alternatively, what if a friend pays you $Z for helping with their business? It seems to me that if I buy something with my allowance and sell it later, the proceeds should be allowance as well, but I'm less certain about the income for services piece.

Saving up! Lastly, allowance or not, how do you save for a predictable recurring "capital" expenses that you'll pay with your allowance? That is, if you were to buy an iPhone 5 today, and would expect to buy a new iPhone 6 in two years, would you start setting aside ~$4 a week from your personal allowance so that in 2 years you'll have enough saved up to purchase an iPhone 6? Or do you constantly find yourself saving 100% of your allowance for one big expense after another? Does that work?

It probably goes without saying that 1) we're both very rational, 2) there is a significant amount of trust, teamwork, and shared goals here, and 3) we totally love spreadsheets. We already both use Quicken to track finances.

Feel free to MeMail me if you don't want to respond in the thread.
posted by 5845(f)(1)(D) to Work & Money (23 answers total) 35 users marked this as a favorite
 
Our allowance is just walking around money. Enough for Husbunny to drive through McDonalds for breakfast, or get pop from the vending machine.

I get by on about $10 per week because I bring breakfast and lunch from home and rarely leave the building once I arrive. I might use it for lunch out one day, a vending machine treat or for buying some crap someone's kid is selling for school.

For things like a new iPhone, that's just a regular expense, not an allowance item. We're eligible for an upgrade next month, so we're waiting to see when the new iPhone is being released, and then we'll upgrade and get our new phones.

We save aside for the usual, but annual, rare, expenses. Car registration, Terminix, renewing the HVAC contract, Christmas, etc.

Vacations are one of those things. Depending on bonuses, tax return money, how extra pay days in the month fall, that determines our vacation budget. If we're having a bad year (like we're having this year) we curtail the vacation.

If we want to have a great vacation, we make a goal and save up for it. For example, next year we aim to go to Washington D.C. with some friends, so we have to put away dough for that. Once we get to the amount we'll need, then we're good and can put money towards something else.

We're nowhere near as organized as you are, but it works for us.
posted by Ruthless Bunny at 6:58 AM on September 12, 2012


//2) there is a significant amount of trust, teamwork, and shared goals here,//

From my point of view, if you have that budgeting down to the last penny is an exercise in futility. Why not just trust each other to not do something crazy with discretionary funds? Definitely budget and save for big ticket items like vacations, but trying to track every penny spent on a book or a cab ride seems like a lot of effort for little return if you have the sort of cushion where an extra cab ride one week isn't going to mean rice and beans for dinner all weekend.
posted by COD at 6:59 AM on September 12, 2012 [2 favorites]


I simplify things for myself by making all "extra/fun" money come out of a single savings account I opened up and contribute to weekly. A friend told me this is what she does, and she calls it "The 'I'm Worth It' Fund".

It's left kind of deliberately vague for me, to account for the spontaneous, living-in-the-moment whims that sometimes come up -- saving up in advance for something is all well and good, but you also want to be able to spontaneously say, "oh, what the hell, my sweetie's had a hard week, lemme surprise her with an ice cream cake" or something now and then. Making the "fun money" come all from one source lets you do both.

However, since you already have a separate fund for dining out, maybe you could adapt it to a sort of longer-range "Big Things We're Saving For" fund, and have that be the fund for iPhones, upgrading TVs, vacations, etc.

As for miscellaneous income, I usually split that evenly between each of the debts I have and the "I'm Worth It" fund. Because getting rid of debt is always a good thing.
posted by EmpressCallipygos at 7:00 AM on September 12, 2012 [1 favorite]


I embezzle a small sum from the family account each week when I do the grocery shopping, getting cash back at the register. I try to limit my discretionary spending to that. If something big comes up, I may go over once in a while, but not usually. If I want to buy something, I try to save the money up out the embezzled money.

My wife pretty much knows I embezzle the money (since she sees me getting the cash back when she occasionally shops with me), so I guess it's not really embezzled.
posted by Doohickie at 7:04 AM on September 12, 2012 [1 favorite]


(I suspect she's also embezzling from the family account ;- )
posted by Doohickie at 7:05 AM on September 12, 2012 [1 favorite]


I use Mint and set myself budgets for things. Some of these things are necessaries (utilities, groceries, and so forth) but some of them are just fun (entertainment, stupid yay happy stuff like nail polish and earrings, coffee shop purchases). I have a rolling budget set for those at $X. If I spend less than X this month, I have more to spend next month. If I go over X this month, I have less to spend next month.

It sounds like basically what you want to do, only much, much more relaxed, and a computer takes care of it for me. All I have to do is log onto Mint to see what my allowance is and how much wiggle room I have.

(Mint is awesome, by the way, and if you're not using it yet you should check it out.)
posted by phunniemee at 7:06 AM on September 12, 2012


We do this. It's a bit complicated because I get paid monthly and the wife gets paid weekly. Basically, we have three shared accounts (the "virtual wallet" product from our bank): "spend", "reserve", and "growth". (The latter is hilarious given the interest rate. It's just savings.) We also have individual checking accounts.

Our paychecks get deposited into "spend"; mine on the last business day of the month and hers every Friday. Every Friday, $50 gets pulled from spend into both reserve and growth automatically. For allowances, $50 gets put into my checking account, and $70 into hers. That is for everything from lunch if we feel like eating out at work alone, to going out (without the other) with friends, to makeup, haircuts, and clothes. The reason it's not just for "fun stuff" is so we don't have to look over each other's shoulders when it comes to those semi-discretionary purchases: "You really need another pair of khakis?" "Why don't you just get the eyeshadow that's half the price?"

Whenever we get cash out of the shared account (for a cash-only restaurant or something) and there's some left over, we split it.

Reserve is for yearly expenses like family gifts, car and renter's insurance, and vet checkups. Growth is for vacations and long-term savings. Obviously, reserve and growth can cover temporary shortfalls, and we pay them back ASAP. Fortunately, the bank will use them as backup automatically and for free.
posted by supercres at 7:23 AM on September 12, 2012 [1 favorite]


If it weren't for the reference to Quicken and the two-people specification, I'd think you were my partner posting this. All three of us (me, partner R, their partner J) deposit our checks into our personal accounts, there's an auto-transfer of $money (equal amount) to the billpay account, and we each get an "allowance" of $dollars every Thursday/Friday. Any purchases for the household come from the main billpay account, as well as bills, naturally. If a household purchase would be more than about $50, we check in with the other two to make sure it's cool.

Basically, the salient point here is that we do each have leftover funds to cover personal things like vacations, personal-specific expenses, and so forth. There's a set amount that comes from our accounts into the billpay/household account; leftovers from our paychecks are our own.

Allowance leftovers: Managed individually. My weekly allowance is sufficient for a week's worth of personal purchases, for the most part. R puts their leftovers back into their personal account. I currently put mine in this one really useless book I own, largely because I usually don't have leftovers. I might get a piggy bank at some point. I dunno what J does.

Advances: Not really. Large-price purchases are either household purchases and thus don't come from allowances, or are personal purchases and come from our personal accounts.

Vacations: I don't know how the other two handle that. I personally don't really travel, due to being a total hermit. R and I are going upstate this weekend, and funds to pay for this are coming out of our personal bank accounts, if that helps.

Saving up: I know that R's in the market for a new phone, and so is waiting until they have sufficient personal money to cover it. They're saving up right now from their personal bank account. I'll do similarly, after I'm done paying off certain personal debt things. (:le sigh:)
posted by XtinaS at 7:27 AM on September 12, 2012


We're in the same boat and have found that using cash for the allowance makes it a lot easier to track. We take out the full amount at the beginning of the month.
posted by dripdripdrop at 7:44 AM on September 12, 2012


From a financial stand point Advances really should be accruing interest at your WACC (Weighted Average Cost of Capital). That's clearly logical. (however a bit absurd).

I think for large future spending one could either
A) build up a separate Reserve (which should notionally accrue interest at your WACC)
B) fund it out of Advances and current cashflow allowance.

If interest is accrued in either case then this is a 'fair' exchange.

Vacation Funds - I would treat as a notional Reserve balance with a Overdraft Facilty. If you set a fixed allowance of say $10 per week then you could work out the maximum spend on any given date that would reduce the year end balance to zero. (where the notional balance accrues interest ).

Personally I don't do any of this kind of thing and just have a vague sense of how much dough I've got at the moment. BUT if you want to run your life like an business then this is how it should be done.
posted by mary8nne at 8:14 AM on September 12, 2012


Actually the Over-draft interest Rate on your vacation reserve/account should be higher than then Deposit Rate. so basically this is an MISF valuation of the future cashflows. relating to your vacation.
posted by mary8nne at 8:16 AM on September 12, 2012


Mr. hmo and I have a similar system.

Vacations: vacations are jointly enjoyed, so they are paid for out of the general fund; they are budgeted as a separate item because they vary in cost. If there is a $3K budget for travel, it comes out of the general fund. It may be considered available in January and then "paid back" over the course of the year if it is spent early.

Advances: Advances are allowed, but no interest is accrued. However, if the amount of the advance is exceptional, there is discussion about the payback period.

Miscellaneous inflows/income: Those are distributed via percentage to savings, general fund and allowance. In the example you give regarding the banjo, the money goes back into the allowance.

Capital expenses: these are rolled into the general fund. The main expense may come out of allowance; maintenance for the enjoyment of the item will be paid by the general fund.
posted by hmo at 8:21 AM on September 12, 2012


We do many of the things you do. Our allowance has been $75 each per month for the last couple of years and that's worked really well as a number that is enough to build up a cushion but not enough to encourage overly-frivolous spending. As to your specific questions:

Vacations: We budget for vacations in advance of them, using several months to build up the fund. So if we know we are going to California next summer, and that it will cost $3600, we will try to set aside $600 per month for the first six months of the year. We do the same for Christmas savings, or home improvement projects, or other large dollar one-time needs. If a bonus or tax refund or some other unexpected money comes in, we often use that to fully fund notional accounts ahead of their schedule to free up "regular" income.

Advances: We use a cash (or equivalent) system for nearly all of our expenses, and try not to spend what is not available. But every month we keep a cushion of money that is for unplanned expenses. For things like an iPhone or other major purchases, we would budget that as a common expense. For purely personal expenses that I can't afford with my allowance, I don't buy it until I have the money. The whole point of our allowance is to provide a fund to buy things we want that our partner does not value to the same extent. If you have not accumulated the money, you can't spend it.

Miscellaneous inflows/income: This is maybe illogical, but once something is brought into the house I'd say it becomes property of the household. Mine is yours is yours is mine. So buy that banjo and play like the wind. But if you sell it that money is ordinary income. The only exceptions to common income for us are gifts.

Saving up! We keep a separate "envelope" to accumulate each of our allowance leftovers. And in fact at the beginning of each month each of us usually puts at least half of our allowance straight into that envelope. Once you have several months built up, you should be able to spend a few hundred dollars at once and not totally deplete it. And the satisfaction of saving half of the allowance makes living on the other half not too hard.
posted by AgentRocket at 8:30 AM on September 12, 2012


We're still in the process of merging our finances, so some of this is my habit and some of this is our habit, but:

I take out $60 in cash each Friday, and that is my walking-around-money. It's work lunches, beers out, and other random discretionary sundries. There's some overlap between this money and my restaurant budget, haircuts budget, grocery budget, etc., as necessary.

Our vacations and big expenses are far and few between and we save pretty aggressively (a bit over 10% a month, outside of retirement money which is another 10%), so we don't have a separate savings program for big expenses. We just transfer a bit of money as needed to cover it and go from there.
posted by mchorn at 8:54 AM on September 12, 2012


My wife and I are recently married, so I'm as interested in reading the responses you get as I am in sharing my own thoughts, but here's what has been working for us so far:
posted by asnider at 9:19 AM on September 12, 2012


When Mr. Leezie and I got married, I continued to shop as I did before except he sucked the joy right out of the whole purchase when I would get home and he asked how much I had spent.

To his credit, he came up with a brilliant solution. Being an engineer, he has a spreadsheet for our budget. As part of that budget, we each get a monthly allowance known as Discretionary. The amount is fixed and any unused portion gets rolled over to the next month. This is our fun money. I can spend WHATEVER I WANT ON WHATEVER I WANT and as long as I give him the receipt to enter it into discretionary, he does not take on pained expressions that suck the joy out of my purchase. Sometimes I go into the red, so I take a break on the spending and wait for it to replenish. We also get "boosts" from each others' bonuses.

Discretionary is not for food, obligatory household items or child-stuff (except for unnecessary but oh so adorable clothes everyonce in a while). It is for frivolous things that are fun. He uses his on game software, books, MP3s and movies. I use mine on clothes, clothes, shoes, handbags, and clothes. We also have fun with the descriptions of expenditures: the "Thunder From Down Under" tickets for me and a girlfriend in Vegas were entered as "Skin show".

Vacations: tchotkes and souvenirs are charged to discretionary. A lump sum portion of food/hotel is also charged to discretionary. The rest comes out of the general fund.
posted by Leezie at 10:11 AM on September 12, 2012


We use jars and withdraw cash from a joint account to pay for all joint expenses. We each contribute 50 percent of the total shad amount, and then whatever we have left over is our personal money. So if all the joint expenses came to, say, 3000 and my share was 1500, and my pay was 2000, I would have 500 left to do with as I pleased (retirement fund, clothing, personal things etc.)

We have jars for household (e.g. laundry card refills), parking/gas (he pays for other car stuff himself since I don't drive), dining out, movies/entertainment (to prevent us from spending all the fun money on dining out) vacations and savings. Anything else is paid for with our own money. Sometimes, we will both kick in for something special e.g. a concert or event. We just split the cost and each pay from our fun money.
posted by JoannaC at 10:44 AM on September 12, 2012


We are following a similar system. The major addition we've made to our system is allowance savings accounts and a vacation savings account. Rather then rolling over excess left in our individual allowances at the end of each month we move the excess into our individual allowance savings accounts. This provides personal motivation as well as a cushion for items like the iPhone 6 you mention in your example.

We've also created a vacation fund, which I highly recommend, it has made my traveling much more enjoyable, knowing that there is a set amount available. You might consider rolling excess from your date night fund into the vacation fund.

RE: Extra money - if it came out of allowance it goes back into allowance. If it's money from a side project we usually split it, 50ish % to allowance 50 ish % to general fund, but I could see a good case for all the other ways of disbursing. Our hobbies (where our random money tends to come from) require expensive equipment, so a lot of times we just agree to put extra earned money to a new gadget.
posted by dadici at 10:47 AM on September 12, 2012


Forgot to mention that we strongly prefer the "each of us gets X" allowance method over the "we each put in X to the general fund and keep what's left" method. It can be challenging enough to be friends with people who make a vastly different amount of money then you, I'm not really sure how I would be content long term living with someone who had a vastly different standard of living then me. FWIW.
posted by dadici at 10:51 AM on September 12, 2012 [1 favorite]


The main thing having a discretionary spending account has done for me is to give me patience. Seriously!

I know I'm getting $x.xx per paycheck that I can do with as I please. If I want to buy something that is several times that amount, I know I can get it buy waiting for the account to build up.

Before, there was the attitude that if I didn't get it now, I never would. There was some truth to that idea, too.

Now I can wait because the account will accumulate until I have enough, or I can get something different right the hell now.
posted by trinity8-director at 2:50 PM on September 12, 2012


We have an allowance system that works similarly to yours - it's for discretonary spending (as we define it - "wants, not needs"), and we have what we call an "entertainment budget" which is basically for when we go out and do stuff together on the weekends and includes any money spent on alcohol for the house.

We keep track of this by using a shared GoogleDocs spreadsheet and we're both responsible for putting our expenses in the spreadsheet, usually by the end of the day but we're not dogmatic about it. We allot our allowance monthly instead of weekly, with the caveat that you really shouldn't spend the entire sum at once without clearing it with the other spouse (and to make sure we have enough money in checking for the bills). We don't allow advances on the money because it always led to one spouse overspending their share and just assuming they could advance on the next month. Except it happened every month.

Usually Misc. Income belongs to whoever earned it/was given it/found it on the street, etc, UNLESS we are in dire need of something or had a major responsibility to take care of. At Christmas, we can count on $X from his great grandparents every year, and we usually try to pre-plan something to use it on, like snow tires or something (not glamorous, but necessary)

Vacations/Savings/Emergencies - We have a separate savings account for things like this. $X is transferred into the account each week. We do not withdraw from this account. For smaller ticket (but still expensive) items like you mention, such as an iPhone, we usually just talk about it and deal with it on a case-by-case basis. If you NEED a phone, are due for an upgrade, go for it out of our checking account. If you WANT a phone, and we have the cash to spare, then maybe half comes out of your allowance and half comes out of our regular checking account. If you WANT a new phone and we don't have the extra cash, feel free to save up for it. That sorta thing.
posted by nuclear_soup at 7:35 PM on September 12, 2012


We have a very similar budgeting system, which has gradually evolved over the years according to our needs. Our tracking method went from mental accounting to a spreadsheet to Quicken to Mint.com back to a spreadsheet to nothing and now we're using You Need A Budget, which I enjoy tremendously. It's also especially important now that we're in a position to save really aggressively.

We set aside enough for known predictable expenses (rent, utliities, daycare, groceries) in their appropriate categories. We then determined (somewhat haphazardly) an amount we could set aside from each paycheck, a chunk of which goes into a "Vacation" account and the rest of which goes into another account which is essentially a retirement savings account. The remainder goes into discretionary funds, which are doled out on a weekly basis. We each get $X per week for allowance, and the family gets $4X per week. Household goods (cleaning supplies, batteries, shampoo, whatever) come out of either the family discretionary funds or groceries. Dining out generally comes out of the allowance, unless it can be justified as maintaining external relationships in which case it can come out of family discretionary funds. Any activity undertaken alone comes out of the allowance. Clothing and personal luxuries come out of allowances (unless it's for work, in which case the family can pay).

Vacations: The amount that goes into the vacation fund is way more than the allowance, so using our allowance to pay for vacation would mean never going on the kinds of vacations we enjoy. The vacation fund accrues over the year, but of course there's no need for it to be spent by the end of the fiscal year. So the yearly amount is only relevant in that it determines the amount budgeted each paycheck. If you want to do some specific activity on the vacation that your partner doesn't want to, that might come out of the allowance.

Advances: This is perfectly ok, within reason. There's no need for interest as a disincentive. The words "indecision owes $X to family" on the markerboard is enough. I think an advance larger than a week's worth of family discretionary income would need discussion. Something that large might be important enough for the family to pay for anyways. Also, for a luxurious version of a "necessity", the family can sometimes pay the base cost with the marginal cost coming from the personal allowance.

Miscellaneous inflows: This hasn't really come up, as this usually happens during transition periods for us when we aren't really keeping track of allowances. However, if I sell something I purchased with my allowance, that money would definitely come back into my allowance. That seems clear. As for the side income, it would be slightly different. In addition to a monetary allowance, we each also get a time allowance of one night a week off which we can spend by ourselves (i.e. we don't have to be present for the bedtime routine). If I choose to spend that evening working on an income-producing side project, I'd say I get to keep that income. If the income-producing side-project is done with other time that could be spent with the family, then it's family income.

Saving: I'd save as much as I could each week. Saving 100% per week is not feasible, but 25% per week is.
posted by indecision at 4:14 AM on September 13, 2012


All sorts of great experiences in this thread; thanks for sharing your thoughts.

A couple of updates and conclusions:

1) I think we'll just continue to have vacations as a separate item, though we'll have to figure out what a workable amount is.

2) I think advances will be allowed, without interest or other penalty. In fact, I just dipped into future allowances to get a really great deal on something off of Craigslist, so I'm in the hole. But (absent extreme circumstances of awesomeness), I think the rule will need to be (at least for me) that you (I) can't take two concurrent advances. So I will make myself go current with my allowance before I take another advance. BUT--because dining overages (i.e., above $Y) are deducted from our personal allowance accounts, I think those should be eligible for more or less unlimited advances. If they were disallowed, SO would be penalized by my advance, which I don't think is fair.

3) I think (and it sounds like at least some of share this view) that if I sell the banjo I bought with my allowance, the proceeds should be returned to my allowance. This makes sense. I still have trouble squaring the extra "services" income with allowance. I have a hobby that ocasionally brings in some extra money, and calling that income mine ALL MINE seems too selfish to me. I guess I'd rather share it as bonus allowance with lovely SO, or put it in our shared dining budget. Or just save it.

4) On saving up, I think I'd find it difficult to accrue an account for future purchases--i.e., always have $4 come out of every week's allowance to go to a new iPhone every two years--so I'll probably just go on specific saving binges for that kind of thing. The catch is, though, I'd love (but do not really need) a new laptop, and, even saving 100% of my allowance for something like that would take approximately 5000 years. Nibbling away at the cost of a laptop might be easier. We'll see.

A few other thoughts:

Phunniemee recommended Mint, but SO does not like anything on the cloud with our finances (even a google doc, or dropbox)--but it may work well for others. We have a very awesome Excel spreadsheet that has worksheets for income, expenses, assets, and the allowance. Allowance keeps a running total of balances at the top and each person enters their debits. Neither of us is apt to fib, and anything that accidentally might be forgotten probably is not important in the big scheme of things.

This level of accounting may not be for everybody, but we both love Excel, data, analytics, and thrift. And it has already completely changed my approach to lunch, for example. I work in an area with a lot of very tasty lunch options, which I had been happy to patronize every day. I'd only eat out in a real pinch now--that's my iPhone money!
posted by 5845(f)(1)(D) at 8:30 AM on September 13, 2012


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