Joint budgeting -- best approach? best bank?
November 8, 2016 11:07 AM   Subscribe

What bank account should we get? How should we jointly budget? With my husband, I'm trying to set up a joint system where we have personal accounts and also a joint account with "envelopes" for certain expenditures and certain savings. Please review my plan below and tell me what bank to get an account with.

We're not good at watching our money, but we're trying to be! We are saving for a down payment and are married with a child.

My goals in creating this system --
  • Goal 1: Regularly save money for a house and baby's college.
  • Goal 2: Focus each of our personal attention on discretionary purchases where additional savings may be possible (e.g., eating out for lunch).
  • Goal 3: Maximize autonomy (within a fair framework that achieves our joint goals).
  • Goal 4: Be realistic, not so tight that either of us rebels immediately.
  • Goal 5: Give us a dashboard of money by category while requiring minimal maintenance.
In general, the plan is to have our paychecks go to our personal accounts but then auto-transfer a certain amount into a joint checking account. From there, we'll pay ongoing basic expenses (e.g., electric bill) and transfer funds to higher-yield savings accounts for a house and college. We'll also have a short-term savings account for joint things like car repairs and vacation.

My plan --
  • Income comes to our personal accounts
  • "Category A" (see below for definitions) and "Category B" expenditures come out of our personal accounts
  • Some funds from us both get auto-deposited to a joint Bank1 Checking Account
  • "Category C" expenditures are paid from Bank1 Checking Account
  • House and college savings get auto-deposited from Bank1 Checking to Bank2 (higher-yield) Savings and a (to be created) 529 or similar
  • What remains goes to Bank1 Savings for "Category D" expenditures
Kinds of expenditures --
  • Category A = personal and non-discretionary (e.g., student loan payment)
  • Category B = highly flexible, where savings might be possible (e.g., groceries, eating out at lunch)
  • Category C = joint and non-discretionary (e.g., the electric bill)
  • Category D = joint and flexible, and bumpy (e.g., vacation)
Why I think this meets the goals --
  • We will be immediately pulling money out for a house and college.
  • By pulling out the basic, regular payments and especially the bumpy payments, we can each focus our attention on the areas where we have the most discretion.
  • To maximize autonomy and encourage budgeting without prompting immediate rebellion, the withdrawal amounts are calculated to be close to what we're spending now on some of those high-spending categories (75%), along with $200. That way, we can either spend as much as we were spending, or use that $200 for things we forgot to put in the budget or don't want to have to jointly decide (gifts for one another, a donation to a certain cause or political candidate, something that I value but he doesn't or vice versa, that sort of thing).
  • We'll have a quick dashboard in that we'll have our personal accounts, Joint Checking (which will work like a house escrow account -- all basic expenditures will come from it, but nothing discretionary will), Joint Short-Term Savings (which we'll decide together -- should we take a vacation or buy an iPad?), and Joint Long-Term Savings for house and college.
My questions --
  • Does this plan make sense? Is there a better way to do it?
  • What bank to use for these joint accounts? I read that Capital One 360 allows you to open multiple savings accounts, so I thought that might help us keep our short-term savings sorted (one for vacation, one for car maintenance and repairs...) Is there a better approach or a better bank that allows the same approach? We would prefer a credit union. Capital One's yield on their savings accounts now is 0.75%.
  • Where should we pay childcare from? It varies a lot, like by at least $300 every month, based on how much time we use each week. And it's a big portion of our income. I'm tempted to set up a checking account just for it because it's so big and variable.
  • How should we handle personal "bumpy" expenditures, like clothes and holiday gifts and stuff like that? They are in Category D right now, the joint "vacation" category, because I really wanted to focus our attention on monthly food and basic-stuff spending. But I'm tempted to move them back to our personal accounts because I don't want us to have to discuss the merits of a pair of jeans. Nor do I want one of us to accidentally spend all the money in that category. Maybe we should set up auto-transfers to our own short-term savings account to have a system for that kind of stuff?
  • This feels like a very, very, very complicated system, yet we're just doing something that everyone does, so is there some far more obvious approach we've missed? (I tried Mint, but I was awful at monitoring and correcting the budget categories, and its ability to talk to my bank kept breaking.)
Thanks for your help and any advice you can offer.
posted by slidell to Work & Money (10 answers total) 6 users marked this as a favorite
What bank to use for these joint accounts?
Given that you have a pretty good idea of what you want, I'd start checking out local credit unions or other banks you're interested in and just asking what they can do for you.

I can vouch for the fact that Capital One's multiple savings accounts are super convenient. They even aggregate all of the interest on the accounts on your tax form for you so you don't have to do the math or enter them individually. Given how low interest rates are across the board, I haven't bothered looking at other banks for a liquid money savings account.

One thing to think about is that if you can get all your accounts with one bank (that has decent ATM access) transfers will go faster, and since your total amount on deposit with them will be higher you'll qualify for nicer treatment (rewards, preferable credit terms, etc).

Where should we pay childcare from?
Category C, you'll either need to keep a larger than usual slush fund in here, or have some kind of overdraft protection set up from one of the other accounts to handle the variability.

How should we handle personal "bumpy" expenditures, like clothes and holiday gifts and stuff like that?
Category A, with an option to pull from Category D after a discussion (you should each be able to budget for your own regular clothes, but maybe if one of you needs a new fancy suit that might be something to discuss).

This feels like a very, very, very complicated system, yet we're just doing something that everyone does, so is there some far more obvious approach we've missed?

You may want to reconsider the universe that you are considering for "everyone." Fewer people have budgets at all than you might think, and of those who do, many don't have the same categories, and only some of the people who think about money in categories manually separate accounts. This isn't to say that your system doesn't look good! As long as it can be mostly automated it looks great (automation is a necessary element of financial success for me, it may not be for you).

Seriously, it's awesome that you've put this much thought into your system. The most important thing is that you're both on board with it. And remember that you can tweak it as you go.
posted by sparklemotion at 12:07 PM on November 8, 2016 [2 favorites]

Personal bumpy expenditures should come out B. Saving by spending less on gift is just as much saved as savings by spending less on lunch. This lets each partner focus where it makes sense to them and gives you the freedom to make tradeoffs that make sense for you. (daily Starbucks vs. cheap coffee plus new shoes).

I would add Bank 3 for lumpy big expenses (as opposed to savings for things like college or new house.) This is where you have money set aside for things that cost of thousands of dollars like a new roof or major car repair or dream vacation. Money in Bank 2 never gets spent, just invested. Money in Bank 3 gets spent but you plan for the spending ahead of time and you spend it thoughtfully.

I am wondering what you are going to do about sharing category B costs. Do you present your partner with grocery bill and ask him/her to pay half? Can one person win by putting off a trip to the grocery store so the other pays the expense? I would put essential household costs like basic groceries and child care in group C and just plan for more variation in the amount spent. After all, the electric bill is just as discretionary as groceries. (I define basic groceries as meat, vegetables, canned goods etc. Alcohol, specialty coffees etc would come out of the personal budget.)
posted by metahawk at 12:27 PM on November 8, 2016 [2 favorites]

Groceries and childcare should go in the joint account. It's inherently unfair if one person does most of the grocery shopping and ends up always paying for groceries.

Does this plan make sense? Is there a better way to do it? This feels like a very, very, very complicated system...

I would (and do) simplify this into yours, mine, ours.

How should we handle personal "bumpy" expenditures, like clothes and holiday gifts and stuff like that?

Clothes are "yours" and "mine." Gifts are the same, with some cost sharing for people not in your household.

What bank to use for these joint accounts?

Credit Unions tend to be much less hostile to their customers than banks are.
posted by cnc at 1:23 PM on November 8, 2016

One suggestion might be to switch around the account that gets the paycheques: have both of them paid into one, central account*. From that set up a regular payment to a savings account for the house/college, and then to your own personal bank accounts as 'pocket money', in which category I'd put all personal expenditure, whether discretionary or not.

That way you know exactly what's 'yours' to spend on whatever you want, and you maintain a clear 'ours' account which should cover everything that is part of your joint lives: childcare, groceries, bills, vacations.

* I realise this might not work for all couples, esp if you are not be splitting expenses equally, and that some people would be uncomfortable about their paycheque going into a joint account. FWIW, my partner and I started with a system like yours, and switched over to an 'all into one, pocket money out' model when we bought property together (and when we decided to totally share both our incomes - it may have made a difference to my comfort with this that I'm the higher earner as the woman in the relationship & already had personal savings which are still mine) & it is definitely easier this way round, although less independent.
posted by AFII at 1:43 PM on November 8, 2016 [3 favorites]

I'm surprised no one has mentioned YNAB yet, given that it tends to be fairly popular around here. Standard caveat: there is a philosophy behind the software (the Rules) that you should feel free to take or leave.

I think your conceptual split makes a lot of sense. That said, YNAB's philosophy is geared more towards virtualizing your envelopes, and their software enables that more easily than it does explicit splits like multiple bank accounts. So as an example, in our household, overspends on personal items (clothes, work lunches) tend to get carried forward into the next month rather than prohibited by coming up against a zero balance.

YNAB (at least the version I use) does not do well with planning future expenses; saying "I need $[amount] in [category] by [date]" needs to be done manually. I have a spreadsheet for it. The new version, I've heard, does this (more) easily/automatically. Instead, it lets you look at what you've spent in [category] over the past [time period] and budget accordingly.

My wife and I put paychecks fully into our joint checking account. We each have individual accounts, but I haven't touched mine in forever, partially because since we direct deposit into the joint account, the terms and fees for, e.g., ATM withdrawals are better. I just spend on our joint credit cards (depending on rewards and bonuses) or get cash from joint account and categorize as personal discretionary after the fact. Having the discretionary category is great for the reasons you outline-- all we need to jointly care about is the balance in the category, and not even that so much, given that lavish months get compensated for by lean ones, and vice versa.

That said, categorizing is a chore, but it's one that keeps our heads in the game. Mindfulness exercise, and opportunity for adjustment and rethinking. "What were these 5 CVS transactions for? All makeup? Maybe we should make a separate category." "Why were there 8 Apple app store purchases this month? More in-app purchases in that game? Maybe you should move that to discretionary instead of joint apps & software."
posted by supercres at 2:33 PM on November 8, 2016 [4 favorites]

Oh, and this is all through PNC's Virtual Wallet; Spend is for everyday (that doesn't go on credit cards* anyway), Reserve for sporadic expenses like vet bills and household repairs, Growth for savings (though we badly need to get a money market instead).

* YNAB bonus: promotes responsible credit card use. Budget outflows are the same as if they were cash purchases, so total liquidity is listed as cash on hand minus credit card debt. We pay statement balance in full every month, because our budget basically forces us to.
posted by supercres at 2:36 PM on November 8, 2016 [1 favorite]

I use Simple Bank, and I can't recommend it highly enough. It's like multiple savings accounts in one. After you sort your savings into different categories, the app will display the leftover amount that's "safe-to-spend" so you don't go over your budget. No fees, and a built-in app to help you organize your different savings goals. No fees, even for depositing checks through the app. Excellent customer service. Every time your card is used to purchase something, you automatically get a push notification on your phone with the purchase info. The one time my card may have been compromised, customer service immediately blocked my card, and sent me a push notification through the app. The only downsides are that you need a smartphone and you won't get a checkbook. If you NEED to write a check, you have to request the bank print it out and send it for you - and the one time I had to send a check, I vaguely remember the money being taken out of my account before the check was delivered, but that was a few years ago and my memory might be wrong. It's so much better than any other banks I know of.
posted by Penguin48 at 3:19 PM on November 8, 2016

My husband and I sound similar to you in terms of our set up and savings goals and we use YNAB for our joint budgeting. What you might like about it is that it really obfuscates the actual accounts in favor of the budget. So you wouldn't have to mess with all the small savings accounts for individual items because you don't check the balances on your accounts to see how much you have - you just check the budget. Does not matter where the money is.

Here's how our process works and you can see whether it might work for you guys. Paychecks go into our joint checking account. In YNAB we assign that money as income available next month. At the end of every month we sit down together and budget it into categories. Our high level categories are: set bills like rent and utilities; expenses that are necessary but vary (groceries, clothing); short-term niceties like vacations, baby stuff, housewares; long-term savings goals like down payment and college fund; and our individual discretionary funds (we each have the same amount and subdivide it however we want). We spend and every few days enter transactions into the software against categories. I think the new version of YNAB allows you to auto-import but I like doing it manually. Every couple of months I transfer a lump sum from our joint account into a higher interest savings account.

YNAB is very good for "bumpy" expenses because of their roll-with-the-punches idea. So as long as you can agree "ok we probably spend X amount on clothing a year" you can put an average amount in that category every month and just spend against it - some months you both need to buy new clothes, maybe it goes into the red. Some months neither of you buys any clothes, it builds up a little reserve. Either way you don't have to fight over a pair of jeans, you know?

Having said all this. I find that YNAB requires a lot of mental energy in the beginning and a fair amount of "checking in" on the regular. As well as a mental shift from "look how much money I have in this account" to "look how much money the budget says I have." The best budgeting system is one that you will actually use. So if you can design a system that you think will work for you, absolutely go for that, regardless of how "complicated" it might be.
posted by cpatterson at 3:31 PM on November 8, 2016 [2 favorites]

Thanks for all the help. A quick follow up: does YNAB run into sync errors all the time like Mint did? (I imagine myself trying to check my budget on my phone and discovering that I need to answer ten security questions or whatever.) Thanks!
posted by slidell at 12:28 AM on November 10, 2016

Syncing would only apply to the New YNAB, which I don't use. (My method: download QFX export files from my bank, and then open in the desktop software.) The YNAB forum might be he best place to get a sense of how banks are doing with syncing. There's also a subreddit.
posted by supercres at 5:01 AM on November 10, 2016 [1 favorite]

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