While I Was Hiking

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Financial Friday: The 10% Rule

I disagree with maintaining separate checking accounts for most married couples. Of course, there are exceptions and situations I don’t understand. But assuming you and your spouse combine your finances and still struggle about having “personal” spending cash as we once did, try what I call the 10% rule. Otherwise known as the line item in our budget app called “Michelle’s allowance.” This principle applies to both couples and individuals.

The setup

Fun shit always comes up that is not mutually beneficial. Like Michelle’s Pole Dancing class, Shakira style belly dancing, yoga membership, musicals, princess coloring books, etc. Or my golf, hiking, camping, REI equipment, supplements, etc. In the past, when I saw these types of purchases come out of our shared account, I would become judgmental. This judgment would sometimes lead to money “spats”.

Now, I love my wife dearly and if baby wants to pole dance, then baby needs a pole! But, it was clear I needed another way to deal with my problem where I couldn’t project my frugalness towards her dream as a pole dancer in a negative way. So, the decided solution was to remove the trigger altogether and open her a separate account.

The 10% rule

We started by automatically saving/transferring 10% from each individual paycheck (total of 10% of your personal monthly salary) into a separate “hidden” account that is to be used as our own guilt-free spending cash and not tracked by each other. There are many easy ways to do this these days with automation.

There are two sub-rules below to keep in mind:

  1. The rest of your income goes into a combined pool to use for everything else you share in life together. You know, the necessities, couple stuff, etc. Try not to split hairs here. Give the other person the benefit of the doubt and try not to be overly critical of their 10%.
  2. Once your 10% is gone, you can’t continue to dip into the main pool unless it has been completely discussed and agreed upon with both parties. I’m thinking of a presentation of value here. Maybe even through a PowerPoint like I once did.

Some might argue that if your incomes are drastically different then it is unfair since one 10% share is significantly less than the other person’s. Or that the 90% one person contributes to the shared pot is significantly more than the other. By all means, tweak this any way you see fit. 

In closing

Neither of us is entitled to use all of the budgeted guilt-free money we share as a couple. Instead, the 10% rule forces us to separately manage our own “special funds” while requiring us to be smart managers of it. This means your partner has no access to it or the right to judge what you spend with your pot of money.

Most importantly, remember you’re a team. 90% of your budget and life goals should be together. Don’t split hairs. Don’t be (Tom) petty. Decide upfront and execute a plan. And if it doesn’t work, discard it.