Personal Spending Money Dillema

[relationshipa1]

Hi,
My wife and I have done a ton of work to set up a solid financial system that works well for us. Recently, we ran into a big issue when our year end bonuses were issued. My wife received just under $20k after taxes, and I received $1,400. She was set on a 70/30 rule, meaning 70% should go to long term savings and 30% should be kept for personal spending. The way we set up our finances has us paying for all joint expenses based on income, so as I make more I also pay more. This means our personal spending money is roughly the same throughout the year. With her 70/30 rule, that means she keeps $5,700 for whatever she wants, and I keep $420 for whatever I want. I proposed we each keep the same amount, whatever we decide, for personal spending, and then throw the rest in our savings. She was not about that at all. Do I have the right to be frustrated with her approach to handling bonus money? Thoughts on a fair way to handle this situation?
Many thanks!

[April Masini]

Whether or not you’re frustrated is less important than coming to a workable solution. 😉 Frustration, annoyance, anger, gratitude — these are all typical emotions that couples have when working with money, so have your feelings, but don’t let them dictate your behavior.

There are a couple of facts missing from your post.

* I can’t tell from the way you wrote your post whether the two of you agreed on a 70/30 rule before the bonuses came out, or if she got her bonus and now wants a 70/30 rule and you can’t seem to agree on this part of the financial system. Clearly, if the two of you set it up ahead of time, and you want to change it now, it would make sense to keep it the way you set it up, and talk about changing it for the future. But if you didn’t anticipate the bonus differential, and you now are trying to set up a way to work this out between the two of you, it sounds like there should be more talk about how to handle this.

* I can’t tell who makes more during the year, and what the discrepancy is — and that should matter in the big financial picture. Just because she got a big bonus doesn’t mean she makes more during the year. Also, sometimes people make big chunks of money as independent contractors or freelancers, while a partner makes less — but has job stability and doesn’t face unemployment or gaps in income — which matters to your big picture plan.

* Also, is there something she wants to buy with the money that you don’t approve of? Or is it just the discrepancy that bothers you. In other words, does this go deeper than the money?

Fill me in a little more…..

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[Anonymous]

April, thanks for the reply!

I’ll try to fill in those gaps… good call outs.

We had loosely agreed to a 70/30 rule a couple months before we knew what the bonus amounts would be, as in she suggested it and I said sure, thinking they would be around the same amount. Once we found out about the difference in the bonuses and how much that meant for our personal accounts and savings, that is when I expressed disagreement with the original rule. Rules can change when outcomes change, right? But a fair point about learning from this and figuring out a solution the next time around.

I actually make more, roughly 20% more in annual salary. With bonuses, we made the same in 2014. I totally understand the fluctuation factor, as we can never predict what a year end bonus might be. I guess my point is that we should try to balance out what our personal spending money is. Or when one of us has un unusually high bonus, does that mean we pocket a lot more money for our own personal spending.

Finally, it really isn’t about what she might spend the money on. I would hope since she has more expendable funds than I do that a lot of it would be spent on “us” stuff, but that hasn’t seemed to be the case.

Thanks again!

[April Masini]

Okay, so it sounds like you’ve got a case of buyers remorse! You both make about the same, annually, with bonuses included, but you set up a financial plan that rewards bigger bonuses with more disposable income. Now that you know she has a bigger bonus, you want to revamp the plan you agreed on.

First of all — keep in mind that this is a really good problem. You and your wife are working on what so many couples never, ever achieve, let alone attempt — financial compatibility. 😀 Second, understand that what you’re talking about is a process, and that in any process, you’re going to have bumps in the road, and inequities in different years in different areas of your budget. And third, I’m sensing that there’s an underlying control issue going on — which isn’t a bad thing when used well — but I hear you expressing upset over the inequity of her spending money vs. yours.

I think that because you already agreed to this deal, you should stick to it for this year. It’s good will on your part, and you may also be on the receiving end of a bonus of some sort, at some point in life, that puts you “ahead” in your comparative disposable incomes.

I also think you should use this opportunity to adjust the bonus rule for future — that is, going forward, not retroactively. You can cap the disposable income as a result of your bonus rule, for both of you. Or, you can decide that if the bonus related disposable income inequity is a certain amount, that a percentage of that amount goes to the other person who has less, or to a community project, or savings. Or any number of other solutions.

But for this year, because you did agree, let it go — and use the opportunity in front of you to adjust your agreement going forward.

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