Sunday, June 3, 2012

Who Manages Your Checkbook?

Or, alternate title: Check Mates

Earlier this week, when I wrote some advice for a young friend who wants to set out on his own, the subject of how to manage one’s finances came into play.  I thought it was an interesting enough subject to warrant a post of its own.

As a single dude in my own apartment, my current financial strategy is “me, myself, and I.”  But that wasn’t always the case.  There was that time when I was married (cold chill runs down spine), and we needed to figure out how we were going to combine two dissimilar paychecks, our house and her kid, to come up with an equitable way to manage our money and pay the bills.

There is a long history of household finances coming out of one giant pot.  But I think that the changing circumstances of modern society have made that option more problematic.  A divorce rate standing over 50% makes the odds of divorce into a coin-flip.  If the coin lands badly, it becomes a real CF to try to divvy up a single stash of cash.  (Not to mention home value, retirement accounts and investments.)  Plus, with blended families and child support going every which way, a couple may bring different situations into the household, in which a 50/50 split may not be a fair resolution.

So what’s the best system to navigate?  Beats the hell out of me.  I suppose it would totally depend on one’s own set of circumstances.  I can only tell you about what worked for us.  My marriage may have been an unmitigated disaster, but our financial plans worked very well, at the beginning and the end.

See, I went into it knowing that I’d never been married but she’d been married twice before.  Between me being “untested” and her having run through two guys already, I realized that it was quite possible that our marriage might not work.  You don’t like to think like that going in, but it can’t hurt to keep it in the back of your mind.  So I went into it looking for a way that would be fair to us both, but not so much that I would get screwed in the end.

You never really know a person until the pressure it turned on and everyone has to scramble.

Here were the basic facts:

She: Government job paying in the mid-40K range.  Two kids, the younger of whom lived at home.  (The older one was out on his own.)  Child support coming in for the young one, plus every other weekend visitation for the father.  30K in the bank from her divorce settlement.

Me: Office job paying about 25-28K.  No kids, about 5-6K in savings.

Mingling funds would not work, not only because she made so much more than me, but she also had to support her son.  The latter would have been less of an issue, but his father was still very much in the picture.  I couldn’t exactly come off like I was his father and he was my son.  I was just the guy that married his mother and took her attention away from him.  (It wasn’t really that way at all.  I was so far down the priority list; I had to use binoculars to see the top.)

So after some negotiating, we came up with an equitable way to operate.

First, when we bought the house, she used her 30K as the down payment.  I paid about 6K in closing costs and then we split the mortgage payments.  We agreed that I would be on the loan, but not on the title.  I figured it was only fair that since she was putting down all that dough on the down payment, the house was pretty much hers.  (I acknowledge that the loan part could have been a monumental mistake, had she held it over me when we split.  But at the time, she couldn’t get the loan on her own so I had to co-sign.)
This was our house.  Spring was always so pretty, with those crabapple trees in bloom.  (Of course, raking up all the crabapples was a giant pain in the ass.)

I’m including this shot because it’s one of my favorites.  We would occasionally get this heavy, wet snow that would line the tops of all the tree branches.  I always thought it looked like a “Paint by Numbers” picture.

As far as operating the household finances went, it basically came down to this: she bought all the groceries and everything involving her son.  I paid all the utility and service bills (gas, electric, water, trash, cable, etc.).  We split the cost of the various home improvements (new roof, deck, furniture).  That way, she covered any extra spending for the boy, and I was paying for the services that were more or less unaffected by him.  We each kept our own savings and checking accounts.  The mortgage costs came out of her paycheck and I would write her a check for half the total every month.

For all the fighting we did, it was never about money, other than the fact that I didn’t have enough of it, once I got laid off from the office job at my record retailer HQ.  I always had enough money to cover my end of the bills, mind you, but I didn’t have enough to pick up the check at dinner any more, or pay for vacations.

When we separated, it was fairly simple.  She stayed in the house.  I kept my bank accounts and she kept hers.  Since she had gotten rid of most of my apartment furniture, I got the stuff we bought together (sectional sofa, TV and coffee table.)  I got one of our two beds and took anything I had brought in, that was still there.

I remained on the loan for another year or two, (but not paying) until she refinanced the home and then I was free of that too.  She had a lawyer friend at work draw up the Separation Agreement, which we both signed.  Then after waiting the mandatory period, (by which I was living in Baltimore), I asked her about making it final.

Apparently I caught her at a bad time, because she flipped out (once again) and said that if I wanted the divorce so bad, I could just take care of it myself.  I told her that it would mean that “I was divorcing her,” even though the split was her doing, but she said she didn’t care.  I think she had a lot of shit going on and just thought of it as “one more thing she had to do.”

I don’t know about her, but I wanted it put to rest because, among other things, I was tired of telling prospective dates that I was “separated.”  Whenever you say that, the obvious assumption is that you will probably get back together.  It seems so “temporary.”  Ours, of course, was not.  Hell, I moved 600 miles away.  That’s a pretty good sign that I’m over it.  I just wanted to put the whole thing to bed and move on.  (I wrote more about the breakup and my subsequent move to Maryland in great detail, here.)

Anyway, I did a little research at the courthouse (a block from my office) and obtained all the paperwork I’d need.  I filled it out, sent it to her, she signed off, and I was ready to go.  We used the Separation Agreement as the Divorce Agreement, which spelled out all the details.  Without a house to divide up or a kid to haggle over, it was really pretty simple.  I took what I brought, she kept what she brought, and we split the stuff we bought together. 

I just had to go down to a “friend of the court” lawyer’s office and bring my brother as a witness.  He had to attest that she and I had not cohabitated over the last year, nor had I left any possessions at her house, nor had we “slept over.”  Easy… she was in New York, I was in Maryland.  My brother and I work in the same office, so the whole thing took about 15 minutes, over lunch break.  It may have been the easiest divorce in history.

When we were walking back to the office, having done the deed, my brother said, “But when do we get to the part where I call her a fucking bitch?

Anyway, I’m drifting a little from my initial premise.  I probably went into all the divorce stuff just so I could use my brother’s line. 

But the bottom line is that we came up with a financial management system that worked for us; not just during the marriage, but at the end, when things can get really messy.

Now, what I want to know is how you do it?  Do you divide up your bills?  Do you keep separate accounts, or does it all go into one household account?  If one account, who manages the bills?  Do you have to come up with a system to fairly account for a “blended family?”  I’m interested to know how others handle this sort of thing, in this ever-complicated world.

Or, if you don’t want to share your financial secrets, you’re perfectly welcome to pick apart the strategy we used, or call us “self-fulfilling prophets of failure.”  Likewise, you may feel free to compliment our Solomonic wisdom in creating an agreement that worked, like a latter day Continental Congress.

Woodward and Bernstein had it right: “Follow the money.”

16 comments:

  1. This is a very interesting point that brought back a lot of memories. I've been married for almost 28 years...first and only (hopefully) marriage. We have broken each other in (he might said just broken). Anyway, in our first few years of marriage, way before online banking and when debit cards were called ATM cards, we used to have the worst fights over the checkbook...because he would forget to record a cash withdrawal and we were living very close to the margin (and those unrecorded cash withdrawals caused overdrafts more than once). Since neither of us had any savings or assets, we started with a joint account and maintain it that way to the present day...although somewhere around year 7 when I got really peeved about unrecorded withdrawals, I opened a separate account in my name only and it was dormant for years and now I use it for my business expenses (I am a self employed business of which I am the only employee). Online banking was the answer to our prayers because we can monitor the account in real time and it helps that we're not living so close to the margin nearly 28 years later. We constantly discuss budgeting and resolve to do a better job. And we have over time. The one additional piece of advice I'd offer to anyone starting out is no matter how little money you have, get into the habit of putting something into savings from Day 1, even if it's only $5 a week. Forming the habit is key, so that when you do have more disposable income, you save some and don't spend it all. Plus 28 years later when you're thinking about retirement, hopefully you will have some money to rely on besides Social Security. Of course, I'm going to be working until forever because I am great at dispensing advice but not so good about following my own advice...not to mention the bleak losses from the market over the past few years. I always manage to invest my 401k contributions when the market is high rather than low.

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  2. I agree with your advice to start saving right away. I sure wish I had, more regularly than I did.

    It's funny... I guess we all just have to feel our way though these things, especially way back when. Family finances are such a minefield. Unless you have a meeting of the minds early on, chaos can ensue.

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  3. When hubby and I married 13 years ago, we had separate checking accounts that we thought of as individual, and we divided the bills fairly equally. After about a year or two of his paying late fees on his credit cards, I took over all bill paying and have never looked back.

    Probably about the time we had our kid (8.5 years old), we started thinking of it as our money. We still have two checking accounts, but our names are on both accounts as well as our savings account (each tied to a checking account). Sort of unfortunately, my husband does not know how much money we have among our checking and savings accounts, just because he does not care and he knows I take care of everything. I do have a doc that lists how all our bills are paid because he has no clue there either.

    I have been working sporadically the past three-plus years and don't bring in much money, but most bills come out of my account since that is how we set it up years ago; I just put money from his account into mine (as well as from savings) when we need to. We have one joint CC that we pay off monthly, and I have a CC on my own, which I rarely use plus an individual Kohl's card. As I said in your other post, everything is paid off monthly.

    One thing worth noting is that when we did our premarital compatibility test as part of Pre-Cana (a Catholic thing), we got something like a 95 percent on money. The priest was concerned that we got only about 25 percent on religion, but I told the padre that that was about 24 percent higher than I had thought and considering that money seems to be the biggest culprit in marriage woes, we would probably be just fine! :-) It helps that we have believed in spending below our means since day 1. When people have different views there, that can be a BIG problem.

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  4. I agree that out of all the problems that tear marriages apart, money differences come in far higher than religion. I'm glad you guys were able to work it out, whatever the solution. Someone has to take ownership of the issue, it really doesn't matter who, as long as everyone is on the same page.

    I suppose the Ex and I might have eventually pooled our assets, once we got some more years under out belt, and the kid became less of a divisive issue, but we only lasted three and a half years.

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  5. Funny how different ways of handling finances work for different people. I've done both ways (separate and together). For a long time Mark and I had separate accounts and were each in charge of paying different things, but, in the end, this created resentment. "It's your turn to pay for dinner, etc." So after four years of split accounts, we decided to put them together.

    It saved us so much arguing, it's unreal. Both our paychecks go into the account and all the bills get paid out of the account (I'm in charge of paying bills because my husband has to handle his business's bills). It's been especially important since we had a child. We're all in this together so to speak.

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    1. I think it’s inevitable that the longer the marriage goes, the more commingled the funds become. Makes sense, I suppose, once you get past the early bumps and bruises.

      Funny about the dinners though. When I was married, we both expected me to pick up our “date” tabs. Then when I was unemployed or under-employed, and could no longer afford do so (and still uphold my household bill responsibilities), she resented it terribly.

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  6. I forgot to add something in my long-winded answer: Suze Orman, a financial TV gal whom I both like and dislike, suggests that people have three accounts--a joint one for household bills and two individual ones for "personal" things--and then having each person contribute to the joint one as a percentage of what they make (e.g., partner A takes home 5k a month and puts in $3,500 and partner B takes home 3k a month and puts in $2,100; I think the rest of each person's money goes into their separate accounts).

    It seems as if it could be a good idea for non-married couples as well as married couples who want to keep things separate, but I would be curious what people's experiences have been like, if they went that route.

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    1. Sounds like a solid idea to me. Anyone else have a thought?

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  7. I've done it both ways. With my first wife, we were ridiculously young, we kept separate accounts. It worked o.k. until she started getting greedy, but it was easy when we got divorced. We each had our own vehicle, and didn't own a house. The only thing we fought over was a lamp (a long story, but it was my line in the sand!) Now, my wife and I keep joint accounts. It's just easier for us.

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    1. That must have been some lamp. What, was it the kind with the leg attached?

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    2. LOL! It was a touch unicorn lamp! We had two different sets of lamps for the bedrooms. For some odd reason, she took one of each and then came back for the 2nd unicorn lamp. I told her she could only have it if she brought back the lamp to the other set. She refused, so I kept the unicorn lamp!

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    3. Sounds perfectly reasonable to me... Having one set each would have made good sense, but taking a mis-matched set, then coming for another one? I'd have said something to her, which would include the words, "Pound" and "Sand."

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  8. My and The Guy's finances are very simple: Everything goes into the common pot. There is absolutely no separation between our finances, and we believe pretty strongly that that's the ideal. Even though I make considerably less than he does, he continually points out how my income "makes our lifestyle possible," and that means more to me than he'll ever know.

    On the practical side, it's easier - fewer accounts to keep track of, less check-writing every month, etc.

    At the behest of my parents and brothers, he did sign a prenuptial agreement that simply states that in the event of our divorce, he won't be able to gain a controlling interest in my family's small business, but that's about it.

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    1. Another long-range nefarious plan, foiled by a pre-nup! j/k

      At least you could blame it on your family... otherwise, that's a tough subject to bring up. Good thing y'all are soulmates...

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    2. Well, his nefarious plan would be dependent on my staying in my parents' good graces long enough for my dad not to change his will for the 157th time. And frankly, with those odds, The Guy would be better off investing with a down-and-out Nigerian diplomat. Ha!

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    3. All the best nefarious plans are convoluted and risky. That's why the hero so often blows up the whole operation at the last second.

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