I’ve found that in all of the personal finance forums I participate in, this has been a topic that comes up very often, and one that I feel inclined to comment on very regularly. So let’s write about it! (This post is originally from my previous blog, but I loved it, so I kept it here.)
I am a strong believer in fun money. I mean no questions asked, buy whatever the hell you want fun money. I think it is essential to easing the stress in relationships and finances in general.
So let’s tell a real-life story of why we have fun money in our budget. On Eric’s first underway after we got married, he went to San Diego. Here I was, twenty-two, my mom was visiting our new home in Hawaii, and I was so excited! Before I had discovered YNAB, I was just going off the balances in our checking account. Woo! $1400! Let’s go shopping! We bought new pillows, new decorations, plants, pots, paint, went to a few restaurants, and drove all over the island. Well, imagine my dismay when Eric called and said “Why doesn’t my debit card work?” What? What do you mean your debit card doesn’t work?
Beep beep boop. Let’s log in to the handy dandy online banking. And … $3.7o. Of course, the numbers are approximate because this is nearly 5 years ago, but I am not joking. We spent $1400 in 5 days. Naturally, he is saying it’s all me and my home decor, and all I can see is bars and I specifically remember a $100+ transaction to a Red Lobster in California. However, with both of us having limitless fun, we managed to spend ourselves into nothing. Luckily for me, my mama was there so she paid for the next few days of life, and he was going back on to a submarine where there were no expenses, but it was a quick lesson learned.
So then came the fun money accounts. Things had to have a limit. Eric is not big on paying attention to our budget, written, in software, on envelopes, or any other way. So we found a method that worked well for him, and I’ve tried a lot of different things for me to see what works, and I’ve found what works best for me.
Here are some methods I would recommend:
The Separate Account
Eric has his own checking account, and I am not on it. Every single payday, an automatic transfer gives him $75 to spend as he pleases. He has a debit card to this account, and it is the only debit card he keeps in his wallet (so he can’t get cash from any other accounts at an ATM). He also has an individual savings account, which receives $100 each payday. Having the separate savings and checking for him has been a game changer: he knows if he can buy home-brew stuff or get a tattoo; I know that all the money in the joint accounts is free for bills and whatever I deem important. There’s no more quarrels over e-cigarette expenses or too many six-packs eating up my grocery money.
*Edit to add: The original post of this was written over a year ago. Since then, one thing has changed. If Eric is unsure of his account balances and making a larger purchase, he always puts it in a joint credit card, and the funds get transferred back into the budget from his savings account. Since he’s not into checking budget amounts, he doesn’t check his balances often, and this prevents him from ever overdrafting an account.
The Cash Envelope
This is all me. I use this for my own fun money, and I have a separate savings account. Watching the cash leave my fingers stops me from spending so much of it, especially when I’m down to $10. However, Eric is a cash spender. He can have $28 in his wallet, and three days later have $3. If you ask him where $25 went, he would be hard pressed to answer. Since our fun money is considered “spent” the moment it is given to us, I don’t have to keep track of either of our purchases in the budget, which is extremely helpful. Cash envelope budgeting works for many people for many categories, but fun money is an exceptional use of it if it seems too difficult to keep up with everything as cash.
The Budget Software
If you use any budgeting software that keeps track of your budget, you may just be able to stick with what it tells you you can spend. I am not good at limiting myself based on what I see on a screen, especially if I know there is more money than what it is telling me. I used to use my credit card to make sure I got my 1.5% cash back on my purchases, but it was difficult to stay within limits because even if I only have $7 left for fun money, my card is not going to decline the $15 shoe purchase. However, there will always be more people with more self control than I have, and I commend them. This is a great approach for many people, and through trial and error about 8 times, I’ve learned it’s not a good approach for me.
Here are some things I consider imperative when setting a fun-money budget:
- Make it equal. Some people may use a percentage based system, basing their fun money on a percentage of their incomes. If you are married and you value your partner, make your fun money equal, even if you are not equal earners. Even if one of you is a stay-at-home parent. You are a team. I have found that every single time I have tried or heard of anyone trying a situation with un-equal fun money, there is resentment from one side. For a long time, I couldn’t afford to fund both Eric’s fun money and my fun money and save for everything we wanted, so I cut all of mine. I would spend a lot of time wanting to spend his savings or his fun money, because he had so much of it and I didn’t have any. It was not a partnership at all; I felt like I was a beggar in my own home.
- Make it realistic. If you know your significant other loves to get Starbucks in the mornings and spends on average $50 a week, but you only spend $20 a week, don’t expect them to just drop to your spending level. Find a compromise that isn’t miserly. Likewise, by making the spending levels equal, you’ll find something that you can accommodate for both of you. If you can only afford Starbucks every morning because your SO doesn’t spend anything, then it’s not very fair to them. There should still be money for savings and other goals beyond your budgeted fun money.
- Make it accountable. If you have a sit down with your partner and decide that $50 a week is an entirely reasonable number, and your partner spends $85 a week the first week, hold them accountable. If you spend $85 the first week and your partner comes in at balance, hold yourself accountable. Take it from the following week. If you both consistently go over, maybe go through again and see if you chose a reasonable number, or if you need to make the number higher. And if you continuously both come in $20+ below budget, see if you can reduce the number to something lower and increase your goals elsewhere.
What do you use your fun money for? Many families categorize fun money differently. Some use it for every restaurant they go to, splitting the bill to pay their half with their fun money. This wouldn’t work for me, because it would end up with me eating at a table across from my husband drinking a glass of water.
In our marriage, it works best to use fun money for anything we do alone, and anything that one doesn’t need that the other doesn’t benefit from. If you need new underwear and socks, it doesn’t come from fun money. However, I buy extremely expensive jeans (at least to me, $80/pair). When I needed jeans, it’s not fair to Eric to have the funds come from the general budget to subsidize my pickiness. So we split it. I paid half out of my fun money (the above and beyond a normal price of jeans) and the Clothing budget ate the rest. And remember that it is all very personal and very dynamic. You might find a system that works for you differently than ours does.
I am a strong believer that a good fun-money system eliminates most marriage problems relating to finance, as long as it follows the above guidelines. If you browse finance forums on the internet, there is a recurring theme in married money problems. Almost everyone is upset with the way their significant other spends money. Even if we’re playing the same game and on the same team, my husband may not have the same strategy as I do, and that can cause issues. The initial conversation to set up fun money (or an “allowance,” as I strongly recommend not calling it) may be a difficult one, especially if neither partner has ever actually been restricted in their spending before. However, once the kinks are worked out, it can be a huge asset to the financial situation. Just remember that it is dynamic and personal to your family, and you can change it at any time.
Do you have a fun money system that works for you? Have you tried one and it didn’t work? Are you struggling to get your spouse on board? I would love to have more insight to this!