5 Ways To Combine Your Finances

Combining your finances with your significant other can be a tricky process, with feelings and ones manhood on the line.  In my line of work, I know that there are several different ways to combine your finances with your partner.  I've seen couples keep their finances separate, completely combine everything and then variations of all all of the above.

I’m not talking about the very important financial discussions you should have with your partner before you combine finances. See our previous post if you haven’t done that yet. But rather the act of "whats mine is yours and whats yours is ours"

5 Ways To Combine Your Finances

After you've talked over the 5 discussions you should have with your partner (see previous post) you are ready to decide how to combine your finances. Based on my experience there are 5 options for combining your finances with your spouse.

1. Combine everything

Both people put all of their money into a joint account and include each other as owners of investments / savings accounts. This is complete commingling.

Example: Erin and Frank open a joint account and have their entire paychecks directly deposited into a checking account. Then, they move $1,000 of it into a joint savings account to meet their savings goals. All of their spending comes from their joint checking account. They have joint debit and credit cards; they do not have any separate accounts or cards.

2. Combine everything in a joint account except for a specific amount that each person keeps in an individual account

Using this method, all of the money you and your spouse are paid goes into a joint, household account, except for a certain amount or percentage that you both decide to put into individual accounts for a nest egg.

Example: Greg takes home $6,000 / month and Hannah takes home $5,000 / month. Greg and Hannah want to combine most of their finances but want to retain a little bit for a personal nest egg and for gifts for the other person. Aside from their joint account, Greg and Hannah have two personal accounts where they each put in 5% of their income. For Greg, that’s $300 / month and for Hannah that’s $250 / month. The remaining money goes into their joint, household account.

3. Combine a certain percentage of each person’s income in a joint account and put the rest into separate, individual accounts

This is the proportionate method. It is also the method that Suze Orman advocates. You both keep your individual accounts and put the same percentage of your income into a joint, household account.

Example: Amy takes home $4,000 / month and Ben brings home $3,000 / month. If Amy and Ben decide to put 20% of their incomes into a joint account, then Amy and Ben would put $800 and $600 into their joint account respectively. The rest of their money goes into separate accounts that they each have.

4. Combine an equal dollar amount in a joint account and put the rest into separate, individual accounts

This is the equal contribution amount method. Both people put in a specific amount into the joint account, regardless of each person’s income. This could seem unfair to the person who makes less because s/he will be putting a higher percentage of their income into the joint account than the person who makes more.

Example: Claire takes home $4,000 / month and Dan takes home $5,000 / month. Under this approach, both Claire and Dan put the same amount into a joint account, such as $1,000. The remaining amounts ($3,000 and $4,000) go into their individual accounts.

5. Keep everything separate

Under this method, you both keep your finances completely separate. This means that you each have personal accounts and do not have a joint account. You pay for household expenses by splitting them and each paying individually. This method may be good if you cannot trust your partner with your money or if you both are older and this is not your first marriage.

Example: Inga and Jim are both 50 and this is their second marriage. They each have kids from previous marriages and don’t plan on changing their estate plan to include each other (they want their kids to inherit). Because Inga and Jim both have long established credit histories and a variety of assets that they do not want to commingle, they decide to keep all of their accounts separate. When they pay for things, they alternate. When they pay their bills, they split it down the middle and each pay’s half.

A Note About Transparency

In the 5 ways to combine your finances, all of the options except of one includes having a separate account that is not your spouses. It’s important to point out here that separate does not mean hidden. I am a huge proponent of the philosophy of complete transparency when it comes to finances. Separate does not mean hidden. If you have separate accounts, those accounts should still be discussed and included in your budgets just as your joint money is.

What's your Financial Personality?

We all have different behaviours and characteristics, and between you and me there are probably some similarities but a lot of differences too. See where you sit in regards to Financial Personality, but most importantly have a read of the way you can become financially fit, you can’t change your personality so how about adopting some behaviours to help you get on the road to financial freedom.

The Hoarder – Love saving and rarely spend it. Taking Frugality to a whole new level.

What you need to do: Set yourself goals and let yourself reach those goals by still sustaining a decent lifestyle. Allow yourself small rewards to keep you motivated towards achieving your long term goals.

The Spender – Finds it difficult to hold onto money. Temptation gets the better of them and they lack self-control.

What you need to do: You probably need a budget, we aren’t going to tell you to cut back, we are just going to make sure that you can financially afford all your living costs and can set aside enough money each month to cover those costs whilst sustaining a decent lifestyle.

The Monk – They feel uncomfortable with money, they cover their basic needs but avoid lifestyle spending.

What you need to do: Ensure your basic costs are covered and you have enough for saving and enough for Living costs. But don’t do this at the expense of your wellbeing. You work hard and earn your money you should reward yourself accordingly. Start small and enjoy what you have worked for.

The Obsessor – Serious about making money and watching it grow.

What you need to do: Set aside a time each day to review your finances. That’s great that you are keeping on top of your spending, reviewing and reanalysing however checking it 5 times a day is becoming obsessive and could impact your relationship. The best thing you can do is bank smarter, not cheaper.

The Avoider – Sidestepping the truth and hoping it will all go away.

What you need to do: If you have money issues or concerns, DEAL WITH THEM. Don’t avoid looking at your finances because when you go to look at them in the future they will still be there but 10x worse. We can help you to set aside money each month and ensure you can pay off your debt before it spirals out of control.

Whatever personality trait you think best suits you, they all have some similarities. They all require having a goals based budget to help stay in control of your spending, safeguarding there’s enough money each month to pay the bills and expenses. However still allowing a decent lifestyle creating long lasting memories and spending time with family and friends.

We are Ordinary people too.

Lynton Burgemeister – Senior Financial Advisor

Lynton has 30 years’ experience in Financial Planning. He has held a variety of positions throughout the years enabling him to gather a wealth of knowledge. He established his company Prudent Asset Management Pty Ltd in 1979. In 2014 Lynton branched out and established Prudent Cashflow Mentors, a partner to Prudent Financial Planning. In his spare time Lynton likes to support the Crows and has travelled to many parts of the world and has an abundant of stories to share.

Trish Woodward – Senior Cashflow Consultant

Trish’s background is in Banking where she worked for Bank SA for a total of 12 years. She worked in a variety of departments excelling in all areas including Credit, Finance, Fraud, Card Services and Training procedures. Trish joined Prudent Asset Management in 2000 working predominantly as an Office Manager. In her spare time Trish likes travelling and to socialise with friends and drink good fine wine having great conversation.

Can you really Spend Money to Make Money?

I emigrated to Australia at the end of 2014, and this came with a big price tag – emotionally and financially. I left my friends and family, sold my things in England and paid for a visa and flight to come and live my dream in Australia.

So when I got here, it was then a case of replacing everything that I did have back in England but it all seemed to cost so much more. I wanted to purchase a car so I could do the things I liked such as going to the gym or needed to do like food shopping!

Like I said I had a lot of expenses coming over here so the last thing I wanted to do was pay out a massive lump sum on a car. I did plenty of research on the internet and I knew I wanted a fuel efficient small run around car such as a Suzuki Swift or a Ford Fiesta. I looked on Gumtree, Car sales, EBay and would even look in the car yards as I was walking around. But nothing seemed to be right and they’d probably only last me a couple of years before things would start going wrong with them which is then going to cost me more  money.

I looked at my budget again, re-evaluated the situation and I remember my partner saying to me once “Sometimes you have to spend money to make money”. This thought stuck in my mind and this is when I realised that maybe spending the extra and using my savings to purchase a newer car would actually in the long run cost me less.

So I started researching again with a different approach and within 24hours I was going to test drive a brand new (well it had 80kms on the clock) Ford Fiesta. It was great, perfect actually, a lot more than I first budgeted but this car could last me a good 10 years. It came with full warranty and the only costs I should encounter in the beginning are the rego and the service. But when you go to a car yard you never expect to pay the full asking price, this sales rep would not even budge $5. I stood my ground walked out and decided to go to another car yard, I thought this would then entice him to reduce the price – but it didn’t.

Later that evening he actually called me trying to see if I had changed my mind, however I broke the news to him that I had actually purchased one from another dealer. That’s right I went to another dealer bargained my way down to purchase a 3 year old Ford Fiesta that was visually better looking, had RAA cover and warranty. I managed to knock nearly $4000 off the asking price through hard negotiation.

So what I am trying to say is, even though I thought the first car I test drove was perfect, maybe getting a brand new car was not quite the best idea. A brand new car loses 10% of its value driving it off the forecourt. I have now gone for slightly older car however it should last me a long time. Its fuel efficient and does the job great, perfect for what I want it to do. Sometimes spending that extra and using hard negotiation can end up saving you money in the long run.

Mothers Day on a budget

Yes dads, husbands, partners its mother’s day this weekend so let’s hope you have remembered. If not, then don’t panic you still have a few days to get organised. You don’t have to spend a lot in order to make it a memorable day out there for those mothers who give their kids the world every single day of the year. It’s not about how much you spend or what you get it’s about making the day all about Mum.

How about getting the kids involved and help them to prepare breakfast in bed for mum followed by a big kiss and cuddle and those are the memories that will last a long time. Yes, a bunch of flowers and chocolates are nice but if the budget is tight how about you think of other inventive ways to ensure mum receives the best day.

Get the kids to do the house chores for the day e.g. cleaning their rooms, getting the vacuum out, doing the dishes, all those jobs we take for granted every day that mum does how about you encourage the kids to take the initiative and do them first. You could even find out what mums favourite meal is and get the kids to help cook up her favourite meal with a nicely set table and maybe even candles.

Homemade gifts always go a long way, they are sentimental and show a lot more thought and appreciation. Ideas such as a photo frame with your favourite picture in of the kids and mum, or a trinket box so she can store her special things in. Dads out there if you are stuck for ideas, go to Handimania website and find out inventive gift and creative ideas, get the kids involved and make something creative and memorable that mum can have. There’s an abundant of ideas on the internet, use them. The best thing is, all of this doesn’t have to break the budget.

We are lucky that our mothers are still here so we can show our appreciation, take a moment to remember all the brave and courageous mothers out there who may have passed on and ensuring their children can still enjoy the special day remembering their loved ones.

Setting up a budget is all about having the right S.U.P.P.O.R.T.

“I’ve had a budget before and it doesn’t work”, ‘I haven’t got enough time to be worrying about a budget”. Yes OK we’ve heard it all before, but the point is, you have money so you need a budget. Maybe it’s not worked in the past because you haven’t had the correct S.U.P.P.O.R.T.

Sensible - Make sure you are realistic with your budget and don’t lie. If you spend $200 a week on alcohol, or shoes or both put it in the budget. If you can afford to spend that amount of money we are not going to tell you not to, we just want to make sure you can budget for everything else to fund your hobbies.

Uncomplicated – A saying I have always remembered from my University life when doing anything is ‘KISS’ – Keep It Simple Stupid. Overcomplicating things is not fun or motivating. We all hate not knowing where our money is actually going and whether we have enough funds each month. Keeping it simple will keep you more inclined to stick with it if you can easily spot incomes, outgoings and potential pitfalls.

Period – you aren’t going to see results overnight and you may start to see some improvements over a few weeks. But give it a period of time. Sticking with it and seeing the long term achievement will benefit you in the long run. After a year you can look back and reflect on how you have done with a budget compared to the year before with no budget – I bet you’ll see the difference then. 

Purpose – what do you want to achieve? Set yourself goals, when you can see you are getting closer to reaching your goals you will be more inspired to stay on track. Whether it’s a small goal to keep you motivated along the way or a big goal of where you want to get to, aim and reach for them.

Open – Be open about your budget, write it down, and put pictures up of your goals. Having constant reminders of your budget and goals will help you stick to it when times are getting tough or impulses purchases are tempting you. Keep a picture of your dream house in your wallet and when you go to reach for the credit card you’ll remember your goal and maybe think twice.

Rigidity – make sure there’s room for flexibility in the budget and there’s room to move money and expenses around. Overestimate the expenses and underestimate the income. When you see you are not maxing out your budget it will keep you motivated to stick with it as you can see from the results it is paying off.

Track – Know where you are with your budget. Once it’s been set you need to track how you are going along the way. You need to make sure your review you’re spending so you don’t fall into the trap of bank fees and overspending and only realising when it’s too late.

We can provide you with the correct ‘Support’ at Prudent Cashflow Mentors, call or email us today and we can help and support you through the budgeting process.

How Much does it cost to have a Prince or Princess?

With the birth of the Princess (will she be named Alice or Charlotte?) even Kate and Wills will be thinking about rearranging their finances to ensure their budget is flexible to fund the whole family.

If you have recently had a Prince or a Princess of your own, or you are about to, you are probably thinking how am I going to afford to cover all these costs? With Prams starting from $600, Cots from $400 and a basic change table from $100, how much do we need to set aside when planning for a new addition to the family? Well mothers don’t stress.

Make a realistic budget and most importantly stick to it, this is a number one golden rule. Work out how much time you can afford to have off work and ask yourself can you live off one income and still sustain a decent lifestyle? If this is all becoming a little too overwhelming our team at Prudent Cashflow Mentors has the skills and abilities to make this stress-free and maybe you can come out of hospital looking as great as Kate did less than 12 hours after giving birth!

Budgets can be difficult when planning for a new baby, because how can something so small costs so much money. Yes ok, if it’s your second or third or even forth child then you can reuse toys, prams or clothes, and this will make it a little less expensive. But children grow so quickly it seems absurd to spend a fortune on things they can grow out of in a couple of months.

Look past the shops and the marketing that is put right in front of us everyday. Maybe you have friends or family that have had a child? Maybe purchase some of their baby essentials and you could save yourself a small fortune instead of buying it full price in store. If not, get on Gumtree there is an array of choices where people are trying to sell items that are no longer in use in their family home, but could be extremely beneficial in your home.

Shocking statistics from AMP state how a middle income family, for two children, from birth until they finish their education, will costs a staggering $812,043 – are you sure you have budgeted enough to sustain a decent lifestyle for you and your kids? Take a look at the table below to see where it all goes.

Minimal effort, Big results.

We all want to have more money, or a better car, or a nicer house but the budget never seems to stretch that far. No matter how hard we work there just never seems to be enough surplus funds left over.

Well let’s put it this way, you’re not alone. That’s right companies are always trying to think of ways to generate more net profit. With the rise of the internet, more competition and more choices to be had, companies need to come up with inventive ways to save and increase their profit margins. One of the earliest recognitions of this was in the 1980s with American airlines cutting 1 olive from all their salads on all flights resulting in savings as high as $100,000 annually.

After doing some research on the internet I collated the top 6 strangest, inventive and most surprising ways that companies have tried to save:

1. In 2004 UPS implemented a no left turn policy as trucks guzzle more fuel turning left.

2. Bank of America cut costs by reducing the weight of their ATM receipts from 20lbs to 15lbs.

3. In 2008 McDonalds cuts 1 slice of cheese from their McDouble sandwich saving 6 cents per sandwich imagine the saving across all restaurants worldwide.

4. In 2008 Cisco shut down for 4 days between December 29th and January 2nd and all workers are placed on unpaid leave, apparently saving $1 billion.

5. In 2009 Yahoo implemented a week’s unpaid Christmas leave for staff saving $21 million that year.

6. In 2009 Ryanair reduced the amount of ice sold, changed their in-flight magazine from A5 to A4 and even proposed to attendants to lose weight to save on fuel costs. How far companies will go to save!

Which is your favourite? Mine would have to be the budget airline Ryanair, they will literally go to any level in order to save and stay competitive in the market, to offer the lowest cost flights.

Get in contact and get involved if you have managed to save big with little effort.

How to Survive Budget Busters on Holiday

So I have just spent 10 days in sunny Bali and wanted to share about my unexpected travel costs that I experienced. Working in budgeting I am very good at ensuring that our costs are covered and follow the basic rule of thumb ‘Spend less than you earn’.

So after shopping around for the best deal, my boyfriend and I booked to stay at The Breezes in Seminyak. Our package included bed and breakfast and 24 hour a-la-carte. So we budgeted for $600 spending money, I went to the post office to pick up our currency before departing (ordered online for free so I didn’t experience the commission charge of $8) and we took $500 in Australian dollars as back up. Contingency planning for those unexpected costs.

But, it all begins before you go with the expenses of a holiday, and when we are planning for a holiday do we really account for all of this. I thought I had but the surprising costs still crop up that just weren’t in the budget.

Firstly, having to buy week long fish food rather than just feeding the fish normal pellets each day. This one tablet set us back $21 and fish aren’t exactly the most expensive pet to have. I managed to get a close friend of mine to go to my house and give the fish this one week long food tablet whilst I was away. So to thank her I bought her a small gift totalling $5.

Travel Insurance, so many people avoid buying it but I use to work in travel claims and talk about unexpected costs. If you were to have an accident or need medical assistant whilst abroad that $70 will be the best $70 you’ll ever spend. We insure our cars we insure our houses, make sure you insure yourself, you are the most valuable asset.

Going to and fro the airport in Adelaide, do we really account for the expense to get to the airport in our hometown? Parking and Petrol worked out to be approximately $130. So a close family friend offered to take us for no charge. But to show our appreciation we bought them a gift totalling $35.

On arriving at the airport you’re not allowed to take water through customs. A 5 hour flight to Bali is a long time to go without water, so I had to purchase 2 bottles totalling $6.

So far, and I am not even at the destination, I hadn’t budgeted for any of these costs. These unexpected costs have already set me back $137. It could have been a lot more though if we didn’t have the generosity of friends and family.

One cost I did expect, through research, is the visa upon arrival in Bali, which was supposed to be USD35, however converting into Australian dollars it was a lot more - $50 each so already you are experiencing an unexpected costs because of exchange rates. Be wise with your money when working in foreign currency and don’t make silly mistakes by not understanding how much you are handing over, especially in Bali they will try and rip you off at any point.

After successfully getting to the resort, I confirmed at check in where our meals would be and they advise how breakfast was included. I then got out the paperwork and showed them it said 24 hour a la carte. The hotel then informed us that this was a menu and the a la carte food was available to purchase. Ok, so maybe I should have read the small print because it was probably stated in there somewhere. But already the money we had budgeted is going to have to go a lot further now as we have to plan for meals every day.

The Resort was really beautiful and you could bill purchases to your room. Understandably, there was a limit of USD200 so once we reached the limit I used my budgeting skills and went to the front counter to ask if they could take out the whole lump sum at the end of our trip to avoid extra transaction fees and exchange rate fees. They were happy to do this and took our details down, probably as a precaution just in case we did a runner!

But one thing you can learn from my trip is, try to plan for the unexpected ensure you have a small buffer that you can pay these expenses and not rack up huge fines. Such as going to the reception and being upfront about the transaction fees on your card. We now have the Australian money we took in the beginning to pay the credit card bill off immediately when we get home so we don’t encounter any late fees by having to wait for the next payday.

So you’re on your way home and you can’t possibly experience anymore unexpected costs right? WRONG – oh yes – exit fees, we were flying with Jetstar so surprise surprise we had to pay this at the airport as it wasn’t included in our flight ticket – so yet again another $45 to pay out.

A memorable trip, and some great lessons learnt, a keen traveller you would think I would have this down pact by now but sometimes unexpected costs come up and there’s just no way of anticipating them. Ensuring you have a small buffer and you know where your money goes, gives you that freedom to work around these costs without tarnishing your holiday.