3 Tips for managing your household’s discretionary income *
Like most couples, my partner and I have the occasional squabble over our household finances. Usually, these arguments arise because of something else — a deadline at work, illness, a difficult commute — but they often open up the door for frank, and sometimes heated, discussions about money. So, how do my partner and I broach the ‘M‘ word without spiralling into an emotional rage?
Like any relationship that deals with money, or some form of it, you must be able to trust all of the people in your network. Trust between partners (theoretically) allows each person to make comments or suggestions about finances without being snapped at and gives people the opportunity to flesh out new ideas about your spending and saving patterns.
In our house, we do a number of things that help us make budget-related issues less stressful, with fewer arguments and better long-term money management emerging as a result of our actions. Our approach relies less on a tried-and-true formula and more on open communication and thoughtful spending (sort of!). It’s an adaptable system that allows us to meet changing short-term goals while pursuing our long range targets.
Techniques that can make money less of an issue
There are plenty of ways that people can establish boundaries for purchases, ranging from sit-down meetings to credit card bans to pre-set levels of personal, discretionary cash (like an allowance).
Learn to distinguish between significant and insignificant purchases
That new 52″ television might look super nice hanging on your wall, but if it’s costing you $150 / month for the next two years, you’ve just taken a good chunk out of your personal income. I’ve always found it useful to think of purchases in terms of something I really enjoy doing — going to movies, reading a book, taking time off work — and figuring out how much I’m going to miss out on those activities as a result of my purchase.
Taking note of spending commitments associated with a discretionary-income purchase and discussing it with someone who will give you an honest opinion is something that should weigh heavily on your decision because, over the long run, it’ll affect your relationships and your quality of life.
Have a credit card plan
Used properly, credit cards are fantastic weapons in the average person’s arsenal; in fact, I use my credit card all of the time to purchase fuel, pay for meals out, cover costs for significant renovation materials, and the odd purchase from websites like Amazon.com or Steep and Cheap. Most of these purchases are paid off immediately, however, because we try to avoid running up our monthly credit card bill.
Often times, our credit card ban keeps us from buying things we’d love to have but it also keeps us from making monthly interest payments that are calculated using relatively high annual rates.
Set your accountable spending limits
You should always keep track of how much you spend although it’s important not to nickel and dime yourself into frustration. An easy way to limit your discretionary spending without micromanaging individual purchases is to start each week (or day or month) with a set amount of cash in your wallet or purse. When I first tried this method of spending / saving, I took a fixed percentage of my net income and set that aside. Once it was gone, I was done until the next injection of cash came along.
It’s kind of like the allowances many people received when they were kids but it’s a basic, easy-to-follow technique that limits personal (and often unnecessary) spending.
Find a system that works for you
My partner and I tried a number of these techniques before realizing that we really didn’t make that many extra purchases. Knowing that we were well under the spending level that we’d identified as ‘too much’, we ended up doing away with many of the systems with which we’d experimented.
The important thing for us was that, while searching for a suitable discretionary spending technique, we learned what we spent on what, and on a daily basis. Based on those discoveries, it was relatively easy to trim the fat and cut out stuff that was unneeded. By the time we settled on a method that worked for us, our spending plan had morphed itself into more of a savings plan, something that gave us more time and freedom to spend doing the things we really enjoy.
* This post was originally titled, “Money issues can be a roadblock to a happy relationship” but was changed because I didn’t think that title accurately reflected the main points of the entry.
