How to create shared savings in a relationship.
Without causing unnecessary arguments about money and individual contributions.
There will be a time when you and your partner are ready to commit to a financial goal outside your daily capacity. Whether it’s a fast car, a fancy apartment, your fantasy holiday or the forever-house, saving money becomes necessary.
Please note: this is not an article about how to start saving, how to manage your money, or how to create a daily budget. This is an article about how to preserve your relationship when you begin saving together, as two individual people.
When I went through this transition with my partner, it became apparent to me how quickly the discussion could dissolve. We had different ideas about money, different ideas about saving, and different financial situations. How could we ever save money together when our circumstances were so different?
My financial situation:
- Recently moved out of home.
- On apprentice wages.
- Increased expenses due to living alone.
- Earning more.
My partner’s financial situation:
- Still at home, rent free.
- On apprentice wages.
- Very few expenses.
- Earning less.
Even though I received the larger fortnightly pay check, because of my living circumstance I had less money left over each fortnight than my partner. Did that mean my partner should contribute more to savings?
I didn’t think that was ‘fair’. He agreed. Yet, realizing this didn’t bring us closer to the solution.
So, what is ‘fair’?
From a young age I have appreciated how unreliable ‘fair’ is as a concept. This is because ‘fair’ is a matter of opinion and therefore different for everyone. Yet, it is still a notion that directs us to create a situation that is agreeable between two (or more) people. It is essential when deciding on saving with your partner to honor the notion of ‘fair’.
This quote from Cormac McCarthy captured the importance of ‘fair’ in his interview with Oprah Winfrey while discussing the nature of his writing:
“You know, you always have this image of the perfect thing which you can never achieve, but which you never stop trying to achieve. But I think ... that's your signpost and your guide. You'll never get there, but without it you won't get anywhere.”
Cormac McCarthy, 2007.
We needed a solution that could be transferable across the numerous chapters of our lives. While I earned more when the discussion first came up, I knew that could never remain the case indefinitely. To save ourselves the discussion every time a pay check changed (which was fortnightly due to overtime hours we both worked) we created one simple rule.
The rule: contribute the same percentage from our individual paychecks every fortnight.
This rule can be easily adjusted for your financial situations by filling in the following sentence:
Contribute the same percentage, [__%], from our individual paycheck every [pay cycle].
All that is left is to determine what the percentage is.
This required an awareness of our recurring expenses, spending habits and expect-able income for each pay cycle. We each calculated the income and expenses in each pay cycle and determined the amount left over. Room for personal spending was included in expenses, creating enough breathing room that the percentage remains ‘sustainable’ and doesn’t generate unnecessary stress on either party. Once we had both calculated the numbers, the remaining income was converted into a percentage.
Income per paycheck: $2,500
Expenses per paycheck: $1,800
Remaining amount: $700
Percentage remaining: 28%
Income per paycheck: $1,600
Expenses per paycheck: $1000
Remaining amount: $600
Percentage remaining: 37.5%
Whichever percentage is lower becomes the percentage both parties honor. The reason for this is to create sustainability for both individuals. Setting a percentage which is unreasonable for one person while comfortable for the other disregards any notion of ‘fairness’.
The key points:
- Calculate your income and expenses allowing for personal spending and breathing room.
- Contribute the same percentage from each pay cycle towards savings based off the lower percentage.
- Watch your savings grow, together.
- Bonus points: set a financial goal to create further incentive to honor saving arrangement.
Following this arrangement means each person is contributing the same portion of their income to a joint cause. Saving via a percentage also honors each person’s individual freedom to their own income. Any additional contributions towards the joint savings then comes from an individual’s free-will, free of expectations.
With this arrange we can minimize the tension between ourselves and our partners when breaching the topic of joint savings.
Share this article with any couples you know who are beginning this chapter of their lives!
Good luck, and happy savings!