If You Can’t Find the Holes, You Can’t Fix a Leaky Bucket

Marriage is a union, and financials shouldn’t be exempted from that. Anything not united tends to pull a couple apart, so I’ve challenged Ria (the non-believer) to get our financials in order. Its a story that started 9 years back when we were both working in Japan, starting simple lives as husband and wife.

The Simple Model

Ria coming from a completely opposite family setup, thinks her money is hers and my money is mine.  Simple right?  Well I, the pragmatic one didn’t think it was simple in the long term- assuming of course you plan to get married for 50-60 more years.  So on the ‘simple’ model with who pays for the future mortgage, future car loan, tuition -- (oh wait, that’s actually the easy part since they’re regular expenses) you could split that based on income capacity, right?

Problem is ‘simplicity’ doesn’t really mean ‘scalable for life’.  Example, who picks to buy ‘steak’ for dinner? but what about in cases when one has no work?

Assuming your partner will work for life is not really a strategy, since you’re overlooking accidents, health and a bunch of other future issues. Now the simple model basically means in a single income home, I, the prime breadwinner, get to make all the calls in the family from what to eat to which car to buy to what house we’ll get.

It doesn’t make a sound marriage does it?

I pitched this idea, everything is pooled and since I’m no billionaire I’m fine moving my pre-married life savings as our life savings. Paid all her debts, since they’re mine now too. We started a real marriage and a financial marriage too.  Everything we buy is now tied as a conjugal decision from what house to buy to the smallest of things, like the type of salt we buy (actually I have no idea why we need to buy Kosher salt but whatever).

You might be thinking -- oh my God that is incredibly complicated!

Well to be honest, it wasn’t easy initially. Her needing to ask me if the shoes she likes to buy is something I think is a good buy was a paradigm shift.  But see, marriage is a paradigm shift. Its not just ‘you’ anymore, its ‘us’. It took us maybe a year until we got a ‘couple-normalized’ sense of what’s a good buy or not. I got her to shop less, but she got me to spend more. I think, getting a couple talking about the small stuff sets a foundation for the real big compromises you make later in life.

Scaling Up

Jumping 5 years forward, we were able to get a hang of everything together decision-making. That makes even bigger decisions more streamlined, like “wanna move to the US?”  Or “is Prius the right first car to buy?”. Its not that all decisions need a rubber stamp of the other, its because you know what the other person wants, and that’s why you can make decisions based on ‘us’ rather than just ‘you’. You won’t get it perfect the first few times though, but that’s fine, you’ll learn along the way. (Being able to return items here in the US does help a lot though!)

But wait, there’s more!

Here we are 9 years later, still doing pooled finances and what was all that effort for?  So that you can set 1 real budget. Not the ‘in your head’ budget, but a real tracked one. Spanning years of expenses.

Big Data for Expenses and Lifestyle  (BOOM…  a good startup idea don’t you think?).

In all sense of seriousness, having data to explain what you have been spending over the past 3-5 years will give you fulfillment. Basically the dumb look on your face once you get the year-end payroll numbers as to where all that money went -- well, goes away.

Here’s a visual picture of that:

Below is our Grocery spending in the last 2 years.

You could say that our lifestyle is ‘flat’ and not increasing, but take a look closely:

On the average, our Groceries spending on the average is a 15% jump YOY (year-over-year). Now that you have that number, you can plan for the future. As a family, there’s at least 30 years of grocery remaining.

Here’s what our future looks like:

This is assuming our current budget is $1000 growing at 15% YOY. So unless as a family we earn $60,000 a month, were not going to be eating 3 meals a day. :)

Of course, your sensibilities kick in and say, that’s insane!  But that’s the whole purpose of this exercise. If you don’t know what’s growing in your budget, you can’t fix it.

So to wrap up.

• A marriage is a financial union, which enables the next point.
• A single budget, then gets better on the next point.
• A fully tracked budget so you can check if you can really follow it, and after some time it becomes:
• An analyzable budget so you can make a fix for which one is leaking the fastest so you can plug it BEFORE it becomes like the graph above.

There are more graphs and visualizations in HelloWallet, our tool of choice for our tracking.  We did start with Buxfer in the Philippines & Japan then Mint until last year. But through all that we kept moving our data forward to get all the financial history we have.

written by Dan