The Ruly Blog

"The comforts of matrimony - a smoky house and scolding wife." Engraving by Robert Sayer (1790). From the Library of Congress Prints and Photographs Division.

Money is a flash point in most marriages. Conflicts over money occur in good times and in bad but many marriages right now are incredibly strained because of financial decisions.

Adding to the economic woes is a broader trend of gender role changes in marriages. Who is the breadwinner any more? Joe Peck’s editorial in The Atlantic has raised a few eyebrows with its dire predictions of the societal impacts of the recession.

The weight of this recession has fallen most heavily upon men, who’ve suffered roughly three-quarters of the 8 million job losses since the beginning of 2008. . . . In November, 19.4 percent of all men in their prime working years, 25 to 54, did not have jobs, the highest figure since the Bureau of Labor Statistics began tracking the statistic in 1948. At the time of this writing, it looks possible that within the next few months, for the first time in U.S. history, women will hold a majority of the country’s jobs.

In this respect, the recession has merely intensified a long-standing trend. Broadly speaking, the service sector, which employs relatively more women, is growing, while manufacturing, which employs relatively more men, is shrinking. The net result is that men have been contributing a smaller and smaller share of family income.

–Joel Peck, “How a New Jobless Era Will Transform America,” The Atlantic, March 2010.

Why is money management so hard for couples? At a macro level, it seems so simple. Each partner should chip in a contribution for the basic expenses and share in the excess funds. Suze Orman gives a good explanation here.

But why isn’t it this simple?

Often the basic problem is that the couple doesn’t have enough money to fund all of their desires. Then it is not merely a conversation of budgeting and accounting but a difficult negotiation about who will sacrifice a dream and who gets to indulge. It is always hard to tell someone, especially someone you love, that they can’t have or be what they want because of a lack of money.

The Medians

If our fictional family, the Medians, were to apply Suze Orman’s advice about splitting their money among 3 accounts: his, hers and ours, their current budget requires that all of the money go in the “ours” account, leaving nothing for individual needs. Suppose Mr. Median’s goal is to eventually get a new flat screen TV, add a deck on the house and buy a new car. Suppose Mrs. Median’s goal is to update her wardrobe and hire a personal trainer or maybe she wants to stop working so she can stay home with their children.

Maybe they both have decided that life is short and they want to enjoy it now. Is it OK if they each charge up secret purchases on credit cards? When they finally have “excess” money in their budget how should they share it? Should it be a strict 50/50? Do they take turns funding their respective goals? There isn’t one answer and a lot of complex emotions involved.

How does a real life couple address these issues? Ruly Ruth shares with us.

My “BFFs” on Bravo’s “Housewives of Orange County” are showing us that even in their elite worlds, money and spouses clash/have problems that mirror all economies of life in this crazy financial era. Lynne’s husband hid from her the fact that they’ve been going under for some time now—-crashing to a horrifying halt. Ending their stay in their gorgeous home, and placing them in a condo to rebuild their lives. Even Lynne admits on the show, “We’ve been living beyond our means.”

A 2003 Reader’s Digest poll “How Honest are Couples, Really?“ found that the most frequent form of dishonesty in marriages was the amount each of the partners was spending.

From clothing purchases to haircuts/dye job costs, a new video game, even how often and where we eat out for lunch, are hidden all the time from spouses. In the grand scheme of things these items seem and may be trivial and unimportant. But when budgets are tight, an $80 blouse or even a $20 Walmart splurge can almost break the bank, especially when a couple’s main goal is working to reduce debt and increase savings.

So this brings us to two questions:

1) Why do we buy/splurge on something we know our spouse won’t be happy about? Is it because we don’t realize the price of the item until we reach the cashier? On rare occasion, yes–but the vast majority of time we DO know the approximate or exact transaction price before we pay for an item or service. So why do we still do it?

2) What can we do to reward ourselves without breaking the bank/budget? (Since often shopping is a known temporary stress relief–yet can cause marital stress once the trip is over.)

Part of the problem is education of the other spouse and appreciation of the desired object. For example, my son has a “Cars” polyester inexpensive $35 comforter. My husband was not thrilled when he learned that it was time to upgrade to a new all-cotton queen-sized comforter for about $100. (For some that would be the basement model.) Until he went to Walmart and researched online for himself would he believe me, and allow said purchase. By the way, this convincing took over two days. So I can see if you found this item for $75, which to me would be a great deal, that you would jump on it without taking the time to educate your spouse, that you would go ahead and buy it and pretend you spent $50 or whatever dollar amount would be acceptable. (I am NOT saying you SHOULD do this–just simply stating that I understand and am probably guilty of this in the past myself.)

On the flipside, my husband has wanted a welder and had to explain to me the variances and options of what is turning out to be a spendy purchase. Apparently a butane torch and a piece of metal are not all that are required!

The other issue that goes right along with this is the unwillingness of spending time on said object by the other spouse/partner. For example, my husband doesn’t mind shopping for my son’s bedding, but he does NOT want to go through a mall with me for a new ball gown or new outfits. This is unproductive to him–he’d rather “throw money at the problem” as our Uncle Jimmy would say, than spend his own time researching ball gowns and garment lines. Therefore he doesn’t always understand what makes a $300 dress MUCH better than the okay $150. (By the way—I settled for the $50 post-pregnancy-not-sure-if-I-can-wear-it-again one this year–just wait ‘til next year, honey!)

So—what do we do now? How to alleviate these purchases that cause marital discord….or at least mitigate the sticker-shock? COMMUNICATION! My husband recently told me after 11+ years of marriage he would rather we spend $25 or $100 more on an item we agreed upon rather than me snatching up a “deal” without letting him know about it first. Prior communication would be ideal, but in this world of instantaneous communication via texting and email, it’s very simple to notify your spouse of the unplanned purchase.

However, probably the best idea would be to talk each week (like we try to) and discuss how many lunches out we plan to have, what gifts we need to buy, and any incidentals that are beyond the typical household requirements. Maybe those incidentals can wait until a sale comes around, or at a later time when maybe a bill is paid off fully. This is my Ruly challenge to our readers—communicate with your spouse weekly and see if it makes a difference in your spending. I hope it does! Let us know how it goes.

How do you rate your communication skills with your spouse about money? What lessons have you learned about the marital checkbook? Please share in the comments.

Budgeting is one of the most basic financial planning methods but also one of the most powerful. A budget is nothing more than adding together your sources of income and subtracting your expenses. Your budget should be the baseline for all of your financial decisions. Most people, however, think budgeting is complicated, time consuming or have no idea where to start.

If you are only going to read one post at Ruly this month, this is the most important one.  Regardless of any other financial decision you make, if you structure your life so that you can comfortably pay all of your obligations as they come due each month, you should sleep well at night and hopefully amass wealth slowly over time.

Art Brown and Family on the couch. (1932) Photo by Theodor Horydczak. From the Library of Congress prints and photographs division.

Sometimes the best way to learn is by example. Allow me to introduce you to The Medians, our fictional family who loosely represents the data on median American income and expenses compiled by the Federal Reserve and the Census Bureau. Because the median doesn’t accurately capture any one particular circumstance, I have filled in a few holes based on my life experience to round out the Median’s finances.

The Medians are a Virginia family (husband, wife and two children).  They earn the American median family income of approximately $73,000.  Both Mr. and Mrs. Median are employed full-time.  Their children are cared for in a day care setting while their parents are at work.  Mr. and Mrs. Median commute to work in the Washington, D.C. metropolitan area.  Due to the high cost of living in D.C., they reside in the distant suburbs where housing is more affordable and commute long distances to work.  The Medians try hard to live within their means.  They aren’t extravagant in their expenses but they do indulge in a few treats: annual family vacations to the beach, visits to family during the holidays, cable TV, a restaurant meal out once a week and occasional wardrobe updates. Sometimes the Medians come up a little short each month and charge a few things to their credit card. They are still paying off car and student loans and their mortgage. They put aside a little for retirement savings each month in their 401(k) accounts and their employers match their contributions.

Peeking inside the Medians checkbook for the month, you see the following:

THE MEDIAN FAMILY BUDGET

ANNUAL INCOME

Mr. and Mrs. Median’s combined full-time salaries		$73,000
Mr. and Mrs. Median’s combined 401(k)/retirement plan contributions		$2,190
Estimated salary income after taxes and deductions for Social Security, Medicare, 401(k) and employer health insurance premiums		$60,000
Estimated Monthly Disposable Income		$5,000

MONTHLY EXPENSES

Housing
Mortgage Payment ($150,000 @ 5.5% interest)		$851.68
Real Estate Taxes ($0.62 per $100 of assessed value on $200,000 home)		$103.33
Home Insurance		$24.75
Home Repairs/Improvements (1% of home’s value)		$166.67
Subtotal Housing Cost		$1,146.43
Food
Groceries (assumes the “Moderate” cost of food at home)		$850.00
Restaurant Meals		$120.00
Subtotal Food Costs		$970.00
Transportation
Car Loan Payment		$200.00
Car Insurance		$166.67
Gasoline (assumes Mr. and Mrs. Median are driving to work)		$400.00
Vehicle Registration/Inspection Fees		$7.00
Car Tax (required in Virginia)		$50.00
Car Repairs/Maintenance		$100.00
Subtotal Transportation Cost		$923.67
Child Care
Day care expenses and/or children’s classes/extracurricular activities		$800.00
Subtotal Child Care Costs		$800.00
Utilities
Electricity/Gas/Water		$200.00
Telephone/Cell phone		$70.00
Internet		$40.00
Subtotal Utilities Costs		$310.00
Debt Payments
Credit Card Payment ($3,000 balance)		$150.00
Student Loan Payment		$125.00
Subtotal Debt Costs		$275.00
Luxuries
Clothes, shoes, haircuts, manicures, etc.		$150.00
Gifts		$50.00
Cable TV		$60.00
Travel (cost of 1 or 2 big vacations per year, airfare, hotel, etc.)		$125.00
Subtotal Luxuries		$385.00
TOTAL ALL EXPENSES		$4,810.10
MONTHLY NET INCOME		$189.90

The Medians feel pretty good about themselves after this exercise. They have done a lot of things right. They are saving for retirement, they own a home and they are making regular payments on their loan obligations. And gee, they even have almost $200 left over at the end of the month. That’s pretty good, right?

Well…not really. While the Medians are doing a lot of things right, this budget is really pretty tight. The Medians spend every penny they generate. The budget prices only the average cost of expenses over the year. If the gas bill suddenly doubles in the winter, the Medians will have to charge that to their credit card, for example. The Medians also are not counting on the fact that since most employers pay every two weeks, their typical monthly income is more like $4615 with two months a year where it is $6923. So, 10 months out of the year, the Medians’ expenses put them in the hole by $200.

There are a couple of things that are not in this budget too that really should be, like life insurance on Mr. and Mrs. Median for the benefit of their children and a small amount for emergency savings. Mr. and Mrs. Median are not putting away nearly enough money for retirement and college savings is out of the question.

Any family budget with less than about $500 “fat” at the end of the month is prone to overspending in my experience. Even the most accurate budget is going to forget a few things. In the Medians case, for example, there is no allocation for charitable donations or religious tithing, which for many people is a common expense. Magazine subscriptions, impulse buys, computer upgrades, they all add up. Also, I have been a bit kind to the Medians on some of their expenses. For the DC area, their housing and child care expenses are probably on the low side.

Also, if you put this family under one extra bit of stress (higher taxes or health insurance premiums, Mr. Median gets laid off or Mrs. Median takes a 5% pay cut, one of the Median’s children has a medical emergency, etc.) this family’s debt load will spiral out of control. The Medians current situation assumes that everything in their lives will go perfectly. As we all know, this never happens. There always has to be some allocation for disasters.

Is it hopeless for the Medians? No. They can do a lot to improve their financial situation but they have to be realistic about how much things cost and consider adopting an extraordinarily frugal lifestyle for at least a little while to build up an emergency reserve. They might consider axing their “luxuries” for a while. Mr. or Mrs. Median could consider “slugging” to work to save on the transportation expenses. (Slugging is an unusual Virginia transportation solution wherein you drive to a commuter parking lot and hop in a car with total strangers so that the driver can take the fast highway commuting lanes (which require at least 3 occupants in the car)). They could stop eating out and try to adopt more frugal eating habits with their grocery shopping.

Is any of this fun? Not really. But this extreme frugality doesn’t have to last forever, just until Mr. and Mrs. Median pay off their credit card and build up at least a small emergency fund (say $5,000). The luxuries can work back in gradually, hopefully as Mr. and Mrs. Median’s income rises over time.

This type of exercise can be particularly stressful for those in retirement age or on fixed incomes. There could come a point at which the budget shows, for example, that a home is no longer affordable. Making a big change like selling a home is stressful and hard. Yet, we all have to be realistic that such a difficult change could come to any of us at any age. Rather than fear the change, I would rather be prepared to accept it.

Now that you have seen what life is like for the Medians, it is time to issue the Ruly Challenge.

The Challenge:  Create or update your household budget.  Have a firm understanding of your income and expenses.  Identify the costs that are fixed and the opportunities you have to save or improve your financial situation.

Below is a Ruly worksheet to guide you in your efforts. You have two options, the pencil and paper method or a spreadsheet with some calculations built in that can be adjusted over time.

• Ruly Budgeting Worksheet (printable pen and paper version)
• Ruly Budgeting Worksheet (Excel spreadsheet)

Be brave!  This is the foundation of your financial planning.  There are no wrong or right answers.  Each budget should reflect the lives and goals of its planners.

Please feel free to share in the comments your thoughts on the Medians or budgeting in general. What advice would you give to the Medians?  (The Medians are fictional and don’t bear a grudge so if you have some tough love to give them, they can take it!) Do you think the Medians reflect the financial challenges of the typical American family?

It will be a difficult week transitioning back from holiday schedules to regular schedules.  Perhaps you are also trying to start new routines as part of a New Year’s resolution as well.  Do your best not to get overwhelmed by what you are facing and take a few moments to breathe every now and again!

Now that we are off to a fresh new year, one of the to do items is to refresh our calendars. As I was going month by month through some planning for the year, I thought it would be helpful to give a short preview of how 2010 lays out with regard to holidays and other matters.

Perception of time is a complex issue and in fact there is a whole science of the “philosophy of time.” No one knows exactly how time is represented in the brain.

“[T]he perception of [time] is crucially bound up with memory. It is some feature of our memory of the event (and perhaps specifically our memory of the beginning and end of the event) that allows us to form a belief about its duration.”

–“The Experience and Perception of Time,” Stanford Encyclopedia of Philosophy

The above fascinating article (which I confess I don’t completely understand) addresses such complex questions as how our brains process events in time and why we don’t perceive the future.

It seems possible that perception of time could vary from person to person and that we all have strengths and weaknesses with regard to working with time. Take for example, the numerous formats of calendars and planners available. Some people like a monthly paper calendar, others a full year viewed simultaneously, others weekly or day-by-day checklists. Some need a combination of all of these. Others eschew all paper calendars and rely on electronic methods instead.

When I am working with time, I find it essential that I look first at the long view of what time there is to work with and then focus in progressively smaller, from years, to months to weeks to day-to-day tasks. Other people I know find looking at the long view overwhelming and just want to focus on day-to-day, week to week or month to month. Both approaches have their limitations. Long-range planning has to be adjusted frequently to adapt to the inevitable changes of life. Short-range planning, while flexible, can be limited in its effectiveness. Decisions we make in the moment today may be “wrong” when viewed on a longer time scale.

First things first, when is our next vacation? 2010 looks to be a near perfect year from a holiday scheduling perspective. All of the major U.S. holidays fall at or very close to a weekend so there are many 3 and 4-day holidays to look forward to and no awkward one-day-off-in-the-middle-of-the-week type of holidays. You can save your precious vacation time for a good long summer vacation or split it up throughout the year for numerous mini-vacations.

• Martin Luther King Jr. holiday comes two weeks from today on Monday, January 18.
• President’s Day Holiday comes on Monday, February 15, which happily coincides with Valentine’s weekend. There are sure to be a lot of romantic vacations that weekend. School celebrations of Valentine’s Day, however, will probably be pushed up to Friday, February 12. The Winter Olympics in Vancouver start that weekend as well.
• Easter, although not a work holiday, comes Sunday, April 4. Spring Break for many schools comes the following week, April 5-9, although it varies quite a bit. If you have children in school, now would be a good time to find out when this break occurs and include it in your planning. If you are planning a spring vacation and have some flexibility in your scheduling, you might want to avoid traveling during spring break weeks to save some money.
• Mother’s Day comes Sunday, May 9.
• Memorial Day comes May 31. There are five Mondays in May this year so it will seem like quite a wait for it to come.
• Father’s Day comes Sunday, June 20.
• Independence Day comes on Sunday, July 4th with the federal holiday granted the following day on Monday, July 5th. We get a built-in 3-day weekend as a result!
• Labor Day comes Monday, September 6th and Columbus Day, Monday, October 11.
• Halloween falls on a weekend again, Sunday, October 31 (which usually means it is celebrated on Saturday night in many places).
• Veterans Day is November 11 and falls on a Thursday this year so if you take just one vacation day on November 12, you get a 4-day weekend, followed by another 4-day weekend two weeks later for Thanksgiving on Thursday, November 25. If you celebrate Hanukkah, you might need both of these long weekends to get prepared as Hanukkah comes early this year, December 1-9. If you celebrate Christmas, you could get a jump start on your preparations as well.
• Christmas Day falls on Saturday, December 25 with the holiday falling on Friday, December 24 and we kick of 2011 on a Saturday as well so 3-day weekends for Christmas and New Year’s as well!

Now that we know how much time we have off, when do we get paid? If you are an employee paid according to the most common biweekly time schedule, paychecks start on Friday, January 15 and end tidily on Friday, December 31.

One budgeting tip that has been helpful to our family is to figure out when the “bonus” paychecks occur. Even if you don’t receive a bonus as part of your pay, there are two built-in “bonuses” to your regular 26 paychecks. Most of us effectively need to subsist on 2 paychecks per month since 10 months out of the year, we only receive 2 paychecks. If you can work your home finances so that you are always subsisting on 2 paychecks per month, the “extra” 2 paychecks can be your “bonus.” In 2010, the “bonus” months are July and December. This timing is also fortunate to help with holiday spending at the end of the year.

So, many positive things for 2010! What other scheduling or budgeting items are you looking into at the moment? What type of calendaring system do you prefer to use? Please share in the comments.