Quote:
Originally Posted by Ducay
The more I read about them, the more I HATE the idea of these "allowance" or "luxury" accounts, since it just gives you more reason/leeway to drop cash on ######ed things. If I love say, expensive clothes, that should be built into your spending habits and budget for the whole family unit.
Giving yourself, say, $1,000 a month to spend on fun stuff is just a recipe for overspending and arguments.
|
???
There is zero difference between "budget for the whole family unit" for the luxury / non-essential purchases and an allowance. In fact, if your significant other is not financially literate,
an allowance is better.
An allowance lets then know "you have $500 a month for handbags". If they want a $3,500 Louis bag they realize they have to save up for 7 months. If you just 'budget' for it enjoy the $3,500 credit card charge you weren't expecting.
Not having an allowance only works if both parties are on the exact same page and even then it can create arguments when, inevitably, one person goes shopping and spends more than the other "thinks is reasonable".
An allowance is, as a general piece of advice, advisable for 90-95% of couples. Only when two tight wads unite, or one person controls the purse strings 100% does 'budgeting for discretionary items' make sense.
Now my 0.02 on the OP's question:
My wife and have everything going into our joint chequing accounts, and have several joint savings, USD and EURO accounts. We have our own RRSPs, TFSAs, and investments, however I manage them. My wife is aware of what we have, in the event of my demise. I maintain a small balance in my 'bachelor' account, just to keep on good terms with the bank I'd used since childhood, and she has one with her old credit union (we're talking under $500 combined) just to keep the accounts in good standing.
All bills are paid out of the common account and a
meticulous budget is prepared using mint.com. We are both emailed when there are overages and we then review our expenditures by category monthly and look where we went over. These budgets are generally rolling budgets, so Mint knows to deduct it from next month's budget. This way we have the best of both worlds - my wife has an allowance for non-discretionary spending in that if she goes over the $500 clothing budget for the month, it comes out of next month. It shows you that you need to pull back these types of expenditures going forward, to accumulate budget room.
If there are bigger purchases to be made, we will discuss them and then make them, and I will manually classify them as non-recurring in mint so it does not effect the budget.
IMO, as an accountant, a rolling budget like the above along with discussion for non-recurring expenditures is the best. It allows you to build an allowance inside the framework of a rolling budget but also allows you to, after a discussion, earmark items as non-rolling if they truly shouldn't count against your budget (allowance).
However, in the case of people who can't maintain a rolling budget, a simple allowance system works just as well and is generally recommended.