Living Within Your Means and the Marital Allowance

The mainstream media is now chock-full of stories about married couples having to tighten their belts to “live within their means.”  It is interesting that these stories are only recently becoming popular because not living within your means is a problem whether the economy is in good shape or, like now, in terrible shape.  But reading a recent story about this spendthrift couple in the New York Times, the picture becomes clearer.

The Jones couple have a combined income of $250,000, an expensive house in Silicon Valley and $100,000 in credit card debt.  They are upside-down on their mortgage because each time they ran their credit card balances up, they did a cash out refinance to pay off the credit cards.  Then they started over.  So they thought they were “living within their means” because their “means” included anticipated appreciation in home value.  When homes in California started depreciating instead, this couple’s “means” collapsed, they had to find a Plan B, and their story became of interest to the media.  As predicted, the standard of living bubble has popped for lots of people.

It’s too bad no one had earlier explained to the Jones that “living within your means” is a function of income and outgo, not asset appreciation and outgo.  It’s also too bad that financial writers in the Times and other media outlets didn’t jump on this issue two or more years ago, when the real estate bubble was still growing instead of blowing up.

So Plan B for this clueless couple called for a substantial cutback in expenses.  Duh.  But Mr. ToughMoneyLove is not exactly sure that the Jones are feeling a lot of pain.  According to the story, they are “reining in expenses” by sticking to a monthly allowance of $600.  Each.  My interpretation of this is that husband and wife Jones are each being forced to survive on a monthly marital allowance of $600, to cover their respective personal discretionary expenses.  Gosh, that must really hurt.

Mr. and Mrs. ToughMoneyLove have had completely combined finances since very early in our 31 year marriage.  At various points over those 31 years, we have used a marital allowance strategy to avoid sniping at each other about one of us spending on stuff that that other thinks is kind of dumb.  In other words, we each got to spend some dumb money without being concerned about looking dumb to our spouse.  The last time we used that strategy, I think our marital allowance was $100/month.  That covered a wide variety of expenditures, including workday lunches.  (Talk about creating incentives for packing your lunch.)

When I saw that the Jones couple had voted themselves a $600 marital allowance (for combined discretionary personal expenses of $1200/month), I blinked two or three times and thought what the …….?   

Yeah, they make a lot of money.  But let’s not forget that they have $100k in credit card debt.  With their house having dropped substantially in value, I’m quite certain that they also have a negative net worth.  Under those circumstances, how can you say that the Jones are really living within their means, when that “living” includes $600 each in monthly personal expenses? 

I suppose I am really making a couple of related points.  First, a marital allowance is an appropriate tool for controlling spending in a marriage in a way that reduces conflict.  Second, when you have not been living within your means for so long, you need to be a lot more aggressive in your debt repayment schedule and less generous in your marital allowance.  In other words, the “living” part of the equation needs to have more emphasis on debt payments and less emphasis on accommodating the well-established spendthrift tendencies of the marital partners.  Even in California, I don’t think that a marital allowance of $600/month gets it done.  It’s like trying to cure a smoking-related lung disease by cutting back from two packs to one pack per day.  The Jones need more standard of living pain to experience net worth gain.

Honestly, even though we have no non-mortgage debt, I don’t think I could bring myself to spend $600 each month in “dumb” money.   But then, if I had $100k in credit card debt, I wouldn’t be buying a turkey fryer at Costco, period.  (Yeah, Mrs. Jones had to have one of those.)

When I reached the end of the Times article, I was kind of hoping but not expecting that the writer would make some cynical remark about the magnitude of the Jones’ marital allowance.  Alas, it was not too be.  But I know who that writer is, from reading some of the stuff she has written on MSN Money about her own personal finances.  She has her own money issues, so she is probably hesitant to jump on someone like the Jones whereas Mr. ToughMoneyLove has no such qualms.  It’s my self-appointed mission to speak the hard truth about personal finance.

What do you think about the size of the Jones’ marital allowance in this situation?  Do you have a marital allowance in your budget?  How much?

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21 Responses to “Living Within Your Means and the Marital Allowance”
  1. Lurker Carl says:

    Dinners out, new clothes and worthless gadgets when you have over one million dollars of debt? I’m reading between the lines here, the house was purchased for $850K but the Joneses had been pulling out equity. That’s on top of $100K in credit card debit. I’m willing to bet there are several car leases tucked in the garage as well.

    Dunleavey titled the article “The Challenge of Living Within One’s Means,” I can’t see how they are meeting the challenge. Mrs Jones now has peace of mind because they are living within their means but they aren’t paying down any debt. What a crock!

    This couple AND the author are in denial, another fluff article to fill up a newspaper.

  2. Carl: Thanks for the visit and comment. It seems that you and I are of similar minds on this. If you want to read more about MP Dunleavey, she moderates the Women in Red message board at MSN Money.

  3. I just did a post on my blog about how my husband and I set up our budget and allowance. We have an allowance as well but our is piddly money that is usually slap gone by the next allowance time. But it works wonders to keep each other happy and have our own choices in things.

    I could not imagine what $600 a month EACH could be doing. Oh wait…yes, I do…it is giving them more money to spend on more worthless things they do need! That is lost money that could be going towards their debts. I don’t think people understand that it should not be me, me, me…but save, save, pay bills. Then Me.
    Great Post! Thanks.

  4. goldenrail says:

    I’m not married, so I don’t have a marital allowance. But I still give myself allowance, keeps end-of-the-semester me from hating beginning-of-the-semester me. (And yes, the fact that it’s Uncle Sam’s money that I’m allowing myself to spend is another issue I’m going to have to deal with in a few months.)

    I give myself $400 a month for everything that’s not rent. My electricity and internet bills usally eat up close to half of that; groceries and gas take up most of the rest. Some months I do ok and have a little bit left for something I’ve been wanting. Unfortunately, I usually go over-board the next month, then feel really bad about it and go super skimpy the following month. Hopefully, by the time I get to a marital allowance, I’ll be better at the whole consistency thing.

  5. Beef: I would be very interested to know the ratio between the Jones monthly debt payments and their combined allowances. I wonder why the writer didn’t ask that?

    Goldrenrail – Good job with the allowance. I doubt very much if the couple in the article are using their allowances for utilities and such. Instead, they buy turkey fryers.

  6. Very good point. The percentages are really what budgeting is for, in my opinion. I don’t think it should be about a set amount…it should be a percentage…it is all a ratio to me. I am willing to bet the writer didn’t ask because he is appealing to the many readers that are in the same situation. And instead of give them the honest truth, they like to sugarcoat things…this is part of the reason people are in the situation they are in…lack of financial education or lack of a bigger picture mentality.

  7. Beef: I’m no expert but I’m guessing that writers in the mainstream media are taught/told to write articles that showcase other folks problems in a way that allows the readers to feel better about themselves. That can’t happen if the writer happens to add that, for example, that in this case, the Jones really aren’t making much of a sacrifice.

  8. Yes, I can agree. Media…Liberal…who would ever think such a thing? ;-p

  9. No Debt Plan says:

    Wow. $1,200 per month in discretionary spending sure sounds like a tough life…

    Sad thing is they are apparently intelligent enough to earn $250k per year. Granted, not everyone who makes that much is intelligent, but usually there is some sort of expertise in something that provides that income. How can you justify paying 20% on a $100k balance? Crazy.

    For our marital spending, we each get 2% per month. Small enough not to significantly impact the budget, but big enough that we can go out and do things or save it up to buy something bigger.

  10. Andy says:

    Some couples like to live in denial of Debt. While my wife don’t have a formal marital allowance policy, we normally check with each other if we decide to spend on anything above $100. Below that I have it covered in my budget. Luckily I have no credit card debt, but it is crazy to carry the Jones’ amount of debt!

  11. What do you suppose is meant by “personal expenses”? If it includes groceries, household items, veterinary bills, gasoline, parking, car washes, the cost of getting office clothing dry-cleaned, and lunches out (some employers, such as my ex’s, ask you not to brownbag but to use the lunch hour to network over restaurant meals), then $600 might not be that out of line.

    But if it means “whatever impulse buy strikes one’s fancy,” then $600 is pretty hilarious.

    The Times’s article is less than limpid. Besides, really: WGAS about a self-indulgent pair who somehow can’t manage to squeak by on six figures? Sometimes I wish that paper would focus a little more on the middle class and a great deal less on the absurdly wealthy and the desperately poor. 😀

  12. Jimbo says:

    $600 a month? I get $80 a month and I am happy to have that. The only way I can have more is if I spent part of that money on our daughter’s food. Sometimes.

  13. Jimbo – Your number sounds a lot more realistic, particularly for someone in as much debt as the couple in the article.

  14. Life is a journey, hopefully this couple is at least starting theirs into real financial knowledge.

    Spending the $15 a buying My Total Money Makeover or something equivalent would probably change their lives wildly, but it doesn’t sound like they are ready for that.

  15. Happy Rock: You need to educate these young adults before they become emotionally attached to the idea of buying a home. It’s too late then.

  16. Blaze says:

    Anyone who carries that much credit card debt has no business having an allowance. I’m reminded of a phrase my FIL used to use: ‘More money than brains’.

  17. Meg says:

    My partner and I each spend $20/week on extras, which is great for getting latte or a magazine without having to justify it. (But dinners out and other entertainment come from our joint finances, which is much more than $20/week) I can’t imagine cutting back to $150/week!

  18. Steve says:

    Great blog!

    My wife and I have a setup where she gets $200/month “fun money”. Well, it’s not really fun, it’s anything for which we haven’t specifically planned. For example, this past month $50 of it went to “camp spending money” for our 12 year old daughter. When school comes around, it will buy backpacks, school supplies, etc.

    Our monthly net income is close to $7,000, and we are trying to pay the house off in the next three years (we are 42 and 41).

    We found that when we committed to paying off the house, everything else had to “fall in” around that. We are both 100% on the same page, so we never have any fights about one or the other feeling to restricted.

  19. Kate Kashman says:

    Thanks for highlighting this article. While it makes me crazy, your post and the lovely comments make me remember that it isn’t actually me who is delusional.

    My husband and I got allowances for the first few years that we were married. It helped us develop good spending habits and we’ve now let them go, but sometimes I wonder if I shouldn’t reinstitute an allowance (for me, he seems to be just fine.) Ah, the lure of Target….

    Great post!

  20. Paul says:

    Yes, my wife and I have a marital allowance, $400 each a month for discretionary and personal spending (haircuts, clothes, cosmetics, eating out, beer, hobbies etc), and another $400 for joint stuff (like eating out and entertainment). Also for a total of $1200 a month.

    We make just under $200k a year combined. The only difference with us is that we have no debt to speak of, credit cards are paid at the end of each month and mortgage is paid off in eighteen months, no children (but one on the way).

    I think their allowance it too high based on their debt, but it also depends on what is defined as discretionary. Is it really dumb money, or does it include misc (but required) expenses such as clothing?

  21. Lurker J says:

    I just discovered your blog after an hour of not finding any good blogs on the internet that focused on money and marriage. Thank you for writing! My husband and I put $500 cash in an envelope each month. That is supposed to cover dining out, movies, wine, weekend travel, and other entertainment. We have a hard time sticking to it since we live in Boston and dining out for two people easily costs $100. Needless to say, we don’t eat out as much as we used to. Thanks to the comments from others, It helps to see other couples are doing similar budgeting.

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