Couples and Money: Consultation vs Allowance

One piece of financial advice that I often see offered is this: If you are part of a couple, give each other a measure of freedom with the money you earn but consult each other on any purchases over $100. In some variations the consultation amount is $50 or even $20. Whatever the amount, the idea is to give each partner some freedom and an ability to spend without answering to the other on every little purchase. It’s reasonable advice in that it keeps one partner or the other from feeling like a child and like he/she is going begging every time they want to buy something, but as a way to manage a budget it’s not very sound.

Why? Because it’s as easy to sink a budget with little purchases as with big purchases. I saw this played out with a couple that I am friendly with. They created a budget so they could work on their debt. They agreed that they would each be able to purchase any item under $30 without consulting the other. Anything over $30, other than gas, groceries, repairs, or bills had to be approved by the other spouse.

“It was a reasonable plan, we thought,” the wife told me. “But we still ended up deeper in debt.”

“What happened?” I asked.

“We both bought too much stuff that was under the limit. We kept thinking that it was okay, since it was all under $30. We never counted on the fact that so much stuff bought under $30 could sink the budget.”

It sounds like this should have been obvious to this couple, but it wasn’t. It turns out that what was happening, in addition to simply buying too much, was that both of them were deliberately breaking up purchases to come in under the limit. For example, in the pre-budget days the husband thought nothing of dropping $150 on an order of DVD’s, books and CD’s from Amazon. After they implemented the budget, he realized he couldn’t do that anymore but rather than curtailing the spending, he started breaking the orders into smaller pieces that came in under the $30 limit. She, in turn, was adding unnecessary items to the grocery cart (shopping at Super WalMarts and Targets make this a real problem) in order to avoid notice. Since “groceries” could be over $30 without approval, she rationalized throwing an extra DVD or purse into the cart during a grocery trip as “grocery spending.”

“Our credit card statements looked ridiculous,” she told me. “There were all these charges, for $28.95, $29.00, or even $29.99. Then there were the $300 ‘grocery’ trips to WalMart to feed a family of two. We were both trying to cover up our spending by hiding it under the $30 limit or sliding it in with other, necessary, purchases. We assumed that if it was under the limit, it couldn’t be doing that much damage. But when you multiply $30 times 50 purchases, it’s $1,500. And when you do that enough, it kills you.”

This couple thought they were doing the right thing by granting each other some autonomy in deciding how to spend their money. But it went wrong for them. So what could they have done differently?

I’m not a fan of this “consultation” system because what happened to this couple happens often under such a system. However, it can work for some couples, provided they address their spending habits. Setting a purchase limit and then just blindly hoping it works out almost never works because if there is a spending problem, this system does nothing to cure it. But if a couple is willing to sit down and talk about what they spend money on and why and get to the root of the problem, they might be able to reach a point where the urge to spend is less and they can trust one another to spend responsibly. Once that level of understanding and trust is reached, the consultation system can work.

I’m a much bigger fan of an allowance system, used in conjunction with a sturdy budget. It sounds juvenile, but it is a much sounder way to manage the budget. Each pay period, each partner is given a specified amount of money to spend however they want. The amount is taken from whatever is left over after the bills are paid and the joint savings goals are funded. They don’t have to consult the other on the purchases, but once that set amount of money is gone, it’s gone. A partner may choose to bank several week’s worth of allowance money in order to afford a bigger purchase. Regardless of how they use it, when the money runs out there is no more until the next allowance period. The reason an allowance needs to be paired with a solid budget is so that purchases cannot be hidden, either. If you know you have $100/week to spend on food (and that’s your normal range), you’re less likely to add in all the extra stuff in your cart because you know your partner will find out that you’re way over budget if he/she looks at the spending. This system keeps spending in check and addresses overspending problems.

Either system requires trust and active discussion on each partner’s part. In order for these systems to work, both partners have to be accountable to the other for their spending (not the what, but the how much) and be willing to live within the rules (not bend them until they break as this couple did). They both also have to be involved with the budget to they can tell when something has gone awry and address it before it gets out of control. The consultation system is more open to “loopholes” and interpretation than the allowance system and can be more problematic. It’s fine to set a spending limit, but only if both partners understand that they still cannot go hog wild with purchases just because they are under the limit.

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10 Responses to Couples and Money: Consultation vs Allowance

  1. Princessperky says:

    If a couple is firmly on the side of debt free and speaks openly about spending any old system works.

    My husband and I have no firm consult rule, but I discuss before spending practically anything (though not ask permission), he tends to keep his spending to ‘free cash’ so long as it wasn’t coming from the budget he spends it (rebates gift money ect)

    But like a smoker needing a plan to quit couples in debt need to have more concrete ideas on money.

  2. ceejay74 says:

    I swear by the allowance system. $60 per person every Friday is just enough to make us feel pretty rich, like we’re not scraping the bottom of our coin purses for little luxuries.

    Also, for groceries, we have a blanket grocery/household line item of $900 per month. Usually it’s more than enough, so we allow little treats in there, but if we tip over the monthly amount, that comes out of the next month’s and we have to cut back. So it curtails ridiculous extra purchases, but allows for little treats like fancy olives or ice cream from time to time. If we have a big household expense, no treats for a while.

    Also, when we get bonuses or other windfall money, usually about half goes to something sensible (debt repay or EF savings) and the rest goes to frivolity (spending money and/or vacation fund). That keeps the element of a chance for more spending money, which makes the $60/week less monotonous.

  3. Monkey Mama says:

    Allowance system works well for us, though we use a combo of both. We discuss all bigger ticket items. In fact, we discuss almost every single purchase. The “allowance” is more for the stuff the other would never agree on as a purchase. We both get $50/month. I mostly buy clothes (out of the realm of necessary) and my spouse mostly buys movies/electronics. He has no idea why I buy what I buy, and I have no idea why we need a stockpile of movies. So we just call the allowance the “nag free” zone, which I think is important in a relationship. A little something for ourselves. But we often discuss the littlest purchases. Big purchases are most certainly always discussed (anything over like $100).

    We aren’t very strict on the allowance budget. It’s just so we know how much we have available to splurge on “whatever.” Doesn’t mean we spend every penny of our allowance or we would never allow a bigger splurge. But certainly an important part of our overall budget so we don’t spend more than we have to spare.

  4. Marie says:

    I guess we live closer to the wire than most. I thought we were extravagant with $450 for groceries/everything but gas and $30 per month per person for an allowance. We also get $35 /month for our personal savings accounts. We use our personal savings accounts to save for things like air compressors and new furniture.

  5. Although my wife and I used to swear by the “consult each other before every $100 purchase” rule, we found that it caused too much contention. We are both very frugal, so we’ve decided to simply make purchases without consulting each other. We don’t ask each other the cost of things we bring home – and that seems to work just fine. However, if one of you is a big spender and the other is a cheapskate… this may not work for you.

  6. Hilary says:

    I agree that the allowance system is the way to go. I think it’s important to both people in the couple to have a bit of financial privacy. If my boyfriend wants to spend money on cycling gear, I don’t want to know about it because if I learn, inevitably I will say “You spent how much?” I know that is wrong so the best way to avoid that reaction is for me to just not know at all. The “allowance” system is really the only way of doing this while still keeping a budget. Of course, one hopes that both people will not spend their entire allowance just because it’s there :).

  7. Diane says:

    I can see why the $30 limit would not work if one or both parties are gaming it!

    I think the allowance method is much more fair & reasonable. The allowance amount can be according to the financial situation. When money is tight it can be less to pay down debt, then possibly increased as income goes up & debt goes down.

    Everyone has to have SOME financial freedom, otherwise control issues & conflict will result.

    My ex-husband & I did not have a set allowance, & both spent fairly freely without fighting about it. This resulted in way too much debt & I would never do that again!

  8. whitestripe says:

    DF and I have just combined our money – we have set up an allowance which is 10% of our weekly take home pay ($80-$100 for DF and $65-$75 for me, depending) and this is our ‘do whatever’ money – df can buy video games and alcohol, i can buy magazines and coffee with friends. Any other ‘joint’ purchases we discuss, and we are planning on having a list that we can see for things we need around the house. if we ever need anything, say like a new garden hose, air conditioner etc, we will just add it to the list.

  9. I tried an allowance system with my now-exhusband. Even though I gave him twice as much as I got, he turned into a snotty, rebellious teenager and charged all kinds of little things. I guess someone who loves the challenge of making the money leftover at the end of the month a really big number isn’t meant to be with someone whose goal it is to make that same number as close to zero as possible. And he was Scottish – a culture known for producing both economic geniuses and the tightest tightwads on the planet. Guess he forgot to swim in that particular gene pool, grr.

  10. Diane says:

    @MoneyMateKate – Excuse me for laughing, but I’ve been there! The premise of allowance vs. consultation presumes that both parties are willing to come to an agreement.

    My ex-husband was willing to let me spend whatever I wanted, and he did the same. He was NOT willing to curtail spending in any way, and when he found some cash that I’d set aside he accused me of “saving money”. Honest!

    Opposites may attract, but financial opposites in a marriage can spell disaster – and did in our case…

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