Family Finances

Are you scared to tread in this water?  Discussing finances with your significant other can be difficult and worrisome.  After all, this can be a delicate topic for some.

My wife and I have been happily married for over seven years.  We are successful in managing our finances in separate accounts.  As a result, personal finance has not put a stress on our relationship.  Although, most "financial experts" think this is a disaster.  It works for my wife and I, and has done so for the 7 years.  In fact, we have very rarely had an argument over finances.  Thus, the reason to share this system and the process we implemented.

Disclaimer, every situation is different and unique.  In other words, there is not a one shoe fits all approach to personal finance.  Therefore, each person and family should manage their finances to fit.  Still interested in reading about unorthodox finances in marriage?

If you are, I will share:

• Our Income Situation
• Background
• Why I Believe Separate Finances Works for Us
• How We Manage Bills
• Financial Position Check-Ins
• How We Manage Investments

Our Income Situation

My wife and I both work full-time jobs.  We are both career and goal driven. Undoubtedly, time management and communication has been key.  Namely, when balancing careers with family time.  Overall, we have managed this well.  We are both compensated nicely.  As such, there is no plan for one of us to stay at home full time.  This would not be a financially savvy move. I can proudly proclaim that momma is the bread-winner.

All of our accounts are managed separately.  Any account you can imagine.  Our checking, savings, 401(k)'s, IRA's, credit cards, etc. are exclusive.  Her accounts are completely managed by her.  Likewise, I control my own accounts.

However, we still consider all of money to be mutual.  Besides, the vows stated were for richer, for poorer.  We consider ourselves a team and position ourselves accordingly.  This includes our financial goal of investing in real estate in the near future.

Background

Our unorthodox finances in marriage started when we said "I do."  Actually, it probably started sooner than that.  We both had separate accounts heading into our wedding day.  The wedding's expenses were split 50/50 between the two of us.  We communicated our expectations and budgets for the big day prior to making commitments.

After the wedding we opened 1 savings account.  This was where we placed our monetary gifts received from the wedding.  We agreed to every dollar spent from that account.  As well as that, we each maintained our other accounts.  There were talks of transitioning into shared accounts.  Neither of us followed through with it.

Subsequently, we kept separate accounts since.  We do not have any intention of changing this model.  We are both happy.  Most importantly, we never argue over finances.

Why I Believe Separate Finances Works for Us

As previously mentioned, every family and couple has their own situation to manage.  Our unorthodox finances in marriage works for our situation. The reason I believe the separate finance model works for us is as followed:

1.  Above all else, we trust each other

Any road, bridge, dam, structure, etc stands or falls on the quality of it's foundation.  Similarly, a marriage will only stand and last on the quality of it's foundation.  Trust is a marriage's foundation. Do you like how I tapped my inner Civil Engineer for that metaphor?

I trust that my wife will make the right decisions with her time and money.  I will never doubt her judgement and decision making.  For this reason, I will never try to control her money management.  Likewise, she trusts me in the same way.  We both know each other's loving intentions.

2.  We are both investors and money managers

This is the second most important reason the model works.  My wife and I pay our future selves first.  Namely, we contribute specific amounts to our 401(k)'s before the paycheck hits our accounts.  Similarly, we pay our reoccurring monthly bills prior to any other additional expenses.

3.  Our cost of living is split evenly

We pay our bills evenly.  One of us pays the mortgage and insurance, and the other pays for childcare and utilities.  We attempt to split our cost of living equally. This includes vacations and other life expenses.  Overall, this is a driving force in reducing financial arguments.

Admittedly, we have never sat down and evaluated this dollar for dollar.  We have analyzed it as a rough order of magnitude, and I consider it to be close enough.

How We Manage Our Bills

We split our cost of living 50/50, or close.  However, this does not include our debt incurred as a result of college.  Nevertheless, we have been supporters of paying off debt.  In fact, we have used our tax return to payoff student loans.  It is important to remember you're a team.

We split major home repair or upgrade costs.  For example, our water softener's mother board got wet and shorted out. The costs to install a new one was split 50/50.  Additionally, our DIY deck replacement's expenses were split too.

My wife and I acknowledge when each of us feels that the other is contributing more.  We both recognize when this occurs.  In this case, we will be sure to the other covers a future bill to bring back balance.  Give and take is the name of the game.

Next, I will share our financial situation check-ins.

Financial Position Check-Ins

Are you ready for another one of The Financial Engineer-ism?  Good.  You know what they say about assuming?  It can make an a$$ out of you and me.  With this in mind, we have regular discussions on our financial positions.

The discussions typically include large expenses that are on the horizon.  For instance, we thoroughly planned the birthing costs for our child.  The contributions made to the Health Savings Account (HSA), saved use 20%.  The discount came from paying the costs in full.  Another example, she recently informed me of the annual plate registration expense.  Thankfully she planned and covered the costs.  Planning, anticipating, and communicating such expenses are crucial when managing finances separately.

Each year I share my budget with my wife.  I discuss my major financial goals for the year.  To demonstrate, I shared my goal acquiring real estate to invest in the short term rental market.  As a result, she has poked holes in my business plan.  She made me aware of metrics that I did not think about.  Our conversations have brought forth ideas that were unconventional to the short term rental market.

How We Manage Investments

Most of our investments are managed separately as well.  These accounts would include 401(k)'s, IRA's, and brokerage accounts.  In addition, I manage our children's 529 plans.  I update her quarterly on each account's balance.  Similarly, we discuss where the fund's are invested.

As mentioned, most of our investments are managed separately.  The future real estate investment has been a cooperative effort.  Both parties must be all-in on this size-able investment.  I am truly thankful she has taken the time to jump in with it.  It has become a bonding experience for us as we track our progress.  This investment is a true commitment that requires research and self-education.  She has provided suggestions and thoughts I did not think about.

In summary

Unorthodox finances in marriage has been working well for us.  It started since the day we said "I do."  I do not see us changing the plan in the foreseeable future.  Separating finance between spouses is not for everyone.  Everybody has their own situation to manage.

We believe this model fits our situation. There are major reasons it works for us.  The first, we trust each other.  The second, we are both great money managers and investors.  Finally, we attempt to split our cost of living 50/50.  Although, we have the best of intentions to help each other thrive.  Having a teamwork mindset is key.  We acknowledge when one person may be contributing more than the other at a certain period in time.  When this occurs the other person reciprocates down the road.

Having great communication about financial situations is crucial when managing separately.  We inform one another of large costs approaching.  Additionally, there are frequent discussions of our financial goals.

Everyone's situation is different.  How do you and your significant other manage finances?

It is crazy to think that it has been two months since we have welcomed our newest family member.  This is our second child and it has been a great experience.  Our family members love watching our oldest take pride in becoming a big sister.  My wife and I have thoroughly enjoyed the cuddles from the little one. We are thriving at being new parents again. This little one came because of amazing healthcare workers who helped with the delivery. Subsequently, this amazing experience does come with childbirth costs.

The cost to have a precious little one in America can be shocking.  In fact, it is probably one of the most costly healthcare expenses a family can experience.  For this reason, some families do not even think that it is financially feasible to have children.  Families are paying thousands in out of pocket costs, even with employer-sponsored health care insurance plans.  As a matter of fact, America has the 2nd highest average annual out-of-pocket medical expenses in the world.

Anyone who is expecting is probably wondering how much the childbirth costs will actually be.  There are a slew of factors that cause medical bills to vary. One of those factors is the level of insurance an individual has.  The level of insurance directly relates to your annual deductible amount.  After the deductible has been reached, the family will pay a percentage of the remaining healthcare bills for the year.

Another factor to take into consideration are the varying hospital charges. The variance in costs can be a lot to take in. I recommended researching the average cost of childbirth for the state you plan to deliver in.  The next few paragraphs will share how my family financially planned for the childbirth costs in our state.  I will also provide actual costs received for the delivery of our little lady.

Financially Planning for Childbirth Costs:

It started out as another day at work when my wife called me.  She asked that I come home early from work so she could tell me something. We met me in our mud room as soon as I walked in.  As I waited for the news she handed me a pregnancy test.  The test indicated that she was pregnant with our second child.  I hugged her and immediately said, "You're welcome!"

We were looking forward to the newest member of our family.  It was extremely exciting for our first born to become a big sister.  It took a couple of days for the initial excitement to settle. After the initial excitement settled, I researched and evaluated the average cost of having a baby.  I received numerous answers through reliable web sources.  Provided that it is a healthy birth, the range appeared to be between $3,000 to $5,000. This cost was with a high-deductible health insurance plan.

This significant amount did cause some dismay. However, it was our second child so we knew what to expect.  I went into the budget step of my money management workflow.  I wanted to ensure that we could pay for the upcoming healthcare bills.  In order to fully cover the costs, I had to increase our Health Savings Account (HSA) monthly contribution amount.  Accordingly, I started contributing enough to max out the HSA by the end of the year.  My HSA contributions should have been increased years ago.  This provided me with motivation to change my contribution amount.  No one should be stressed about the finances during this delightful time in life.

The 2020 contribution amount for an individual HSA is $3,550 and is $7,100 for a family. Therefore, it would take a year to have enough saved in the account to cover the birthing costs.   According to Lively's 2019 spend report, 96% of Americans spend all of their annual contributions within the same year.  You can invest the contributions if you find yourself in the other 4%.

Actual Birthing Costs

The party of 4 commenced at 8:30AM on a March 2020 morning.  Our little 6 lb 14 oz baby arrived. Finally, we were complete as a family.

How Bills are Presented:

A couple months (and numerous dirty diapers) later we received all of the bills for the childbirth.  The costs came in the mail on a Explanation of Benefits (EOB) from our insurance company.  Explanation of Benefits are detailed cost breakdowns for each patient (momma and baby).  They showed the following:

1. The total "usual" charges (same fee offered to everyone)
2. What our insurance company paid
3. What we need to pay out-of-pocket (from our HSA account)
4. The Adjusted Amount (amount written off by healthcare provider)

How Insurance Covers:

I am sure you all are wondering what the heck is an adjusted amount.  An adjusted amount is a pre-agreed upon amount that is written off.  Insurance companies have contracts in place with their in-network healthcare providers.  These contracts document previously agreed upon amounts of money that their client and they will pay for a healthcare service.

Contrary, if your healthcare provider does not have a contract with your insurance company (a.k.a. out-of-network), they are NOT obligated to write off the difference between what the insurance company approves for payment and what the standard childbirth charges are. Therefore, you may be liable for the differences that are not written off by your healthcare provider.

A provider has to show the total "usual" amount on all EOBs, as they are required to by Federal Law. This helps prevent insurance fraud.  Next, I will share the EOBs by each patient (momma and baby):

Momma's Stay:

Total "Usual" Amount: $26,896

Insurance Paid:  $4,867

Patient Out-of-Pocket: $2,277

Adjusted amount:  $19,752

Baby's Stay:

Total "Usual" Amount: $8,462

Insurance Paid:  $6,417

Patient Out-of-Pocket:  $714

Adjusted Amount:  $1,331

Actual Costs Summary:

To summarize, we spent 3 days in the hospital.  This included the delivery day and two recovery days.  The total costs, for both momma and baby, were $2,991.

There are some considerations to evaluate with this total cost.  The first, this was an overall healthy and natural birth.  The second, these were only childbirth costs.  There are additional healthcare service charges leading up to delivery day.  The final consideration is that we had some previous medical services throughout the year.  Consequently, the result of us meeting our deductible amount at the point of delivery.

Our annual deductible amount is $1,500.  Once our deductible was met, we covered 10% of the allowed amount. The allowed amount is an amount an insurance company will pay for a covered healthcare service.

In Conclusion:

In conclusion, preparing your finances prior to having a baby is key.  Therefore, adjusting all budgets to contribute more towards the HSA account.  The HSA account should have a minimum amount to cover each state's average childbirth costs.  Most importantly, be aware of the varying costs for additional medical services.  Finally, a healthy financial position will allow you to focus on what really matters.