If my wife and I wanted to separate most of our finances while sharing certain bills, here’s how I’d do it:
- 1 budget file
- 3 checking accounts (Mark’s, Kate’s, Shared)
- 3 master categories (Mark’s, Kate’s, Shared)
*I say ‘3 checking accounts’ for simplicity, but it’s more accurate to say three types of accounts. Each of us could have credit card and savings accounts in addition to checking.
Applying the Basic Budgeting Workflow to this Framework
The YNAB education team would remind us it all comes down to:
- Entering income.
- Budgeting income.
- Following the budget (and handling overspending).
In our separate finances, joint budget example, it could work like this:
Mark’s and Kate’s paychecks would land in their individual checking accounts. They’d record the transaction in the account register, and the money would become available to budget.
But wait – they’ve separated their personal categories, so Mark (for example) would need to record and budget his entire paycheck before Kate recorded hers. If they record their paychecks at the same time, the ‘Available to Budget’ number will reflect both amounts, and neither Mark nor Kate will know what’s available for his or her personal categories.
In other words, both partners would have to budget new money immediately to stay out of the way of their partner’s next inflow.
After recording his income, Mark would work through his budgeting process, making sure his money does all it needs to before he gets paid again.
Within a ‘Shared’ master category, Mark and Kate could maintain a Category called ‘Shared Available to Budget.’ Mark could put whatever percentage of his paycheck (or flat amount he and Kate had agreed on) into the ‘Shared Available’ category, then wait for Kate to work through her personal budgeting process before they worked through a joint budget session to allocate shared money to shared categories.
Following the Budget (and Handling Overspending)
Mark and Kate use their personal debit/credit cards to spend inside their personal categories, and the joint debit or credit card for their shared bills. Simple enough.
But what about overspending? YNAB gives you two options for how to handle your overspending: you can subtract the overspend from next month’s ‘Available to Budget’ or you can keep it inside the overdrawn category.
In this scenario – joint budget file, separate finances – Mark and Kate would always need to keep their overspending inside the overdrawn category. YNABers call this “pointing the arrow to the right” because that’s how the software indicates the choice.
Let’s summarize before this gets too long, and we can hammer out more of the details in the comments:
Mark and Kate each have a personal checking account as well as one they share.
- They maintain one budget file with three master categories: Mark’s, Kate’s, and Shared.
- They each record and budget their own income individually, including funding the Shared master category.
- When overspending occurs, they “turn the arrow to the right” – keeping the overspend in the category and dealing with it directly (as opposed to reducing the global Available to Budget number).
Jesse’s on a horseback trip with a bunch of scouts somewhere in northern Wyoming at the moment, but we chatted about this scenario on Friday. He agreed with the approach I outlined, but he took it one step further: no separate checking accounts.
“If your budget is your reality,” he reminded me, “the account funding the category is irrelevant.”
So Jesse’s take would be to do what I prescribed above, but not to bother with three checking accounts.
Comments? Questions? Clarifications?
Your Next Step
Budgeting is not restrictive. You won’t be spending less, you’ll be spending right. So what do you have to lose? Except all that debt and stress?