A few days ago I mentioned that we follow the 60-40 Rule and think I should follow up on what that means for us as a newly married duo with student debt and savings goals, and how we came to this rule of ours.
Everybody has their own way of managing money, and when you get married there can certainly be a few growing pains as you figure out how to make two systems work together. Even if you don’t combine finances, you may have goals revolving around savings, budgeting, or paying down debt. Before we combined finances I used to use my credit card for everything and paid it off every month. My paychecks only came once a month, which made my budgeting and spending so much easier to track. I only had to think about managing my money once every 30 days, and paid off my credit card at the end of every month. This habit was so ingrained in me and I brought it with me into our marriage. Initially we started putting everything on our credit card, but quickly realized that this wasn’t going to work for us. Even though I still get paid once a month Mr. M&M gets paid bi-monthly on two separate dates from me, which means we were receiving 3 paychecks over the course of 30 days. Our budgeting became a mess and I grew frustrated that I couldn’t get a quick snapshot of our finances at any given moment. It was then decided that our checking account would be used for all expenses excluding our automatic payments such as the gym, cable, and Netflix that go on the credit card.
Once we had our tracking system down we were able to get a better picture of how much we could save at the end of the month, when we should set up online deposits towards our student debt, and how where our money sinkholes lay. Now, my money personality is more akin to The Mustachians. I don’t remember the last time I went shopping for clothes, would like to avoid spending money on housewares or superfluous items, daydream about cutting our my gym membership, selling our car, living in a studio apartment, and funneling all of our excess cash towards debt repayment all while living happily every after. Mr. M&M has a more even-keeled and realistic view of our finances. He reminds me that we have other goals besides debt repayment such as buying a house and having children, that we are young 30-somethings who want to enjoy their life, and if I want to be a sane debt-free woman in 10 years that I should probably keep my gym membership or the car that gets us around the city. Luckily we balance each other out and can usually agree after minimal discussion on how to spend our money.
The next step after joining our finances and deciding on how to track our money was to determine what we’d do with the excess cash we had at the end of the month. In order to make our finances more streamlined, we decided that whatever cash we had leftover needed to be allocated before we eve had to think about it. Thus, the 60-40 rule was invented. It’s simple in its execution and keeps us from having a discussion at the end of the month revolving around how/what/when/where we should spend our extra dollar bills. If your goal is a quicker debt repayment, or you want to save more for a house or vacation down the line, you could easily adjust the percentages to reflect that. Maybe you live at home with your parents rent-free and can allocate 90% to debt repayment, or maybe you’re a new family and want to set aside some cash for a future down payment so you would adjust your savings to 70% and leave the rest for retirement contributions or a vacation fund.
Coming up with a financial plan has helped both of our stress levels immensely, and keeps us moving forward on our journey towards financial freedom. I’ve said it before – I have no intention of retiring early – but I would love to have more financial freedom than we do now and can’t wait until our massive student loans are paid off. With the 60-40 rule I still have a goal of saving 20% of our income, but now I know what that savings will do after we’ve, well, saved it. It feels like we’re finally in a good groove financially and are making progress towards our goals.