Complexity of personal finances

As I've mentioned previously, I'm working to put together a user's manual for our finances. I've stolen liberally from Blueprint for Financial Prosperity in terms of the specific details of the guide. One item in particular that's taken a lot of effort is the development of an account linkage map. Basically, I'm trying to map out in a diagram all of the electronic linkages between our various accounts. Here are some examples of what I'm talking about:

• Which accounts are set up for bill payments to credit cards?


• Which online savings accounts are linked to which chequing accounts?


• Which accounts can be used to contribute to retirement accounts?

At the moment, this map is a bewildering flowchart, with a noodly mass of arrows criss-crossing each other.

As frustrated as I get untangling this mess, however, my list of 25 accounts is nothing compared to My Dollar Plan and her portfolio of 181 financial accounts. That is one seriously pimped system, with fingers in several credit card arbitrage pies. The thought of trying to map out this system in some sort of graphic form makes me a bit nauseous. Kudos to her for making it work, though.

The joys of merging finances

I'm currently on a kick of improving the level of communication between myself and Ms. Loonie regarding personal finance. As part of this, we're looking at combining our finances. Currently, we hold a joint chequing account, our mortgage is a joint account, and Ms. Loonie is an authorized user on one of my credit cards. Aside from that, however, we have separate accounts.

I don't believe that a couple should only hold joint accounts. It's nice, for example, to be able to use our respective credit cards to shop for gifts for each other, without giving away the surprise. However, I absolutely believe that a couple needs to have transparency around their finances. To have one partner hiding debt from the other is a recipe for disaster.

Ms. Loonie and I have decent communication in this area, but it tends to be mostly in the form of short "did you pay the bill?" conversations, just to make sure we're keeping on top of things. Beyond these basic checkpoints, we don't often discuss our respective budgets.

One thing has come up in our renewed discussions around finances: the two of us have different approaches to paying our credit card bills. Although neither of us carries a revolving balance on our cards*, she uses each month's income to pay off the previous month's bill. I, on the other hand, set aside cash every time I make a credit card purchase, and use this accumulated cash to pay the bill when I receive it.

From what I've read, the ideal approach to budgeting is to use last month's income to cover this month's spending. Neither of us is at this point yet; I'm using this month's income, and she's using next month's income. This poses a problem for developing a consolidated budget, and I'm not sure exactly how to tackle this.

One solution, building on yesterday's post, is to build up a cushion of one month's worth of Ms. Loonie's discretionary income, and use this to get "ahead" on her credit card. It won't get us to the one-month-ahead ideal, but it will at least get us in sync with each other. I think we'll try to go this route. Until we get there, I'm not sure how we can put together an effective household budget.

Do any of you have experience with this?

* I currently have most of my revolving debt on a 0% credit card, and the rest is on my line of credit. Our regular-use credit cards are paid in full at the end of the month.

Developing a user's manual

Five Cent Nickel and Blueprint For Financial Prosperity have each set a goal for 2008 to develop a user's manual for their respective financial lives. The idea is to have a consolidated list of the accounts and policies that make up your finances (think retirement, savings, investments, debts, insurance, etc.), along with account numbers, passwords, and instructions on how to access the accounts. This is helpful for anyone, to avoid having to remember your own account information, but is particularly useful in the event that something happens to the household's primary financial manager. I'm the one in our household who manages the finances, and I would really like for Ms. Loonie to have easy access to this information if something happened to me.

Interesting Money wrote in November about several approaches to sharing this information with your spouse, and these posts all have me thinking about exactly how to set this up. I'd like to combine this idea with Big Cajun Man's periodic status reports, to work toward a general goal of improving the financial communication between Ms. Loonie and myself in 2008.