It's common for dual-income couples to use one partner's earnings as discretionary. One salary goes towards basic needs and living expenses, and the other goes towards the fun, discretionary stuff, such as restaurants or holidays. It's an easy option for budgeting, but if you're not careful it could also lead to overspending.
Picture: Russell James Smith
This budgeting tactic might be even more common when one partner is a freelancer. Freelancing usually means you deal with an income that varies. It's easier to use the steady income towards important expenses and the variable income towards everything else. However, over at the Wall Street Journal, Certified Financial Planner Danielle Schultz warns:
Over time, this trivialises the freelancer's work, she says. And, if the freelancer has a windfall (a book deal, a big contract) it means the household might, out of habit, use the uptick for bigger toys, she adds.
Of course, every couple is different, and this might not apply to your situation. But it's something to keep in mind, because the danger to overspend here seems subtle. Especially when income is variable, if you're only dedicating that income to luxuries, you might not realise how much you're spending on wants vs needs. It might be more than you realise.
To combat this, Schultz recommends contributing the same percentage of each partner's earnings to all expenses, retirement contributions and savings. A percentage is better than setting a dollar amount, she says, because each person is saving in proportion to how much they earn.
To read more about this topic, head to the link below.
How to Plan Finances when One Spouse Freelances [Wall Street Journal]