Why a ‘Mad Money Account’ Could be the Perfect Failsafe

It’s estimated that about 50 percent of all marriages in the United States end in divorce. And of the marriages that end in divorce, it’s estimated that about 20 percent of all marital breakups in some way involve money.

Yes, money can lead to a slew of problems. On the one hand, money isn’t everything. But on the other hand, you can’t live without it — so it’s a necessity. Not surprisingly, a lot of money issues between couples occur over differences in opinion on what’s important to spend on. He, for instance, might want to put a good chunk of disposable income toward a country club membership every month. Conversely, she might want to go on a seasonal shopping trip to bring the latest fashion trends into her closet. Regardless of the situation, it can be difficult to strike a balance between husband and wife, or boyfriend and girlfriend when it comes to money — and that’s why a mad money account may be right for your relationship.

Look, we’re all human. And while we all have financial obligations that we need to take care of each and every month (i.e., the mortgage, utility bills, car payments, etc.), there’s the question of what to do with some of the leftover disposable income from your paycheck. Yes, you should be investing some and saving for your financial future, but what about fun money?

Enter the concept of the mad money account, which is essentially a bucket of money you save toward each paycheck that you can use to spend on whatever you want, whenever you want (just so long as enough is there at the time of the transaction).

There’s no shame, there’s no guilt and there are no questions asked. And what’s really nice about these types of accounts is that they take any splurge spending off the table. So if he wants that country club membership, it’s on the table — just so long as there’s enough money in his mad money bucket. And she’s good to go out on that shopping spree and spend as much as her mad money account warrants. Separate mad money accounts can be a great financial habit for couples to get into for a couple of reasons:

  • It allows couples to have some fun: After marriage and even after children, so many couples sacrifice most of — if not all of — their disposable income for their family. This isn’t always a healthy way to manage money, as couples deserve to treat themselves from time to time too. It’s OK to splurge a little bit, as long as it’s done responsibly.
  • It encourages responsible spending: Many individuals and couples go into debt when they buy something on impulse that they know they cannot afford. With just a swipe of their credit card, they make a promise to themselves to pay it back later. Often times, they don’t, and fall further into credit card debt. Credit card debt isn’t just bad in terms of the amount you’ll pay in interest, but it can also really hamper your credit score, thereby preventing you from qualifying for financing. Mad money accounts encourage responsible saving and responsible spending.
  • It can prevent arguments: No more arguing about if you’re going to pay for the country club membership or the seasonal shopping sprees this year — couples can now have both because each person has their own mad money account that they can put toward such purchases after they accrue enough money. Say goodbye to arguments and say hello to getting what you want in a stress-free, guilt-free way.

Regards,

Ethan Warrick
Editor
Wealth Authority


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