Q. My wife and I consistently disagree over the household budget. I work; she takes care of the home. We have three kids in school. She pays the bills from a household account that I fund bi-monthly. I save for emergencies and long-term investment. There is never enough money, so I don't save what I should. Whenever I mention setting up a budget, she complains that I don't appreciate what things cost. Help me take the emotion out of this issue. Can you suggest a simple process for us to set up, and live with, a budget?

---H.B., by e-mail


A. First, call it a Spending Plan. It sounds better and feels better to talk about your plans for how you will spend your money. It's also accurate since most income is spent, not saved. Even aggressive savers spend more than they save.

Second, don't be too hard on yourselves. The period of our lives when we are raising children is the greatest period of financial stress that most of us ever face. This happens for a very specific reason: the cost of supporting a family, without any inflation, rises at about 6 to 7 percent a year. Few families have their real earning power increase at that rate. That's also why so many families have two earners.

Now let's get down to the hard stuff.

As long as one spouse tries to dictate what will be spent, you are doomed to living in Controlville. It does not matter that you have the best intentions. What matters is that one person is in control and the other isn't.

Many primary earners believe that they can, and should, determine how all money is spent. It seems logical but marriages don't work on logic. They work on sharing, doing the hard work of setting goals, and on partnering to reach those goals.

My suggestion: find out where the money has been going. This means going through your checkbook register and your credit card statements and assigning expenditures to categories. The easiest way to do this is with a computer program like Quicken or Microsoft Money.

Then talk about where the money is going and whether you could spend less is some areas so that you could spend more in others. With a little luck, one area where you'll agree to 'spend more' is on your savings.


Q. I'm married, 32, and making $120,000 a year. My wife is a homemaker, busy raising our two children (ages 3 years and 3 months). I put 12 percent of my pre-tax income into a company matched 401k. I also dollar-cost average $375 a month of after-tax income into six mutual funds, including a college fund for each child. In addition, we put $55 a month into a combined $750,000 term life insurance policy and keep a simple, interest bearing bank savings account with one paycheck in it at all times for emergencies. We have no debt outside a mortgage ($2,000 a month) and a single car payment of $400 a month. We pay off the credit card each month, no matter what.

On the occasional month where our bills are larger than normal or we have an extraordinary expense, our cash flow can be tight. This year we "hit bottom" in the August heat when, after paying all our bills and putting the $375 into savings, we were down to $12 in the checking account (this lasted 24 hours--- my paycheck hit the next day.)

So my question is--- is this a negative thing? Or is minimizing the amount you keep in a checking account and maximizing what you put into savings the right thing to do? I get depressed in the tight months thinking we have spent too much on our house or car, but my wife is quick to point out that we are always saving, even in the tight months. What do you think?

---P.B., Austin, TX


A. Listen to your wife: it's time to lighten up. You've set goals and you've met them. Don't lose sight of that because it's been difficult once or twice.

Forgo some of your after-tax investing for a few months and you'll have more money in your checking account at all times. Presto! No problem. Remember, you're still earning interest on the checking balance so it's not like you're missing a great opportunity.

Another thing you can do is make a careful examination of your income flow. Then try to move some expenses into the months that have more income. You have, for instance, more cash flow after the employment tax stops coming out of your checks around the end of August. Also, if you're paid every two weeks, there are two months in the year when you receive three paychecks instead of two. In the Burns family, we try to make our annual insurance and real estate tax payments in the 'big cash' months. Finally, in some areas you can smooth out your utility bills by going on a monthly average bill plan. In the Southwest, the combination of the July and August electric and water bills can be deadly.