Quote:
Originally Posted by James81  But if you save 3 to 6 months salary, very few expenses are going to arise that will destroy all of that in one swoop. |
This is silly. Let's get some sensible definitions and premises:
1) Divide expenses up in two ways. The first split is personal (ie. benefiting one member of the family) vs. family (benefiting more than one). Do this division rationally ie. fixing the car that one family member uses to get to work benefits everyone. In my example, sunglasses were personal, the car was family.
The second split is planned vs. unplanned. In my example sunglasses were planned, the car repair was unplanned.
2) Assume the sum of desired planned expenses (personal and family) is greater than available money - that is, if you had more money, you would spend more. Obviously the way family finances are managed only matters when this is the case since if there was more money than the family could figure out how to spend then any vaguely functional accounting system would work equally well and without strife.
I believe these are reasonable to the point of being axiomatic.
In my example, I showed the inherent tradeoff between a planned individual expense and a surprise family expense. Now, I will agree that if you have "enough" savings, you can handle all surprise expenses en passant and never have it conflict with previous personal expenditures. Almost no one operates this way in my experience because the required savings for something like a big uncovered medical bill are much more than 3-6 months, but it is in theory possible.
However, no matter how much you save, you can never alleviate the issue raised by 2). So there is always a tradeoff between the desire for planned personal expenses and the desire for planned family expenses. If you manage this tradeoff by means of separate accounting, you create exactly the same inefficiencies I described in my example when lower priority personal expenses edge out higher priority family expense, or vice versa. Only this time they can't be alleviated by savings since savings must be retained for unplanned expenses [and no, you can't have arbitrary amounts of "extra" savings for planned expenses without violating 2)].
The point is that this tradeoff never goes away, and separate accounts are a bad way to manage it.