Sharing expenses in relationships

  • Determining how to Split expenses in a relationship can be a difficult issue to solve. Below I’ve explained the methods I feel are most useful depending on your situations.

50/50

This method is one of the most common ways couples deal with expenses. Both individuals keep their individual accounts and individual expenses separate but household expenses are split 50/50. Tally up the cost of household expenses, then split that amount down the middle. Each individual pays half of this cost.  These expenses include rent/mortgage, utilizes, HOA, cable, etc. Each individual is still responsible for their own credit card bill, car payment, and other expenditures that are not related directly to housing. This method works best if both individuals have similar income. If the two incomes are not similar, this method may seem a bit unfair to the individual with the lower-income. For example, a couple with incomes of $5,000 and $2,000 a month, decide to split housing expenses of 1600. The individual making $2,000 will be spending 40% of their income on housing while the other is only spending 16%. The individual spending 40% will have far less spending money, this could lead to a lot of problems down the road.

Assign bills

With this method bills are assigned. Both individuals have their own bank accounts. All the bills are laid out and each bill is assigned to an individual. That individual is responsible for everything associated with that bill. The issue with this method is for most couples there’s typically one large bills and many of the other bills will vary, month to month. So one individual may end up paying far more than the other. Many couples will decide, one person will pay the rent/mortgage and the other person will be responsible for most of the other bills being that they are typically much lower. When deciding to use this method take into account the range of the expense. Track the cost of the expenses. Make sure both individuals are ok with the discrepancy of the assigned bills.

I personally would not recommend this method since it keeps the one individual in the dark on all of the household bills. Both individuals should be aware of what’s going on in the house. With that being said this method could work well if one individual makes significantly less than the other. The individual making more could take on the more expensive bills, while the other is assigned the less expensive ones. Also both individuals should keep in mind, the other doesn’t know anything about their bill.  For this reason open communication about what’s paid and when is important. Just in case something goes wrong.

Proportional income based

With this method takes into account the incomes of both individuals. This method allows both individuals to pay a proportional 50% of the expenses based on their income. This method might be the best if you and your significant other have drastically different spending habits, or drastically different income, and are not ready to combine your finances completely. With this method, if you make 80% of the household income you pay 80% of the expenses. For this method you want to first figure out what percentage of the household income each individual makes. You then assign each individual that percent based on their income. Each individual then contributes that percentage to the monthly expenses.

You can facilitate this process a number of different ways. Each individual can keep their separate account. Simply set up a joint account for both individuals to contribute their percentage to. Then pay bills via that account. In some cases one individual will pay the bills and the other individual reimburses them. I personally think separate accounts and one joint account would be easier for tracking, but if one person gets paid at random intervals having one person pay then be reimbursed can be far more convenient.

The following Example can be used to determine what percentage each individual should pay. Simply replace the example numbers with your real numbers for each individual.

Jon makes $75,000

Sarah makes $50,000

75,000 + 50,000 = 125,000

75,000 / 125,000 = .6  –> (60%)

50000 / 125000 = .4 –>(40%)

Jon pays 60% and Sarah pays 40% for expenses.

One account

This method is hard for many people to do for a variety of reasons. Ideally you only want to consider this method if you are married. If you are not married you should have separate assets. With this method both individuals put all of their money into one account. Both individuals have access to this account. Everything is paid from this account.

This method can cause a lot of issues if both individuals are not in sync financially and communicating effectively. This method also requires a lot of trust. If you and your significant other are not on the same page financially, I would not recommend this method until you are both in sync financially.

Congrats

Congratulations, you’ve hit a big milestone in your relationship. Deciding to live with your significant other is no small task. Don’t rush into it. Make sure you’re ready and discuss how expenses will be split ahead of time. Talking about finances with your significant other can be a tough conversation but don’t avoid it. Having clear and open expectations will help in the long run.