Mixing love and money isn’t easy. Couples cite sharing finances is as one of the biggest stressors in a relationship — it even comes out ahead of addiction or emotional abuse.
Why is it so hard? Because differences in income, debt, savings, spending habits, and values can be rife with power struggles. Sometimes on partner is passionate about the family budget, and the other doesn’t care about money at all. Finding common ground can be extremely difficult but balancing a chequebook together doesn’t have to be a battle.
Below are a few different ways to share finances with your partner:
Split everything 50/50.
Many couples choose to split costs halfway down the middle. These means each person contributes equally to fixed and variable expenses, regardless of income. The easiest way to do this is to add up all your regular costs each month, and divided it by two. This is how my husband and I approached our finances when we first moved in together. We opened a joint chequing account together, and each contributed the same amount to it. From that account, we paid all our joint expenses. It worked great for us because our incomes were similar (less than a $10,000 difference in our salaries), so everything felt very fair. In a partnership where one person makes significantly more, splitting all the bills equally can leave the other partner feeling like they are carrying a heavier burden on their paycheques — because they are.
Split everything proportional to income.
In my opinion, this is one of the most fair and equitable ways to split costs when there is a big difference in incomes in a couple. Say one person in a relationship is making $70,000 per year and the other is making $30,000, for a total household income over $100,000 per year. When it comes to splitting bills, the higher earner would cover 70% of the cost because they earn 70% of the household income, whereas the lower earner would cover 30% of the cost because they only make 30% of the income. This means if your rent is $1,500 per month, the higher earner would pay $1,050 (that’s 70% x $1,500) and the lower earner would contribute the remaining $450 each month. This makes perfect sense mathematically, but sometimes people don’t feel like it’s fair because the dollar amount can differ significantly.
Split financial responsibilities.
I know of a few couples that do things this way, but it’s not my favorite. Essentially one person agrees to pay some expenses, such as the mortgage and a car payment, and the other agrees to pay the other expenses, such as utility bills and groceries. Usually this is a shortcut to splitting costs in a way that seems fair consistent with either of the above methods: for example, the higher earning taking on the higher bills. But sometimes it can become very unfair very fast, because the partner taking care of the variable costs can find that those become very high unexpectedly. Suddenly they never know how much they’ll owe each month, whereas their partner is dealing with easy fixed expenses. Nevertheless, this method can still work very well for some couples, just make sure that your estimates are as accurate as possible so there are no surprises.
Don’t split anything; everything goes into — and out of — a single account.
This is a very traditional approach to joint finances, and still one of the most popular choices, particularly after marriage. Both partners deposit their entire paycheques into a joint account, and then all bills, including both joint and individual expenses, are paid from this account. Some couples have “rules” when it comes to personal spending from the joint account, such as they have to tell their partner if they’re making a purchase that exceeds a certain amount, like $100. This approach is awesome for full transparency and sharing with your partner, but is hard to manage if your money personalities are very different.
But there is no “right” way to manage money with your partner
How comfortable you feel sharing finances, and what income and expenses you even want to share, depend entirely on your relationship and your individual personalities. Sometimes super financially savvy people fall in love with people who are terrible with money, and merging finances puts the fiscally responsible person at too much risk. Other times major personality differences or diverging goals make it difficult to share money without one partner feeling like they’re giving up too much. Some people come into relationships with major assets, others come in with major debts.
Sharing finances is NOT easy, and it takes time to find a method that works best for you and your partner, so don’t feel frustrated if you have to try a few different methods over the course of a few months or years before you get it right.
One important thing to remember is circumstances can change with time. It’s not uncommon for one person to support their partner while he or she finishes school. Sometimes people are laid off from their jobs or become temporarily disabled, and need to rely on their partner to carry them through months of years of unemployment. In many cases one parent might decide to work part-time or even leave the workforce entirely to stay home with children.
In other words, how you share finances and the reasons you choose the methods you do can and will change with time, so you should always be flexible to new ways of tackling bills and managing income.
This is how my husband & I manage our money
After tying the knot in October 2015, my husband and I decided to combine all finances in the New Year. Since we’re both good with money and committed to growing our net worth, I thought this would be easy. It wasn’t. It took a surprising amount of planning, strategizing, and bargaining before we finally hacked out a budget that works for both of us.
Believe it or not, I’m the spender in our relationship and my husband is the saver. I’ve always focused on out-earning my spending, and my husband tries never to out-spend his earnings. Both approaches lead to the same end, but they’re opposites, and that made creating a household budget to satisfy both of us challenging.
But we did get it!
Now we put all our income, and take all of our expenses, out of one account. We allocate the same amount to each of our TFSAs and RRSPs, despite differences in income and financial assets. The rationale behind this is simple: now that we’re married, legally everything is split 50/50. In other words, it doesn’t benefit the higher-earning spouse to put more into their personal savings accounts, because at the end of the day, half of it belongs to their partner anyway. We agreed on equal amounts of discretionary spending each month, which means we now transfer a fixed amount out of our joint account and into our individual accounts. This gives each of us the freedom to buy whatever we want, without the other person worrying that we’re going over budget.
Creating a joint budget was challenging, particularly in the wake of an economic recession where job loss always a possibility for my husband. Then I introduced a lot of uncertainty to our household income by leaving my full-time job to pursue my online business. Nevertheless, we hacked a system that works for us right now, and that’s all that matters! This the first time I’ve merged finances with someone else, but I’m thrilled to feel the power of two incomes working towards our shared goals and building a life together.