Splitting finances with your partner (marriage partner, common law partner, or partner that you live with) can be a touchy subject within the relationship. However once you move in with each other and take the next step or plunge, Money Under 30 agrees that it’s very important to talk to your significant other about finances and how you plan to split the household expenses.
Every relationship is different, what works for you might not work for other people.
Things can get a bit more complicated when one partner makes much more than the other.
A lot of personal finance bloggers think that splitting things 50/50 is equal, but when you make different amounts and there is income inequality, I don’t think it’s fair.
50/50 is equal but it might not actually be fair
The Financial Post states that 50/50 agreement (splitting everything down to the wire) may be equal but it may not be fair. I think this is especially relevant if there is an income inequality (let’s say where one person is making at least 25% more than the other).
For a dating relationship that makes sense, but once you are living in a household together, resentment might build on the partner that makes the lower income.
When I was living with my ex-boyfriend (we had bought a house together) we also had a joint account but split everything 50/50 even though I did much more in housework and cooking. We put the same amount of money into the joint account on a monthly basis.
When I was going to graduate school and making less than he was, I felt pinched and stressed out about my finances, but we still split 50/50. Doing this made me feel and think that it would be easy for division of assets should the relationship disintegrate. And disintegrate it did, within a year or so everything was divided into two when we broke up.
Instead of splitting things 50/50, here are options to consider when there is income inequality:
splitting options when there is income inequality
- Total Incomes Calculation– If one makes $40,000 and the other makes $120,000 the total is $160,000. So the lower income earner should provide 25% of their income to household expenses and the higher income earner pays for 75% of the household expenses. This is the option Daily Worth suggests.
- Percentage of Pay– The individual making $40,000 and the individual making $120,000 would each pay a certain percentage of their income, say 20% to the joint account. So the lower earner would pay $8000 annually and the higher income earner would pay $24,000 annually into the joint account. Obviously this options leaves a larger amount for the higher income earner for their own use but it’s the same percentage deducted for joint use.
- Everything in One Account- Of course another option is to merge everything, this would also involve a lot of communication and I would assume would be much more common with couples who did not sign a prenuptial agreement. My friends use this option and take out a certain amount each month for their own spending use.
- Everything Separate but Split Expenses- Finally the last option would be for one person to pay the mortgage, and the other person to pay for the hydro bill and the groceries. I know a lot of couples who have this method for their finances.
How Should Married Couples Split Finances
My husband (I’m not going to call him Mr. GYM because he isn’t Gen Y, heck I’m barely on the cusp of Generation Y myself) makes more than I do and has much more in assets saved up. In my opinion, he is financially independent but chooses to continue working to achieve his passive income goals.
We talked about how we would be comfortable splitting finances in a relationship actually even before we were even dating. It was easy and comfortable for us to discuss the subject of money.
How we contribute to the household expenses works for us:
We each have our own accounts, we know how much each other makes, and we have a joint credit card and joint accounts.
We also had a prenuptial agreement done before we got married, which indicates that the assets we have prior to marriage are our own (like our condos) and anything that has both our names in it are joint assets.
Each month, we input our incomes into a joint spreadsheet and deposit a percentage of our active incomes (for now, it doesn’t include passive income like dividends which is from investments) into the joint account on a certain day of the month. This is for joint and household expenses, including:
- Groceries and household goods (this includes my husband’s almost daily Red Bull which I don’t drink, and chocolate and junk foods which he doesn’t tend to eat and I love eating- New York Cheddar Kettle Chips anyone?)
- Eating out together
- Activities we do together, like watching a movie or accommodation and activities while traveling
- Electricity
- Internet
- We have a ‘family car’ an SUV that we purchased with our joint account and the maintenance, gas etc. is from the joint account
- Baby stuff or family stuff including RESP contributions for the little one
- Netflix (up until a few weeks ago I was paying for this myself, and using it the least, now it’s added to the joint expenses)
For larger purchases, like a house, we will take the average contribution over the past 1.5 years (we started this system when we got engaged, to pay for the wedding) and each of us will come up with x% of the total amount needed.
We have our own individual accounts for things like:
- Clothes or other treats for ourselves
- Eating out with friends or family without the company of each other
- Expenses related to our work
Related: End of Life Planning Checklist in Canada
Since we have different investing styles, our investment accounts are managed on our own and he is the portfolio manager for baby GYM’s RESP. I advocated for a portion of baby GYM’s RESP to be passive and therefore invested into index fundswith TD e-series. My husband will research and buy large cap/small cap equities with the rest.
The Child Tax Benefit payments if we get any are lumped into our joint account. Every little bit helps to fight against the Motherhood Penalty in Canada.
This works for us. I’m happy, husband is happy. What works for us might not work for others- every relationship is different. That’s why it’s called personal finance. It’s personal 🙂
The most important thing is to make sure to communicate. Having some separate accounts can help avoid financial infidelity in my opinion.
Readers, do you have income inequality as a couple? How do you split your expenses with your significant other?
GYM is a 30 something millennial interested in achieving financial freedom through disciplined saving, dividend and ETF investing, and living a minimalist lifestyle. Before you go, check out my recommendations page of financial tools I use to save and invest money. Don’t forget to subscribe for blog updates, a free dividend yield spreadsheet, and the free Young Money Bootcamp eCourse.
When we were first married, I made slightly more than my husband. Now he makes way more than I do especially since I don’t work as much. So we definitely have income inequality. However, what has worked for us is putting everything into our joint account and then putting our spending money and gas money (and anything else needed) into our own separate accounts.
As long as both people are happy, I think couples should do whatever works best for them when it comes to combining income (or not) and handling expenses.
@Kim- Thanks for sharing what works for you and your husband. I like how everyone who commented have different approaches and it works for them 🙂 It makes me so happy!
Interesting arrangement – I always like seeing what people do.
We combined most of our accounts. I make about 2x what my wife does, so there’s definitely income disparity, but I’ve always viewed marriage as signing up to become a single financial unit, and so has she. We pay all of our expenses out of shared accounts, we view our separate retirement accounts as combined, and overall treat everything as a team.
As we approach retirement, I wouldn’t be surprised if we scale back to one income if we feel we’re in a position to do so and one of us hates our job. I never understood the “I’m going to retire even though you can’t, because my 401(k) contributions and my savings allow me to…sorry!” mindset that I see some couples have. To me, THAT would build up resentment, no matter the reason. But to each their own 🙂
We do have two separate “fun money” accounts so that my wife can go shopping and I can spend money on video games. Judgement free spending for now…it’ll likely go away in the future but for now it works and helps us stay more aligned with our goals.
No prenup FWIW.
@Dave- Thanks for sharing what you and your wife do with your incomes, sounds like you have something that works well for you both. I agree with the “I’m going to retire even though you can’t” because that makes it not as fun, what’s the point when you can’t enjoy your retirement with your significant other? Although my husband is not going to fund my retirement accounts, since we do the percentage based contributions for our joint accounts, it leaves me a bit more money to be able to fund my retirement accounts. It does make things a bit difficult since I want to achieve my passive income goal and I don’t think I can achieve this going part-time for work in the timespan that I want to. So I’ll have to re-evaluate things year by year.
We really struggled with our income inequality when we were living together but before we got married. When we were first dating, I made more than my husband for several years but never by more yhnan 10-30%. But then my husband started making much more than me (like 50% more) and I was still paying for the mortgage entirely since that’s what our cohabitation agreement said, even though I owned well more than half the condo at that point.
Now, we are in the situation where I have more assets (for now), but he is making 95% of the household income. Our asset difference is small enough now that he could very well eclipse me within two years. We need to fix a clause in our postnup that made the condo growth marital without him having to share his income because that is pretty unfair at this point.
For a while (2016 Q4 and most of 2017), I felt like we should do 50/50 because I had more assets even though I had no income. The problem with that is that I have so little liquid assets (my net worth is only 3% cash despite being almost seven figures…) that that quickly made me feel broke. So now we are doing an income ish based split. With where my husband’s income is, we will probably keep doing that until I can cover my personal expenses each month, have money to save and contribute to the joint account. We’ve been doing a lot of re-negotiating what is household vs personal spending too. One question we are asking now is “Would [husband] pay for this by himself?” since the household spending is all by him and I think it’s helping us be a bit more frugal right now. Like we are going to road trip to a wedding next summer we would have otherwise flown to and take the bus more than Car2go.
I do think though that long term (i.e. within five years), we will probably combine everything. We are similar in ages, have similar investing strategies (he does less bonds than I do, but we both do 50/50 US/international Vanguard index funds), and we really want to have a team philosophy long term. Plus, even though we didn’t start dating in college, we did meet in college and the primary difference in our net worths was the fact that my parents paid for my undergrad vs he paid for his with student loans. We are just both really protective of our money still 😉
Ack sorry for my novel comment haha! 🙂
@Leigh- No, thank you for your novel comment! If you are planning to combine everything in five years, will your post-nup say that everything you had before marriage is still yours and everything together post marriage that is appreciated would be shared in the unlikely event of divorce?
Lol, I like the term ‘eclipse’. I think what you have now sounds fair, it would be difficult paying 50/50 even though you have more assets but not more liquid assets, because you have little cash flow at the moment.
Well, it sounds like you and your husband have similar investing strategies, because if I remember correctly, you got him interested in investing and saving!! 🙂
One of our current thoughts is to combine everything when our net worths are equal, so it wouldn’t matter so much the numbers. I want to make sure that however we structure things, I get first dibs on keeping the condo and that it is feasible for me to buy him out. When I mentioned this, he laughed and said it would be really weird for him to stay in the condo since I had lived here for several years before he did.
@Leigh- You two are so great thinking about worst case scenarios! Hah yes that would not be very nice if he wanted to keep the condo, perhaps out of spite!
We spent so many hours discussing what would happen if they condo value went DOWN by a huge chunk, but forgot to discuss it going up by a huge chunk 😛 haha.
@Leigh- Never a bad problem to have! 🙂
My husband and I used to split everything 50/50. I estimated our expenses (including kids RESP) and we would deposit the same amount each month in our joint account. Everything else was ours to spend whomever we wanted. When one of us didn’t earn as much because of mat leave or shortage of work, the other one would make up for it. It was a partnership and it worked for us. I could never just have one account .
@Caroline- That’s nice- sounds fair- it would be hard to do 50/50 when one wasn’t bringing in as much. Did you and your husband have similar incomes?
We did for a long time. He had his own construction business so his income would fluctuate a lot. We would always backup each other as needed. It was what worked for us.
@Caroline- Thanks for sharing, Caroline!
Let’s see if my comment goes through! When my husband decided to move in together we created a spending plan based on each person’s current consumption. He does make more money than me, so 50/50 didn’t seem totally fair for us. Plus, he had two cats he bought beore me, so he’s solely responsible for their costs. I feel like I’m the only super selfish one on this thread!
@The Luxe Strategist- So happy your comment went through! No, not selfish, equitable! Hah, yes I have a dog too prior to my marriage (oh gosh an expensive one at that) and I am solely responsible for his costs. How are the cats doing with their new stepmom? 😉
@Gabe- Looking forward to your post! That’s great that you haven’t fought about money even though you may have different money values, because we all know that’s one of the top reasons for marital discord!
Since we have been married, we both make about the same income and thus it made sense for us to have a 50/50 split. We have a joint account where use it to pay for our expenses and deposit our checks. We have no quarrels about this arrangement and probably won’t until or if one makes significantly more than the other.
Mother with Cents has discussed, however, about possibly being a stay-at-home mom down the line when Baby with Cents is in grade and I will solely bring in the income. But we will cross that bridge if that comes about and discuss about possible adjustments.
@Kris- Another great arrangement! When Mother with Cents was on maternity leave (for 12 weeks I think, in the US), was there an employer top up? If not, what did you do about the 50/50 split at this time (e.g. did she have similar income at the time?).
Yeah your correct GYM. Mother with Cents had a 12 week maternity leave and she did get a top up from her company where they would pay the remaining amount that the state did pay not for the leave. I believe it was around 60% the state paid for the leave from what she earned and her company paid the remaining 40% . So there wasn’t any drop off in income during that time.
@Kris- Oh that’s nice that she had a top up to equal her full pay- that’s less money to save for, when one is deciding to have a family. I haven’t had a drop in income yet either but will in the latter 6 months of my leave.
Your way sounds much more civilized. For me, everything belongs to me and I have control over daily things. Investments are 60% power to my decision and since there’s only 2 of us, it’s usually my decision. But I’m a fair person 🙂 so I try to keep it equal…even tho he brings in a lot more than I ever will. I’m still the boss!!
@Lily- Haha! Wow Jared married well!! I’m sure he’s happy with the 60% decision making since you seem to be doing very well with your investments together!
Ther is income inequality in our relationship, but it doesn’t affect my money management habit at all. To me, the family finance is viewed as one. What’s my money is her money and what’s her money is her money.
Okay, joking aside. We used to have one spouse pay for the mortgage and the other pay the rest of the bills. Now we pool our money together and pay for our expenses and invest whatever we have extra.
I care more about how our money is being spent rather than who is paying for the expenses and what percentage.
If the worst case scenario happens, the court will split the money 50/50. I have no issue with that.
@Leo- Lol, Leo 🙂 Interesting, I’ve heard of that division as well- where one spouse takes care of mortgage and other takes care of groceries etc.
For us, my bf makes a lot more than I do. before we bought a house, we kept everything separate because we had our own bills to pay. Now that we’re under one roof, we had to figure out who will be paying what. So his paychecks covers the mortgage and I pay for everything else. This works out for us because he is the spender and I am the saver which is why I budget lol.
@Melanie- That sounds good, so you have a lot of control with what you contribute towards the ‘together money’ (except when he goes over his data on his cell phone!).
In my most recent relationship, there was an 8-10-fold difference in income between me and my partner, as I am a physician and she works for a non-profit. Without a lot of discussion, I ended up carrying most of the financial load, and it was a huge source of stress for me. In the future, I definitely intend to talk more openly with my (hopefully next) partner about money!
@Solitary Diner- Wow, yes that’s quite the difference in income. It can definitely be a hard topic to talk about, it’s like the big elephant in the room sometimes (especially when there is an obvious income disparity). And the longer you take without talking about it the bigger the elephant gets (at least for me anyways), so I end up blurting it out awkwardly usually lol.
When you talk about using your monthly active income, what do you do about bonuses? How do those affect your contributions? Or do you two not get bonuses? They account for more than half of my husband’s annual income at this point, which means we really do need to take them into account somehow.
@Leigh- Neither of us get bonuses 🙁 But I think if you take a certain percentage, e.g. 15 or 20% the monthly income (even if income is zero for that month and even if it’s a lot that month), then you have a larger amount in the ‘joint money’ which can be used as a joint emergency fund if needed.
Very interesting ideas in this post. I am married and never has it been this complicated to split up our finances. I am more of a “saver” where she is more of a “spender” she respects my goals and shares in them but we have it set up so she has a much healthier spending budget. Maybe over time this will shift but I think it works great now.
I get happy to see her be able to go get something fun and I feel blessed to be where I am in life so I can’t complain. Down the road it might need to shift but I am old school in thinking that a sit down if it feels out of whack is the best remedy. Very good read though thanks.
Do you think your system is working?
Damn Millennial
@Damn Millennial- I think it works for us so far. My husband says he thinks its fair. Though I find there are things that are questionable- should they be in the household budget or should I be buying it with my personal money? I find more often than not I am buying things with my personal money when I could perhaps put it in the household budget. For example, I bought matcha green tea powder today (it was $27 haha on Amazon) and technically it’s foodstuff and probably should be in household…
My husband and I share all the money and we are fully transparent. This being the case, it didn’t matter that I made more money when I was working or that he makes all the money now. The process has never changed. This is just the reality from being with hubs for 14+ years – we share everything. It only works because we have the same goals.
@HP- Awe, 14 years that’s a long time! I think if I met someone and we were together a long time, before the ‘later in life’ marriage, I would have went the ‘share everything’ route. But since we both had some assets beforehand, we decided to go this route.
I’m amazed at how similarly you and your husband split up your money and how my husband and I split up our money.
Some differences are, though, that he pays his child support, and I have a goal to pay off the house–so a good amount of my money goes towards that.
Like you guys, though, we are happy with it!
@Jaye- Thanks for visiting! Yeah, it’s totally personal how each couple manages their money. I wouldn’t feel comfortable being 100% separate and I wouldn’t feel comfortable being 100% combined.
Hi, my husband and I have shared finances for the last 10 years, just everything combined.
Due to income inequality, we would now like to do a total income calculation which puts us at 63:37. My husband is fine for this to pay for all expenses, but argues it isn’t fair to him (he is the 37) because I have double the saving potential as him. I spend more on personal expenses hence moving to the total income calculation. He wants to do 63:37 for expenses but then split the total savings 50:50. Could you share your thoughts? I see his point but also seems a bit counter for me to pay 63 then also give another 13 to him for his personal expenses.
@Anonymous- Hmm. That’s a tough one! I am the person who makes less in our relationship, and my husband does have much more saving potential (it doesn’t bother me though because he’s contributing more to the expenses/family savings), we take a certain percentage (e.g. 25%) of our gross income and put it into a pot. Maybe that might work better for you rather than splitting the total expenses into proportions?
There is an older artist couple down the street. One of them will work for a year or two to support the family. The other will do art — which, sadly, doesn’t pay well. Then they switch for the next year or two. I don’t know what happens if one of them hits the big time and sells a painting for $10,000,000 🙂
@Anon- That is a brilliant way to do it! Like Peter Lik’s photography of $8 million (was just looking at his stuff the other day).
My spouse has kindly agreed to put haircuts into joint expenses. His costs $20, mine costs $150. When I suggested I stop the coloring and cuts every six weeks, he protested saying he liked it when I looked great. Since he currently has more income than me, he agreed it could go into joint expenses.
@Karena- That’s great that you and your spouse were able to have an open and honest discussion about what works for both of you.
I guess our situation ended up old school as we married young and had kids mid-20’s so I make 100% of the income and pay 100% of the expenses.
The challenge was the discretionary spending for my wife and I ended up giving her an allowance per week with extra to save and splurge from time to time.
She has her own credit card and I don’t see it 😉 and I don’t complain but I see all the Amazon deliveries 😉
We used to have joint everything but since she doesn’t work and for estate planning, it’s not a good thing to have everything joint as she would struggle to get a credit card. So we had to set her up as independent just in case. The estate planning and primarily account locking upon a partner passing away is different per province and region.
@Dividend Earner- That’s a good idea, to have a discretionary spending account and boundaries re: having her own credit card and you not seeing the bill, hah 🙂 It can work well for some who make 100% of the income and other times it can be a power struggle.