The topic of how to split finances with your significant other has been discussed many times before by other personal finance bloggers and also by myself. There are different ways to split household expenses and one way might work well for one couple and another way may be difficult to work around. Additionally there are other factors to consider, like is someone going to drop their income drastically (e.g. become a stay at home parent), or is there unequal income?
One thing is for sure though, is that it is of utmost importance to have the money talk before the marriage talk. Because once you start wedding planning there is ‘no going back’ (oftentimes anyways) and couples get wrapped up in wedding planning that they forget what is most important- working out the day-to-day marriage after the big celebration.
Here are some ways to split your money with your honey:
1) Split It Right Down the Middle
Splitting everything 50/50 (shelter, groceries, electricity) is common for a lot of couples, and something I did in my last relationship. We split everything in half, it didn’t matter whether I was a student and worked part-time or whether he worked full-time and became a student. We did have a joint account that we also contributed a set amount (same amount) every month. I wrote a piece on why equality in relationships and finances might not work for everyone because it did not work for me. This is probably the easiest method to do with the least amount of calculation.
2) Split Different Expenses
Some people have separate accounts but different expenses are assigned to a particular partner. Just like one partner would do the laundry and the other does the day-to-day cooking, one partner would pay for the rent/ mortgage while the other focused on joint retirement savings or the cable television. I know a few couples who do it like this and they don’t bother with a joint account. However, because they are married and do not have a marriage agreement, everything after marriage is considered joint property anyway.
3) Joint Accounts with Percentage Contribution
As I discussed earlier in a post about the pros and cons of joint accounts, there are many different ways to create a joint account. This is the way that my fiancee (I can’t believe I am using that word!!!) and I plan to do after marriage. We earn different amounts and we plan to contribute X% of our income per month to the joint account (and this percentage can vary depending on our expenses, need for savings e.g. need for RESPs if/when we have children).
4) Joint Account with Allocation of Expected Expenses
Additionally, another way that may be more equitable that a straight 50/50 split is the calculation of the expenses needed for the month. Let’s say for example it costs $3000 a month. Let’s say partner A makes $50,000 a year and partner B makes $100,000 a year. Total income is $150,000. Partner A would pay 1/3 of the $3000 a month and partner B would pay 2/3 of the $3000 a month. This is similar to the above method but not exactly the same.
5) Merge it All Together
Many people (more traditionally) merge it all together in one pot. Some people say it is better because it facilitates communication about your money and promotes teamwork, and others who I spoke to and have gone through a divorce regretted the decision. Like I stated earlier, what works for some might not work for others and it is dependent on the individual couple. If there are different spending habits within the couple, this may be a bit more difficult and cause more conflict.
6) Merge Most of It Together and Take Out Me-Money
Last but not least, an increasingly popular option is to merge it all together in a joint account and take out $100 or $200 of spending money (for example) a month to your personal account. This is a good option for those who want to keep a bit of privacy in case you want to get a present for the other for their birthday and don’t want them to see!
As you note from the above, there are a multitude of ways to split finances with your partner. Which way (1-6) do you use?