When you’re single, it’s not tough to figure out who pays the bills – it’s just you. But once you’re in a long-term relationship and have shared expenses, how do you manage the household expenses? There are many strategies and each comes with pros and cons. Ultimately, you have to find the method that works best for both of you and your shared financial goals.
Here are 4 ways couples can handle their money:
Split It Up
For some couples, there’s a focus on making things equitable. The basic premise is that he pays for his expenses and she pays for hers. And then for shared expenses, they split them up. For instance, in this scenario, he might pay his student loan bill and she pays for her tuition payments and car loan. And they either split the rent and utilities 50/50 or assign who pays rent and who pays the cable bill. This is an increasingly common way to run household finances and I’ve experienced couples who make this work well. Here are some pros and cons to this approach:
Pros: It’s easy to administer as long as you can keep track of your own income and expenses. And in terms of fairness, this approach works. You also don’t inherit the bills the other person brought into the relationship.
Cons: Splitting the bills is hard if there’s a large disparity in income between the two parties. If she makes $70,000, it may be easy for her to pay her portion but if he earns $24,000 and has a student loan and car payment he’s responsible for, it might be impossible to stretch his salary to cover his expenses and contribute to the shared costs of the household too. Also, if everything is separate, there’s little accountability between the two of you without some intentional conversations about money.
Similar to the previous approach, some couples both contribute to the total financial outgo but take fairness to the next level. In this case, couples share all expenses based on their ability to pay. In other words, couples will calculate the percentage of income each person brings into the house and split the bills based on that figure. For example, if he makes $60,000 and she makes $40,000, he would pay 60% of the household expenses because he makes 60% of their total income.
Pros: If fairness is a value for you, you’ll love this – everyone contributes and everyone pays their fair share. Nobody feels like a freeloader. It also alleviates any problems of drastic income disparities too.
Cons: This can get complicated. On the surface, the math isn’t difficult but the logistic of actually paying the bills or the mess of transferring money from her account to his and vice versa? That can be a headache without a good system in place. And for date nights, keeping track of whose turn it is – or how much he or she spent on the last one – may get confusing too.
Many couples combine their money together and pay all bills out of the common account. There’s no discussion of fairness in this simplified method – it’s all shared, even the bills you brought into the relationship. In practice, you deposit all money into a joint checking or savings account and you pay all bills, regardless of whose name is on the envelope, out of that same account.
Pros: This way offers simplicity for paying bills – only one account to manage. Couples help each other with the shared financial load too. Also, there’s built-in accountability for sticking to a budget. It’s hard to hide superfluous spending when it all comes from the same account. That could lead to better money management.
Cons: Shared finances mean you must have shared goals and align your spending habits to a shared plan to make it work well. That level of communication is tough, particularly if you’re not on the same page financially. Also, if there’s a difference in income level, the person with the larger income could at times resent the other for the seemingly unfair load they carry in the finances.
There is definitely room to combine these methods too. I’ve seen couples combine every aspect of their finances but have separate accounts in addition. They will oftentimes reserve a small amount for each of them to use as their personal stash for blow money. This is also particularly helpful around anniversaries, birthdays, and holidays – the times when you don’t want visibility into one another’s purchases.
Another idea is to embrace what feels natural in most homes – having one person control the separate accounts. This is a small twist on the “split it up” method. Oftentimes, there’s one person in the relationship who is more organized anyway so you can still split the expenses but just have that person control the separate accounts. You get the benefit of simple management (one person) but fairness (both contribute).