You could be tying the knot or getting into a live-in arrangement but how you are sharing expenses in a relationship could go a long way in deciding how successful the relationship would be in the long run. When you are getting into a relationship and looking at compatibility, after emotional and physical compatibility the most important thing is financial compatibility.
How you handle your finances as a couple determines how peaceful, happy, or fulfilling your relationship will be. Sometimes spouses have high-paying jobs but they often squander away the money they earn because they lack financial planning. And many times in their life they find themselves burdened by debts and mortgages. Sharing expenses in a relationship could be the first step towards financial planning and keeping track of the expenses, credits, liabilities and joint income and expenditure, could help you plan your future better.
How Do Couples Share Expenses?
If two people are living under the same roof and are in a relationship it is inevitable they would share the expenses. But sharing expenses in a relationship is not as simple as it sounds. Many couples say that sharing expenses become the bone of contention.
Sometimes women expect the men to pay more and they want to keep their own income in a savings account. For instance Riti Sivan (name changed) didn’t earn half as much as her husband who was a chartered accountant but they had an understanding that he would run the show and she would save her income. Once they decided to buy a property it was she who took the loan and paid the EMI.
There is no rule book of sharing expenses, every couple does it in their own way. But sharing expenses in a relationship should be a well-communicated, sensibly sorted out decision. It should not be a power game where one person takes the decision and the other person follows. It has to be a joint decision that should be followed diligently.
Psychologist Kavita Panyam says, “When both are working, both can pay according to remuneration and needs. The wife can take care of her personal essential requirements with her money and same for the husband. If the wife is not working then the budget model may work well. As for the 50-50 part, this is a personal decision between couples. The 50-50 part may also figure in all other areas as well should this be agreed upon.”
She further adds, “Having said this, it’s always better for a woman to be financially independent. She should be in a position to cater to her own needs. In the case of women who aren’t working, but have property and liquidity they could use the joint account model and run the home together. While financial independence and decisions are personal to each couple, it’s the bond they share or lack of it that matters in the long run which may play a key role in decision making.”
9 Ways To Share Expenses In A Relationship
So far in this article, we have realized that there is actually no hard and fast rule in sharing the expenses in a relationship. But some basic rules can be definitely followed to ensure that there are no fights and issues around finances in the relationship. If you follow these 9 rules of sharing and spending then you would be in a happier space financially.
1. Paying the rent or property loan
You could be living in a rented home or you could have invested in a house and have to pay the equated monthly installment (EMI) on a home loan. In an article finance whiz Suze Orman tells couples, “Tally up your combined net monthly take-home pay. Then add up all your shared monthly household expenses. The key word here is shared — like mortgage or rent payments, food costs, car payments, and utilities. Leave out your morning latte and gym membership, unless they come on a family plan.”
How do you split bills when one makes more? Orman uses this example to explain the formula: One person makes $3,000 a month and one makes $7,000. The monthly take-home is $10,000.
“Now, let’s say for this example that all the shared expenses — mortgage, utilities, food, car payments, and so on — add up to $3,000. That’s 30 per cent of your take-home pay of $10,000, so each person contributes 30 per cent of their individual monthly pay to the household account. The rest they keep for themselves. And it’s up to you to take control of your remaining cash. Put it in your own checking or savings account.”
So when it comes to the rent or the mortgage having a joint account from where the EMI is paid, is a good idea.
Related Reading: How Much Money Should My Husband Give Me?
2. Have a monthly budget
This is the most important part of sharing expenses in a relationship. You make a budget for the household and you have individual budgets as well for your individual expenses.
Rony Agarwal, an IT professional said, “We had a household budget that we would stick to till the middle of the month. Then we would be overjoyed that we had under spent and would start buying stuff for the kitchen counter, expensive cushion covers or wall clocks thinking we are within the budget only to realize that by the end of the month we were way beyond the budget. “
So there are some spending rules that have to be followed if a couple wants to stick to the budget when they split expenses.
- Sit together and decide how much funds they would allocate to the budget.
- Go through a detailed review of the budget at the beginning of every month.
- Run a check on credit card spending and ensure that even while spending on your credit card you stay within the budget.
- Make sure all the money that you have is accounted for.
- Maintain a tab on your individual budget and spending as well.
3. Have a budget worksheet
Not many people follow this but this is the best way to keep tab on your expenses and split your finances. If you write it all down in a budget worksheet(you could opt for an excel sheet) it’s always there for your reference whenever you need to review and decide.
There might be a month when you have spent more on groceries and less on entertainment. You can re-allocate the funds in your budget in that case.
The budget worksheet can have the following:
- Savings – For emergency, for retirement plans and for education.
- Housing – This section will have mortgages and rent, taxes, insurance premiums and repairs.
- Transportation – Public transport spend and maintenance of private transport.
- Food – Groceries, meat and veggies, eating out.
- Entertainment – Holidays, movies and calling guests over.
- Health – Regular meds, health insurance premium and self-care products.
Different sections of this budget worksheet will be the responsibility of each partner.
4. Keep a tab on your liabilities
Liabilities can include property and car loans, EMIs on a student loan or even annual school fees or that premium on health insurance. If you keep track of your yearly spend on liabilities then you wouldn’t be suddenly caught off guard because the health insurance premium could look like a monstrocity.
A good way to share the expenses in a relationship is to take individual charge of the liabilities. While one partner can be responsible for the health insurance another can take care of the annual fees.
5. Don’t live in denial
This is the coping mechanism of many couples. They don’t want to believe in their monthly and yearly expenses. For instance, if their monthly transportation cost is $500 they would put it down at $300 in the budget and think that they can actually manage in that. They cough up the extra $200 and lose track of that. So in the end they do not get the real picture of their expenses and live in denial that they are managing within a budget.
Avoid a situation like this and have the gumption to call a spade a spade and have a realistic idea of your expenses.
6. Think of changing times
Two people might be earning at one point of time and then one partner might decide to take a break for child rearing and sometimes the other might want to take a break from work and try new things or even want to be a househusband. That is the time you need a back-up plan.
A great way could be to deposit the joint salary in a joint account and then have equal amounts moved to individual accounts. Depending on that person’s spending habits he or she could build up on that account if they want to take a break from work.
Related Reading: 15 Clever Ways Of Saving Money As A Couple
7. Don’t compare earnings
This is a great way of avoiding ego hassles and competition when you are sharing expenses in a relationship. There will be times when one partner might earn more, one might take child care break and not earn anything at all or there might be a need to join a job with a pay cut because of market dynamics.
Always treat your income as a joint income and whoever earns more means he or she is adding to the joint income which is only great for a couple. Kick the ego issues out of the window.
8. Pay from one income, save from another
A great way of sharing the expenses in a relationship is paying all expenses from one person’s paycheck and using the other person’s paycheck for savings and investments.
They obviously would have to have the freedom to be able to spend from their salaries when they want but a good understanding would be needed to stick to this spending rule. But couples who go by this have greater financial compatibility and trust each other a great deal usually.
Related Reading: She Had Financial Independence But NO Freedom
9. Sharing based on trust
This can be only achieved when both partners have an unbelievable understanding and are sure that they are into a happily ever after. Vinay Sahay, a corporate communication director, said in his 20 years of marriage there has never been a method of who paid what. “I could be going off to work and suddenly I remember the electric bill has to be paid, I would just tell my wife to do that. She could also call me up at work and tell me to get home a few thousand from the ATM because we had guests over and we had to make some payments the next day. It has been never yours and mine, it has been always ours, and based on time and convenience, anyone could make the payment.”
Also, Vinay and his wife never had a joint account but they have investments, property, health insurance and the likes. They say they have grown rich together.
Who should pay the bills in a marriage?
There is no particular answer to this question. Couples ideally should do what works for them. That’s what Suze Orman also says. She believes that it’s not always possible to split bills 50-50 because couples don’t earn the exact same amount. “One will earn more and the other will earn less but despite that, if there is a 50-50 splitting of the bills it would lead to frustration and resentment,” said Suze Orman. So according to the income of the respective partners, the splitting could be done 70-30.
Rina Ray, who has been married for 5 years now, says that splitting exact amounts makes her feel like she is living with a roommate. “There are some months I pay the electric bill or the maid’s salary and there are other months my husband pays that. There is no hard and fast rule. Although my salary is a bit more than his but at no point in our relationship, this is considered as a basis for splitting the expenses. At the end of the month, we just ensure we have enough savings in our bank account that’s all.”
So in the end sharing expenses in a relationship is a methodical thing no doubt but it entirely depends on what method works for a couple. Some couples find too much budgeting and tabulation restrictive and even claustrophobic so they keep a basic tab. But they are also successful in growing their money. Guess that’s what you call financial compatibility at the end of the day.