As a couple, you’ve gone halfsies on many a meal, saved for trips together, and gifted joint presents. So now that you’re ready to take the next step in your relationship and move in together, splitting your shared expenses should be a cinch, right? Not so fast. There are a few intricacies and to consider when sharing household finances. In our next installment of the Love & Money series, here’s how to go about splitting bills when you’re partnered:
Decide on a System
First, agree on an approach that you both feel most comfortable with. Consider the following methods:
Separate Accounts: You handle your money completely on your own, and devise a separate system to pay joint bills. The obvious advantage to this is that you have more control over your money. If you and your significant other have drastically different money management styles, this method might be the best to start with.
You can test the waters by saving for a trip or a joint wedding gift. If things go well, you might consider also opening a joint account for shared expenses.
Joint Account: You pool your money together and tap into your one joint account to handle all your bills and to save for any shared goals.
If you’re going this route, set some ground rules. Do you need to have a discussion before buying certain types of items, or for purchases that cost more than a certain amount? Having a joint account will require more communication and a clear setting of boundaries. Otherwise, it could lead to resentment, financial infidelity (where one partner is opening secret accounts or making discreet purchases), or other acts of betrayal.
Separate and Joint Accounts: You open a joint account to pay for bills and any shared goals. You also have separate accounts to use for whatever you please.
Figure out what works best for you, whether you want to combine finances, keep them separate, or do both, says financial coach Gerald Zeigler. Whatever you do, establish full transparency, especially if you’re married. “If you’re not married, then establish boundaries, and determine which goals you’ll be working toward together,” says Zeigler.
There’s no right, wrong, or best way. Just like you aren’t a more unified couple if you wear matching outfits while on vacation, you aren’t a “better” or “closer” couple merely because you only have a joint account.
What it boils down to are individual preferences. I personally can’t imagine ever only having a joint account with a partner. I’m quite rigorous in my money management, and I don’t need anyone I couple with to be equally so. Plus, we both need ample space to make our own spending choices. And remember: You can always switch it up or make changes as you see fit.
Divide and Conquer
Once you’ve determined which approach to accounts is best for you and your partner, you’ll want to get into the nitty-gritty and figure out how to divvy up the bills. Will you be splitting all the bills? What about pet care for your partner’s pooch or feline? And does that go for any existing expenses you had before you started splitting bills, such as car insurance payments?
Consider a typical household expense, such as internet. If one of you works from home, should that person cover that bill? No question should go unanswered. Take time to talk things through. It’s important to establish clear rules and expectations from the get-go.
If you and your partner bring in different amounts of money, consider proportional splitting, recommends Tina Parcell, a financial coach of Advising Well. For instance, if your income is 60-40, split the bills as such. Do you each earn the same amount? Then divvy up the bills evenly.
And if one partner brings in a steady paycheck while the other has variable income (i.e., is a freelancer), then consider designating the partner with the steady income to handle the main expenses, such as rent and bills. The other partner is responsible for covering discretionary expenses, such as groceries, household items, and bills that are paid in installments throughout the year, like insurance.
Designate a Household CFO
When I was in college, we designated one of our roomies to be the household CFO. We each were responsible for handling certain bills, and the CFO did basic math to figure out how much was owed. Having the one who was most financially savvy (she was a business major) handle our bills prevented confusion and ensured we paid all our bills on time.
Let’s say you and your partner decide to each handle certain bills instead of having one person take care of all of them. In that case, you still might want to designate a household CFO to make sure the bills are all paid and that you’re on track with your spending.
Consider a Joint Emergency Fund
When you’re splitting funds, your financial situations affect one another more directly. It’s one thing when your partner is temporarily underemployed and you can’t go out to fancy dinners as often, but another when their circumstances mean you won’t be able to cover your rent.
As my partner and I are both self-employed, it’s scary to think that our lean months should ever coincide. To allay potential stress, consider creating a joint emergency fund that’s intended to cover your shared living expenses. Figure out a target amount you’d like tucked away. If you ever need to tap into it, talk to your partner about who is responsible for topping it off, then figure out a means to stay accountable.
Honor Your Money Management Style
This goes for relationships in general, but if you feel like you’re compromising in any way just to please your partner, chances are that it will lead to stress and resentment. I find that it’s important to be honest and to honor what works best for each of you. Instead of trying to change someone, which usually has a success rate of zero, come up with a creative solution that takes into account your respective needs and ways of being.
Your partnership is akin to a delicate dance. You’ll need to be sensitive to each other’s needs and pressure points, and your household finances are an extension of that. By communicating as necessary and having a game plan in place, you’ll be able to devise an approach to splitting the bills that is perfectly tailored to your relationship.
Jackie Lam is a personal finance writer. Her work has appeared in Investopedia, Magnify Money and The Bold Italic, and she’s been featured in Money, Kiplinger, Forbes and Woman’s Day. She runs Cheapsters.org, a blog to help freelancers and artists with their money, and to balance their passion projects and careers.