How can a couple equitably split expenses if each member earns different amounts? Some couples pool all of their money together into a fund that's jointly “ours.” But what if you don't want to do that? Some couples prefer to keep their money separate, even after they're married. They each chip in to pay for certain shared expenses, like the mortgage or rent.
However, splitting up costs by raw dollars — such as splitting a $100 item into $50 increments each — isn’t a sustainable solution if the two people have wildly different salaries. If one partner is making $200,000 a year, while the other is making $20,000 a year, it might be tough to ask each partner to share in the cost of the mortgage.
This can cause tension in relationships when income inequity occurs, but it doesn't have to. Fortunately, there are some solutions that you can tackle that will make the task a bit simpler.
How to Maintain Separate Accounts, But Still Be Fair
If you’re committed to maintaining separate accounts, try this tactic: Split your expenses based on a certain percentage of your income. For example, you might agree that each of you will chip in 35 percent of your income toward housing costs each month.
The higher-earning partner will pay more dollars (in raw money), while the lower-earning partner will pay fewer raw dollars. But both partners will be paying the same percentage of their income. You could do this with every budgeting category — groceries, utilities, veterinary care and more.
One of the keys to this system is to pledge complete honesty up front. Each member of the couple must be very clear about what they earn and what their budget is like before you can determine exactly who owes what each month.
Remember, this advice applies mainly to couples who want to maintain separate accounts and both chip in for shared expenses. That's not the only strategy that couples use to maintain "separate" pools of money. Here are some other ways that couples can keep their finances separate from one another:
- Allowance: Each partner gets an "allowance." This can either be the same amount of money (in raw dollars), or it can be proportional to each person's income. This allows each partner to spend their allowance on whatever they want while maintaining the bulk of their money in a shared pool. This is a particularly helpful strategy if one spouse is a shopaholic while the other tends to be more frugal when it comes to spending.
- Selection: In this scenario, each partner pays for certain bills, while the other pays the remainder of them. For instance, one partner pays the mortgage, while the other partner pays for groceries and car insurance. If one member of the relationship earns more than the other, he or she might elect to pay for the more expensive bills.
- Performance Bonus: One partner focuses on bringing as much money into the relationship as possible, while the other, lower-earning partner focuses on cutting back costs as much as possible. This way, the partner whose time is "worth more" can maximize income, while the lower-paid partner can exercise frugality and help the duo save as much as possible. The partner who focuses on saving money should keep a tally of how much he or she saved each month, and may even receive an "allowance" or a "performance bonus" based on that amount. After all, a penny saved is a penny earned.
- Spousal Salary: What if one partner is a full-time parent, while the other partner works outside of the house, but the two partners want to maintain separate accounts? The partner who earns income could pay a "salary" to the full-time parent. It sounds radical to some people, but there are reports of success stories from happy couples who enjoy maintaining separate accounts, even when one partner focuses on domestic work full-time.
Talk to your partner about these options and any others you might consider and determine which would work best for you as a couple before you make a decision on which to adopt.