How To Split Finances When Living Together.
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Merging your life includes your finances, this is how to split finances when living together.
To successfully split your finances when living together you’ll need a budget.
Budgeting takes some effort and work when you’re managing your own money, never mind when there’s two of you.
In our relationship, we took the time to discuss and agree on the approach that was right for us to merge and plan our finances together.
Over time our approach to finances has taken its own shape and grown into something that is unique to our situation.
The methods below are a good starting point to split your finances when living together.
Table of Contents
Budgeting As A Couple
Budgeting as a couple is a must when living together.
A budget is about directing your money, controlling your outgoings and cutting down unnecessary expenses.
But it’s also about planning for your financial future.
The way in which you split your finances when living together will heavily influence your relationship.
Of course it would, money is such an emotional part of our lives!
There is no right or wrong, but what is right for your relationship.
How To Split Finances When Living Together
The question most couples ask is whether to have joint accounts.
For me the joint account is really a discussion to have after choosing your method of budgeting.
My question to you is; does having a joint account fit with your way of budgeting as a couple?
So before you start discussing accounts, lets consider how you could split your finances with your partner.
Here are 3 common ways in which you can split your finances when living together.
Split your Finances using the 50/50 Split
The first method is to split your living expenses 50/50.
Take the total monthly amount of your bills and outgoings, divide it by 2, and each of you contributes your share.
Let’s say Kuda and Stacey are moving in together.
Kuda earns £2,000 per month, Stacey earns £3,000 per month, and their living expenses add up to £2,000 per month
The 50/50 split means they each put in £1,000 towards their bills, and keep the remainder to themselves.
Why choose this 50/50 split method
Each person is pulling an equal amount of weight towards your lifestyle.
This avoids a situation where one pays for everything whilst the other assumes little/no responsibility.
The one who earns the least doesn’t feel dependent on the higher earner.
The higher earner also doesn’t feel like the lower earner is financially dependent on them.
What to watch out for with the 50/50 split method
Since the only focus is splitting shared bills alone, it can have a roommate feel to it.
This can work for some couples but for others it can negatively impact their ability to work together as a team with money.
Stacey, being the higher earner, will have more disposable income after the bills are paid compared to Kuda.
This could result in Stacey having a more lavish lifestyle plus being able to save and invest more than Kuda.
On the other hand, Kuda may end up becoming jealous of the difference in income when he sees Stacey having a more lavish lifestyle than his.
Ultimately, this method is about both of you pulling equal weight when it comes to paying for your living expenses.
Money can make or break a relationship. Learn how to use money to enhance your love and unity with your partner with the Couples Money Starter Kit Workbook.
Split Your Finances According to Your Income
This approach is similar to the 50/50 split method, however it takes into account your levels of income.
The first step with this is by adding up your income, to get the household income amount.
Then you calculate all your living expenses and get your total amount for your outgoings.
The difference is that you split by proportion to each person’s income.
For Kuda & Stacey their combined household income would be £5,000 per month, with Kuda’s portion being 40% and Stacey’s portion being 60%.
The total for their bills was £2,000 per month, so Kuda would pay 40% (£800) and Stacey would pay 60% (£1,200) towards their shared bills.
Again they each keep the remainder to themselves.
Why choose this split according to income method
Due to the acknowledgement of your income levels, it’s actually fair in the truest meaning of the word.
You’re both pulling equal weight based on your capacity, which in this case is your income.
The lower earner doesn’t feel like they are being overstretched or do more than they can afford.
What to watch out for with the split according to income method
The higher earner could feel as though they are paying for almost everything, especially if the pay gap is wide.
The lower earner may start to feel, or even become, financially dependent on the higher earner for their living expenses.
Joint Money
This approach is different from the previous two and requires a different mindset.
This is where you combine your finances and merge your financial decisions together.
The starting point is similar to the previous approach where you view your income as one combined household income.
The difference is that you disregard the percentages as you don’t see “your money and my money”, but rather it’s “our money”.
Think of this as 100/100.
This approach would mean both Kuda and Stacey would not only budget their outgoings together, but also discuss what to do with the remainder.
This method enables you to be financially intimate and develop a solid financial plan for your relationship
Why choose this joint money method
This method is primarily for couples who are committed and are looking to build a future together.
Unlike the other two, the focus here is beyond just shared household bills and groceries.
You’ll also jointly make decisions on your savings, debts and investments.
You’ll also be able to start planning your financial future together.
You could aim to live on one income as a couple and use the other income for financial independence.
This is our preferred method as we’re in a committed relationship.
What to watch out for with the joint money method
If you’re not in a committed relationship yet it may not be suitable for you.
This method requires trust and openness in the relationship to work.
The merging of money is the easiest step, the merging money mindset and financial behaviours is the challenge.
Can end up leaning too much towards needing each other’s permission for expenses that could be autonomous.
Ways to Split Finances When Living Together
Every relationship is different so the way you approach budgeting as a couple will vary.
What works for me may not work for you, and the same vice versa.
The biggest part is figuring out what works for your relationship.
Remember you can tweak these approaches to have a system that fits you.
For instance, you may have the 50/50 approach to your bills, leaving discretionary spending separate whilst having a joint money approach with debts and savings.
Whatever way you’ve decided to manage your money as a couple, respect the decision you’ve made.
Take Action
Discuss with your partner today about what approach feel right for you.
Save this as a reminder of the options you have and use it as a guide on your path.
Check out the Couples Money Workbook and start working together as team with your money.
Share this with your friend, family, or partner and encourage them on their journey
Let us know how you’re getting along by getting in touch with us, we’d love to hear from you
Knowledge is powerless without action
So take action, and take care
Thando