How Should Couples Split Finances? What You Need To Know
Managing your finances as a couple can sometimes be a delicate topic, especially if one earns more than the other.
Relatedly and understandably, I'm often asked how couples should split finances, so I wrote this article to help you resolve that.
The best time to have agreed on how to manage money as a team was yesterday, but if you haven't done so already, then the next best time is now!
Who Should Pay the Bills in a Relationship?
The first step is figuring out who should pay the bills in your relationship. There is no right or wrong way to go about this. Every relationship is different, so whatever works for you as a couple is the best way to go.
If only one of you is working, one natural inclination would be that the earner pays the bills. However, things can get more complicated when one of you works part-time or earns significantly less than the other.
In those cases, it can be tough to decide how much the lower-earning partner should contribute. In any of these situations, it's challenging but essential to ensure that the lower-earning or non-earning partner feels empowered to be an equal partner in financial decision-making.
Remember, you're operating as a unit, as equal partners, regardless of whether your contributions result in a particular paycheck or not.
Should a Man Pay All the Bills?
It's a common myth that a man should pay all the bills. There are no laws stating that only a man should pay the bills. Instead of focusing on gender, focus on the best way splitting expenses makes sense in your relationship.
For example, if your husband stays home and takes care of the kids while you work, it makes financial sense for you to pay the bills, or vice versa. If you both work, you should split bills however you decide between each other it makes sense.
How To Pay Joint Bills
You can choose from a few methodologies:
Everything in One Pot
Some couples decide to go at it as a team, regardless of how much each earns. After all, income earned by either spouse is usually considered marital property.
Couples who choose this route can set up a joint banking account, deposit all of their income into that account, and use it to pay their mortgage and other bills.
Income Split
On the other hand, some couples may choose to split all bills equally or proportionally to their income.
For example, if one partner earns $60k a year and the other $40k, it results in a 60/40 split. In that case, each partner can put their respective 60%/40% of income into a joint checking account for paying joint bills while placing the rest of their income into individual accounts.
One Person Handles It All
Some couples may be more comfortable having one partner (typically the one who earns more) pay the bills, with the other writing a check for their portion.
However, watch out for if this feels too nitpicky and doesn't contribute to the spirit of a shared relationship.
Bill Assignments
Finally, some couples divvy up who will pay specific bills or expenses, for example one person covers rent and utilities, while the other covers food and leisure.
Here watch out for strange incentives, even if unintentional, such as the person who doesn't cover food feeling freer to say "let's go out to eat!"
Factors That Will Impact Splitting Decisions
Every relationship is unique, so it's essential to consider how the following common factors apply to your marriage or partnership, as they can make splitting family finances challenging to talk through.
Money Management Habits, Separately and as a Couple
Joint accounts can present challenges when each partner has very different money management habits. For example, say one of you is very frugal and likes saving every cent, while the other enjoys shopping sprees.
In this case, a shared account can lead to constant arguments unless you are able to communicate effectively, be honest and accountable, and build structures to support this setup.
If you're struggling with this dynamic, then you can consider having some separate accounts and possibly a joint account for your main, joint bills. You may also want to seek out a third party to help you sort this out without leaving lingering resentment or anxiety.
One Partner Makes More Than the Other
If one person makes more than the other, the lower-earning partner may feel upset or think it unfair if they need to contribute equally to the bills.
One way to combat that is to put all of your collective earnings in a joint bank account to pay the bills while allowing each partner to withdraw an equal amount of "fun money" for personal use, i.e., $500/month or any other amount that fits your family budget.
You can also opt for an explicit percentage split, as discussed above, and you can even customize it! Some couples choose a percentage split that feels good, while others choose one that directly corresponds to their income differences.
For example, if Partner 1 makes $120k and Partner 2 makes $80k, then they could do a 60%/40% split, mimicking the ratio between their respective incomes.
No matter what you choose, the keys are that you're both on board, and the decision brings clarity, thereby setting expectations and allowing you to plan ahead, which minimizes both anxiety and arguments.
Prenuptial Agreement
A prenup is a legal contract and a great way to get on the same page before getting married, as it pushes you to acknowledge and discuss all the different facets of your current and future financial lives.
A prenup can also set out how you'd handle finances in the case of a divorce, which can bring you tremendous peace of mind if you know that you'll be taken care of should that happen.
This may also make it feel safer to manage and split your finances as a couple in ways that maximize your combined success!
If you're already married and don't have a prenup, don't fret — you may be able to consider a postnuptial agreement, which can cover many of the same topics, it just is drafted when a couple is already married.
Financial Responsibilities
If one spouse has debt, tuition, or other financial responsibilities, they can carry that burden alone, or their partner can help out. It's important to consult with your tax professional about whether it's better to go solo or tackle things together from financial, legal, and/or tax perspectives.
If you're tackling things together, perhaps one partner pitches in toward the other's tuition so that the latter can further their career, which ideally will benefit the family in the long run.
By the way, if the last sentence sets off any alarm bells in your head…note that a prenup may be drafted to include stipulations about debt, tuition, or other financial responsibilities. That way, neither person is able to "cut and run," i.e., take advantage of the other's support and then leave.
How Should Couples Split Finances?
Let's look at specific financial situations and see how they can impact your relationship's money management plan.
Schedule a free consultation with me to learn more!
Goals
You can have joint or personal goals. An example of a shared goal could be to save up to buy a house, with each partner contributing an equal amount.
On the other hand, if one partner wants to save up to buy a motorcycle, perhaps they should save up for that on their own, from their individual funds/account.
Debts
I recommend approaching debt as a team, whether that includes financial support and/or emotional support in the form of encouragement.
Even if one partner is paying off all their debt themselves, the other partner may pick up a greater portion of the shared bills to help them out. It's all about whatever works for your financial situation and keeps each person feeling good about their partner.
Savings
"Savings" is a broad term and can refer to retirement plans, saving up for vacations, keeping a rainy day fund, and more. It's important to decide how much of your household income each of you will save in proportion to your earnings.
Feel free to have personal savings accounts for personal use and a main joint savings account for household saving goals.
Investments
Similarly, you should be on the same page regarding investments.
Each partner may have different levels of risk tolerance, so talking with an investment advisor or other financial planner who specializes in (or at least has experience with) assisting couples can help you get on the same page.
If approached from a place of partnership, investing can even be a great way to come together and bond over shared goals for the future.
Household Expenses/Bills
Create a budget for all of your daily and weekly expenses, including food and entertainment, gas or public transportation, etc.
It's best to approach this as a team, as figuring out who contributes more to which bill can introduce unnecessary complexity, decision-making, and opportunities for tension.
This is why I recommend figuring out an overall split of shared expenses rather than trying to go item by item, purchase by purchase, etc.
Retirement Planning
You should be saving for the future as a couple — after all, you are probably planning on retiring together!
Before you even meet with your investment advisor or financial advisor, I suggest that you and your partner first discuss what you'd like your retirement to look like.
Where do you want to be, with what standard of living, and what kind of legacy do you want to leave? Then, work with your financial advisor to set up retirement accounts for each of you.
Another thing to ask about and/or look into is how much you are on track to receive from Social Security, which is, in most cases, monthly payments that you receive when you hit retirement age for the remainder of your life.
Emergency Fund
You should have a joint emergency fund that will cover both of your expenses for at least three to six months.
This fund should be liquid, i.e., easily accessible, as you may need quick access in the event that you're using the fund to cover emergencies like medical bills or household maintenance items.
Needs vs. Wants
Finally, decide what is needed and what is wanted. Be flexible enough, though, to realize that a "want" for one person, which they can therefore forgo, may actually be a "need" for the other person.
A small yet important example for many couples is using the AC at night during warmer months — either person might prefer it warmer or cooler, but also it may live for one of you as a preference, whereas the other person can't even sleep without having that warmer or cooler environment!
Tips for Splitting Finances as a Couple
Communication is key: Be open and honest! Don't be afraid to voice concerns.
Allow for fun money, even if you're managing finances jointly: Allowing each partner a side stash may do wonders for your relationship. There's no guilt or resentment for how a person chooses to spend money that is theirs.
Make investing something you do together towards a goal: Approach investing as a team to know that you are jointly prepared for the future.
Ensure that everyone knows what the household bills are: Add up all of your bills each month, including small(er) ones like mobile phone plans or streaming subscriptions.
Adjust for pricing and inflation gaps: When saving for your future together, thinking, say, 20-60 years down the line, remember to consider inflation and how the prices of things like rent, food, etc. may change over time.
Account for children and extended family care if necessary: If you plan on having kids or supporting elderly parents or other family members, then even if those expenses will only come years down the line. Be sure to take them into account when planning for your future.
Forgive for past indiscretions and move on: If you've had past money arguments, try to say what needs to be said and/or let those arguments go so that you can move forward together.
Separate Accounts vs. Joint Accounts in Marriage
You have options when married and splitting money, including separate accounts and joint accounts in marriage.
Check out the pros and cons of having separate accounts.
Pros of Separate Accounts in Marriage
Increased privacy with personal spending.
Reduces anxiety over a partner's spending habits.
Makes splitting expenses much easier.
Cons of Separate Accounts in Marriage
Spouses cannot access the account, even in an emergency, unless properly set up.
Challenging to set and reach shared financial goals.
It can make it feel like a spouse is keeping secrets.
Joint accounts are the most common when married; here are the pros and cons.
Pros of Joint Accounts in Marriage
Open communication regarding financial decisions is much easier.
Provides peace of mind regarding paying bills.
It can bring a couple closer together when setting and reaching financial goals.
Cons of Joint Accounts in Marriage
Hard to pull off surprises or have any privacy.
Both partners are accountable for each person's spending.
The funds can be held accountable for the other partner's debt.
FAQs
I understand how delicate this topic is, and you may still have questions, so here are answers to the most common ones I see on the subject.
Should Marriages Be 50/50 Financially?
It could be if both couples earn decent incomes and are comfortable splitting everything halfway, but there's * no * hard and fast rule about it.
How Should Couples Earning Different Incomes Split Finances?
I recommend using a joint account for paying the bills, with each couple putting in an equivalent percentage of their after-tax income.
You might have some carve-outs here that you adjust the calculations for, i.e., (student) debt payments, but either way, once you've handled those, then the rest of your income can go to your side stashes.
Is It Okay for Married Couples To Keep Finances Separate?
Yes, it's perfectly acceptable for married couples to keep finances separate.
Every couple makes different financial decisions. Some like to keep completely separate accounts, and others like to have joint accounts. Others have a combination of joint and separate accounts. There's no right or wrong way to do it.
What works for you and your spouse to split the monthly income and cover the bills is what is right for you. If that means keeping separate accounts to cover the monthly bills, then that's what works for you.
How Should Unmarried Couples Share Finances?
Sharing finances when you aren't married is riskier because there aren't any laws regarding asset division if you end your relationship. However, if you're living together, it's important to consider the big financial picture and have open communication regarding your finances.
Many unmarried couples have a joint account for the bills, and separate accounts for private spending. This ensures the household expenses are covered, but still provides a level of privacy that you may desire while unmarried.
Splitting Expenses Doesn't Need To Be a Split Decision
Hopefully, you now have a clearer picture of how couples should split finances.
There are pros and cons to having joint bank accounts and keeping money separate, and it's important to discuss with your partner how you want to approach joint finances and get on the same page about spending decisions.
First, sit down and have a (long) chat(s) to get on the same big-picture page (even if some goals are more important for one of you or the other). Be sure to understand your income and expenses and figure out how to achieve the goals at the top of your priority list.
It's often best to talk with someone who can help you facilitate a loving and healthy conversation about these topics, so please feel free to schedule a complimentary Financial Harmony Consultation.
Want to level up your game around money in your relationship? My free quiz will help you learn your Couple’s Money Personality Type AND how you can grow from there!
Adam Kol is The Couples Financial Coach. He helps couples go from financial overwhelm or fighting to clarity, teamwork, and peace of mind.
Adam is a Certified Financial Therapist-I™, Certified Mediator, and Tax Attorney with a Duke Law degree and a Master's in Tax Law from NYU. He is a husband, dad, and musician, as well.
Adam's wisdom has been shared with The Wall Street Journal, the Baltimore Ravens, CNBC, NewsNation, and more.
