Splitting Finances: It’s Easy if You Do It Smart
Being in a mature relationship is all about sharing…or is it? It generally is, until the matter of finances comes up. This topic, according to a recent survey, is where about half of the couples go in separate directions. That is, they prefer to maintain their own bank account, separate from their partner.
If you and your partner find sharing expenses a big hassle, then splitting finances might be just what works best for you. There is no hard and fast rule for everyone, you need to use the method that you both agree on, and one that maintains a harmonious relationship.
How to Get on the Same Page with Your Partner About Money
Two factors, good communication and trust, is extremely important in your relationship. Even with that, pooling all finances and expenses might not work out because of each individuals’ ideas and financial priorities. Here are some of the downsides mentioned in the survey regarding pooling all income and expenses:
- Loss of financial independence – Using a joint checking account or a credit card, can be a big bone of contention if the couple can’t agree on how to spend discretionary funds. No matter how many rules they set to break this down, it’s usually too hard to maintain when the money is coming from an undivided source. Because of this, most couples feel that separate accounts work better.
- Unwelcome scrutiny on purchases – This often happens when one partner is a saver and the other is a spender. Things may be okay for a short time, but after a while, the saver might tire of the stupid impulse purchases the spender makes on Instagram or Amazon. Also, the privacy desired when buying holiday gifts is gone.
- Having different goals on spending – This issue tends to pop up the most. One person may realize that bad debt such as credit cards, needs to get repaid as quickly as possible. The other person isn’t concerned, and then the arguments begin when their spending seems like it is unnecessary. Splitting finances when this happens is generally a good idea.
- Having no back up plan in an emergency – No one actually plans for a divorce, but relationships do go south sometimes. If you’re in a pooled income and expense arrangement, it can be very stressful sorting out each individual’s rightful share. In this event, splitting finances ensures each partner of financial independence if a break-up should occur.
Some ways in splitting finances
Usually, most couples will keep a joint checking account where general expenses like rent, utilities, cable, and food are purchased. In addition, each will maintain a separate checking account for their personal spending. It’s a simple matter to have their banks automatically transfer their share of the monthly expenses.
There are a number of ways to decide how much each person contributes to the joint checking account for their share of the fixed expenses. Basing it on the income level of each person tends to be the most acceptable way of splitting finances.
- Sharing total expenses equally – If both parties are earning about the same amount of money, splitting the total down the middle is the easiest way to calculate, and the fairest. However, there are sometimes circumstances where one person may be in school for an advanced degree, or maybe staying at home to care for a child. Adjustments need to be made accordingly in cases like this.
- Proportional sharing – For couples that have a large difference in income, it usually works best when the joint expenses are shared based on percentage of income. As an example, if one person earns 75% of the total household income, then the other partner would contribute 25%. Say the total expenses are $2,500, so the person earning 75% of the total income would contribute $1,875, and the other $625.
It’s important for every couple to discuss the money topic before they’re married. Creating a budget is also one good way of deciding how the bills are going to be paid. I believe that a full disclosure should be made at that time also. Income and debts, including contingent liabilities, should be on the table for discussion. Goals need to be established too, both short and long term.
Whatever method of sharing you choose, keeping a separate checking account helps in splitting finances.