The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Broadway2019 on July 14, 2017, 08:51:22 AM
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My fiance and I are looking to combine our incomes and expenses in August. How do you splt up bills? Is it always 50/50 or income based?
For example, I make $40k more so thought income based would work better even though I am footing more of the bills. Not sure it is fair to split 50/50 because then she would be left with no money while I have plenty.
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we do 50/50, our income split is 45/55. I think it's important to remember you guys are playing for the same team, so do what makes sense, I (nor my SO) would stick to a strict 50/50 expense split if it meant one of us couldn't max out our 401k, for example. Ultimately it's all coming from the same bucket.
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Well....I'm married, it's a communal pot for us. All $$ go into the one account and all $$ go out of the same. We don't pay attention to who brought in or spent what because we are on the same page (the MMM page!) about how we want to manage our money.
Money issues are the leading cause of divorce. That's where I'd sit down and have a chat and a think. If you aren't on the same financial page for the most part and wouldn't trust sharing an account for all incoming and outgoing, do you really want to be married? I also ask this because even if you don't combine finances, if you don't have a pre-nup going into this marriage, it doesn't matter that you didn't fully combine them or you did some other breakout. In the event of divorce, it will be considered that all money earned or debts incurred by either party during the marriage was both "yours". Also compared to my peer group, hubby and I have been married for ages and ages. A lot of others divorced. A lot of it was about the Benjamins.
50/50 and income based does work for some people, and there are people on the forums that it's working well for, which is awesome. MadFientist blog also comes to mind. I'd just caution that I think for many people it won't work and will cause friction. If FIRE is your goal, it's also more advantageous to fully tap both earners power in jointly held accounts.
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We've been consolidating bank accounts and finance stuff since we were married. It's not "mine" or "hers", it's ours. We are generally in agreement with how money should be spent and savings, so this has worked out well for us.
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50/50 and income based does work for some people, and there are people on the forums that it's working well for, which is awesome. MadFientist blog also comes to mind. I'd just caution that I think for many people it won't work and will cause friction. If FIRE is your goal, it's also more advantageous to fully tap both earners power in jointly held accounts.
^^ Good points here
For us, we track expenses both separately and together, I think it's helpful (for us) to look back at who buys what. However, the money is ultimately aggregate, and so should the expenses.
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My husband and I have been married five years, and we maintain (mostly) separate finances and pay bills according to income. He earns a LOT more than me ($175k vs $65k), so by using this method we are both able to max out retirement accounts and save in taxable accounts too.
We use a simple formula: because he makes 73% of our overall income and I make 27%, we pay 73% and 27% of most household bills and shared expenses, respectively.
There is always a lot of debate around split vs. combined finances, and what it might mean about your marriage if you choose not to combine, blah blah. For us, we are both very independent people, so having independent finances works best.
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Each of us keeps $100 (' private fun money') from paychecks and the rest goes into joined account. It works great for us and is very easy.
My husband makes 3x what I make.
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We combine all income and expenses (and have a few shared credit cards), and put savings where makes sense (tax advantaged etc.). Our income is split about 60/40. We are very much on the same page financially (there would be friction in other places too if this weren't the case) and discuss small and big purchases together.
EDIT: The only potential for weirdness is "gifts" for each other, but we do that pretty rarely anyway since we are both adults.
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If you aren't on the same financial page for the most part and wouldn't trust sharing an account for all incoming and outgoing, do you really want to be married?
I'm married as well but don't believe that you're in trouble having separated finances (secret finances is a much different story). We are both higher earners but my income is a multiple higher than DW. The way we worked it out is to sit down, talk through what is important to us and then work our budget backwards. We started with how much needs to be saved for financial goals (retirement, student loans), then how much spending money we need to not feel deprived, then to bills and filled our budgets equally until one of us ran out of income to use. To do this our goals had to be well defined and agreed between us (yay marriage?).
This has ended up with me paying more of the bills but still having significantly more spending money each month as well (I use this spending money to buy financial freedom). The point above about it not mattering if you end up divorced is completely true, and I have no illusions that she'd get half of anything we accumulate.
Neither of us would be happy if we weren't actively involved in our own finances (one big pot that one person looks after). We're also of the mind that incentives and goals are important to growth, so having one large pot of money that has your raises / bonuses / overtime cut in half wouldn't work for us. If either of us earn any side-hustle money we get it to ourselves, as well as if raises occur we can decide how to allot those together (the DW is fervently proud of being independent and paying her way, and I'm in no way going to fight against one of the reasons I married her).
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Just wanted to add- I don't think it says anything about anyone's marriage if 50/50 or %income works for them. I think it takes ALOT of solid communication for that to work without causing one or both parties to be unhappy. So those who are doing it successfully are doing something extremely right.
I think that marriage is a partnership so we are team playing everything, including finances. This works well and I think it's probably better as a default position if neither party feels strongly one way or the other On the independent front.
But you have to have this chat with fiancé. We can give you pointers but we don't have to live it.
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Well....I'm married, it's a communal pot for us. All $$ go into the one account and all $$ go out of the same. We don't pay attention to who brought in or spent what because we are on the same page (the MMM page!) about how we want to manage our money.
Same here. We each take $100/week for whatever, but all family expenses go on credit cards and are paid out of a joint account. My wife has no interest in handling bills and finances, so I take care of all that. When we first met my income was 2.5 times hers, but now I only make around 20% more than she does. Neither of us ever cared about who made what - once we got married, it was all considered 'our' money.
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We do an income based split, which I think is the most fair whenever there's any significant difference in income.
About 80%-90% of our checks go into a joint account that handles mortgage, food, utilities, insurance, savings, etc. and we each keep the remainder for our own discretionary spending. This saves us the conversation about why he needs a 9th guitar pedal or why I need to pay money to run a race. We're both pretty frugal, so these overall small purchases are not any cause for concern and undoubtedly add to our respective happiness. This arrangement saves us from having to even try to keep it "fair" or "even," which would just be exhausting and counterproductive to our domestic bliss :)
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Just went through this recently. We used to split 50/50, but we've both changed jobs (and incomes) over the last 8-10 months.
Now, we split "shared" expenses 55/45 (not an exact split of income, but tilted that way). Things that are shared - mortgage, utilities, groceries, household items (tissues, TP, etc.), any dinners/drinks out that we share, etc. Basically anything we buy that we both will partake in, we count as "shared."
https://adamhagerman.com/share-expenses-living-together/
There are three ways to look at it, imo:
1) 50/50 (easy math, maybe not most effective)
2) Based on % of income
3) A shared pool. All of your income goes into one pot, you pay off your shared expenses, then each of you receives 50% of what's left (at least based on articles of I've read of various ways to split shared expenses)
The reason we do 55/45 is that we're about 57/43 on after-tax income on our paychecks. She's a govt employee so she has different (read: better) pre-tax retirement options than I do. So our goal is to make sure we can both max out our Roth IRAs, cover our portion of the shared expenses, and have roughly the same left over for a) personal expenses and b) other investing. If we did 50/50, she'd be very close to choosing to max out her IRA or paying for her own personal items.
You two have to decide what's best for you. She actually came into the discussion thinking 50/50 would be most fair ("We will eat the same amount, shouldn't we pay the same?"). After going through several examples (we ran 5 scenarios in a spreadsheet) we decided 55/45 would be best for us together.
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All $$ goes into one checking account and all $$ (investments, bills, and cc payments) gets paid out of that checking account. Easy peasy.
We are both maxed on all retirement accounts so those are the same and our brokerage is joint. We each get a separate/equal amount for "guilt-free" spending but it is just a budget category as all the $$ is still in the same pile.
I make about 25K more than Hubs but our paychecks are similar since I can do the Mega-Backdoor Roth 401K thing and he can't.
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There's always debate around this, and I've been on both sides of the debate.
Let's take a step back and ask - what are your partner's long-term goals, what are your goals, and what goals do you share? How does marriage fit into your goals? Is marriage an agreement of exchange of favors, transactions that you'll attempt to balance, until death do you part, or does it mean something else to you?
I've seen some relationships where everything seems to be a transaction. "You owe me this, because I did that." In other relationships, you see more charity. "I know my partner works very hard doing that, so I try to always do this, so they don't to have to worry about it." Also, sometimes you see teamwork. "I really enjoy doing this, and I'm good at it, but my partner is much better at doing that, so they take full responsibility for it."
Now, a marriage doesn't have to be "the unified one" to be successful and mutually beneficial. However, the decisions around money (like all marriage decisions) should be arrived at together by looking at your shared (and individual) goals, and figuring out how to accomplish them. Trying to "split money fairly" is one approach, but to me, it sounds like the best approach if you each have largely independent goals you are working towards, and just want to use the marriage as a way to benefit each individual.
So before you choose an approach, what kind of shared goals do you have, and what kind of marriage do you want to have?
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There's always debate around this, and I've been on both sides of the debate.
Let's take a step back and ask - what are your partner's long-term goals, what are your goals, and what goals do you share? How does marriage fit into your goals? Is marriage an agreement of exchange of favors, transactions that you'll attempt to balance, until death do you part, or does it mean something else to you?
I've seen some relationships where everything seems to be a transaction. "You owe me this, because I did that." In other relationships, you see more charity. "I know my partner works very hard doing that, so I try to always do this, so they don't to have to worry about it." Also, sometimes you see teamwork. "I really enjoy doing this, and I'm good at it, but my partner is much better at doing that, so they take full responsibility for it."
Now, a marriage doesn't have to be "the unified one" to be successful and mutually beneficial. However, the decisions around money (like all marriage decisions) should be arrived at together by looking at your shared (and individual) goals, and figuring out how to accomplish them. Trying to "split money fairly" is one approach, but to me, it sounds like the best approach if you each have largely independent goals you are working towards, and just want to use the marriage as a way to benefit each individual.
So before you choose an approach, what kind of shared goals do you have, and what kind of marriage do you want to have?
This +1000
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Do what makes the most sense to you and what you are comfortable with. Communicate. communicate. communicate. My wife and I have all our income going into one acct(401K's are being maxed out, taken out before funds deposited). All bills are paid from the one pot. When we were paying off debt, we picked the accts that got us the biggest bang for the buck and targeted that first, then the other debts(so my car loan first, then her student loans). It works well for us.
The biggest issue I have seen with the separate finances is dividing the bills fairly. I have seen posts where one partner has all the income and they use their excess for playmoney, and the other partner can barely cover the necessities and can't afford anything extra, that breeds a lot of ill will.
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My SO and I aren't married but have been together for 7 years and live together. He makes about 3x what I do.
We split things in a way that is roughly income based. We don't share bills 25/75, but instead split up what each one is responsible for. For example, he pays the mortgage, and I pay the utilities and groceries. We didn't want to have to be transferring money back and forth all the time and we both trust each other to pay things on time. We have made changes to who pays for what a couple times. Honestly, we went much more by "feel" than by a calculated percentage but it worked out to roughly correspond to our incomes.
We don't really pool our money. We have a joint checking account but don't really use it except in the rare case when we need to give money to each other. (Like, if we go on vacation I usually pay for everything and then he reimburses me for his portion after.) Anything we buy just for ourselves comes out of our own personal money.
We probably keep our money a lot more separate than most, but it works pretty well for us. Neither of us have been married and we were in our mid-thirties when we started dating, so we were both used to doing things our own ways and having a lot of autonomy.
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I've been married four years. My husband makes more money than I do, but I am a teacher with 12 weeks off/year, and if I worked 12 months/year we'd make roughly the same amount.
Our money is a shared pot. We think of ourselves as equal participants in a sort of cottage industry. I never, ever think about who contributes what or who is consuming what. We are a team pulling together to serve the community, our children, and each other in the long term.
Over the years I've learned to think about household chores the same way. I used to get bogged down in a "score keeping" mentality that I think is very common in the marriages I've observed. After a while I got over it. Sometimes I'm lazy and Mr. ETA picks up the slack. Sometimes he's lazy and I step up. Most of the time, we feel like the other one is contributing way more than his/her fair share and tend to thank each other/apologize accordingly.
A much more pleasant way of living, I've found.
The money thing and the chores thing are the two biggies that I've seen that tend to totally screw people up. People don't necessarily get divorced over these things but they sure do tend to have sad, loveless marriages when they get tripped up in these two traps. Politically, I'm not a communist but in marriage I think it works great. I mean, assuming both partners are fundamentally operating in good faith. I know that's not always the case.
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We each have our own checking account where our paychecks are deposited. We manage our comfort levels for reserves in the account individually, with an agreed upon minimum of 2.5k reserve which could pay for our entire household expenses for a month.
We have a joint account for house down payment where we contribute a defined minimum amount per month.
We have a goal for total tax advantage savings with each of us being responsible for contributing to the max for IRA and the rest split along income percentage.
We have assigned bills. I pay rent and renter’s insurance. SO pays groceries (~$350?) and utilities (~$50). We are responsible for our own individual expenses for health, gym, cloths, car insurance, car maintenance etc. Alcohol and dinners out are up in the air who pays, usually SO does. SO pays own student loans (~$240 min). I have none. I tend to pay for vacations, but it’s fluid.
Who is responsible for what has switched as circumstances have changed. I paid for everything minus student loans for 2 months while SO was only working part time. There were 2 months in there were I had a broken ankle/was on bedrest/couldn’t drive and was living with my parents so SO paid everything except my medical bills, including my credit card bill from the previous month because it was sent to our apartment.
Other than a home purchase, no major purchases have come up. Plan is to continue contributing to the house down payment fund (after purchase) at the same rate until we get ~15k which will serve as an e-fund, house maintenance/repair fund, and joint large purchase fund. We have been living together 10 months and I imagine we will move to a more joint structure eventually. I also paid ~80% of wedding expenses at they came up, but some of that meant reducing my house fund contribution by half for a month.
TL;DR-Joint major purchase savings with minimum contribution goals, Individual IRA, split by % income for 401k contributions, pre-defined individual responsibilities for household purchases, completely individual spending otherwise. And we make it up as we go along.
Also income is about 60/40 in my favor.
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...even if you don't combine finances, if you don't have a pre-nup going into this marriage, it doesn't matter that you didn't fully combine them or you did some other breakout. In the event of divorce, it will be considered that all money earned or debts incurred by either party during the marriage was both "yours".
The post above is something everyone needs to consider going into a marriage. If there's a divorce, every dollar invested/saved during the marriage gets split 50/50 regardless of who earns more or who spends more. It's also important to consider that if you're the higher earning spouse you WILL owe your ex alimony unless you can prove that he/she cheated on you. I know most married people don't want to think about these types of things, but it can't hurt to know what would happen to your finances in the event the marriage doesn't work out.
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We have one communal pot. All money and all expenses are joint.
We don't nickel and dime each other. I might roll my eyes at his new camera, or him at yet another box of fabric, but whatever money we have belongs to both of us. We don't have a budget, allowance, envelopes or anything like that.
This probably wouldn't work for everyone but in 13 years, we have not had issues.
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All $$ goes into one checking account and all $$ (investments, bills, and cc payments) gets paid out of that checking account. Easy peasy.
We are both maxed on all retirement accounts so those are the same and our brokerage is joint. We each get a separate/equal amount for "guilt-free" spending but it is just a budget category as all the $$ is still in the same pile.
You just described exactly what we do too :)
We decided on a fair "fun money" monthly allocation together. The "fun money" concept has saved us countless hours of arguments. Before we used to argue about him eating out at work or me going to happy hours. We spent far too much time nitpicking each other's spending habits on rather meaningless stuff that now we don't even discuss. We both have our "allowance" and it can be spent on anything, and that's that. No more money arguments. It's a total life saver of a system for us.
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Dump all your money into one account and pay all expenses from one account. Anything else is a psychological ploy to make you feel better about yourself, and it's basically worthless.
Make your life easy: one account; all income goes in; all expenses go out; trust your spouse and yourself to make smart, discretionary purchases; communicate about any large expenses.
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My husband and I have been married five years, and we maintain (mostly) separate finances and pay bills according to income. He earns a LOT more than me ($175k vs $65k), so by using this method we are both able to max out retirement accounts and save in taxable accounts too.
We use a simple formula: because he makes 73% of our overall income and I make 27%, we pay 73% and 27% of most household bills and shared expenses, respectively.
There is always a lot of debate around split vs. combined finances, and what it might mean about your marriage if you choose not to combine, blah blah. For us, we are both very independent people, so having independent finances works best.
"By using this method we are both able to max out retirement accounts and save in taxable accounts too." Why couldn't you max accounts if you had a combined account?
You wouldn't have to waste time and do BS calculations of percentage of income just to pay an electric bill.
Also, you are only "independent" of one another" psychologically. Legally what's yours is his and what's his is yours.
One account, all goes in, all goes out, life's good.
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We have separate accounts (with each other's names on them) out of laziness. We just kept our pre-marriage accounts & direct deposits in place.
We're living off of less than DH makes & saving part of his income and all of mine.
All of DH's income goes into "his" checking account and he pays all the bills out of that (and directs some to an attached savings account).
All of my income goes into "my" checking account and we invest that money.
We always discuss/agree on large purchases (and sometimes even small ones).
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My husband and I have been married five years, and we maintain (mostly) separate finances and pay bills according to income. He earns a LOT more than me ($175k vs $65k), so by using this method we are both able to max out retirement accounts and save in taxable accounts too.
We use a simple formula: because he makes 73% of our overall income and I make 27%, we pay 73% and 27% of most household bills and shared expenses, respectively.
There is always a lot of debate around split vs. combined finances, and what it might mean about your marriage if you choose not to combine, blah blah. For us, we are both very independent people, so having independent finances works best.
This is what we discussed doing. Splitting our expenses based on % income. And also giving a monthly spending allowance to each others separate account.
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All $$ goes into one checking account and all $$ (investments, bills, and cc payments) gets paid out of that checking account. Easy peasy.
We are both maxed on all retirement accounts so those are the same and our brokerage is joint. We each get a separate/equal amount for "guilt-free" spending but it is just a budget category as all the $$ is still in the same pile.
You just described exactly what we do too :)
We decided on a fair "fun money" monthly allocation together. The "fun money" concept has saved us countless hours of arguments. Before we used to argue about him eating out at work or me going to happy hours. We spent far too much time nitpicking each other's spending habits on rather meaningless stuff that now we don't even discuss. We both have our "allowance" and it can be spent on anything, and that's that. No more money arguments. It's a total life saver of a system for us.
This is exactly our system. We've been doing it for almost 10 years, and it works great. I think it helps that my husband has basically no interest in finance, but he has the password to our Personal Capital account, so he can always check in if he's nervous. I would be very surprised if he ever has.
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We use the communal pot method and couldn't possibly imagine it any other way. We do, however, both have our own side gigs that we use for "fun" money.
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Although we held onto separate accounts for awhile, we did ultimately close them and have everything joint (will be married 9 years next month). We have both our 401k's maxed out. I make about 78% what my husband makes, but both are good salaries. I track every penny that goes in and out and currently pay all bills because he would get lazy about them sometimes and incur a late fee here. Almost every bill is now set up on auto-pay, and I check accounts regularly to make sure nothing is amiss. It works well for us, because we trust that we have the same goal, and I am very detail oriented whereas my husband doesn't want to be bothered with the details, although he does like being able to ask "how much did we spend on x this year vs last" and know that I can answer. I had gone through a divorce before we married so it took me a few years to make the jump to everything being joint. We are MUCH more on top of our finances now that it's more streamlined.
Since we work together we don't have the separate lunch or happy hour sort of thing (well, to be fair, I think the last "happy hour" we attended was a going away affair for someone 3-4 years ago?). If we did work separately I'm not sure how we would track that, but I don't think it would be a big deal since we rarely eat lunch out anymore anyway.
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All $$ goes into one checking account and all $$ (investments, bills, and cc payments) gets paid out of that checking account. Easy peasy.
We are both maxed on all retirement accounts so those are the same and our brokerage is joint. We each get a separate/equal amount for "guilt-free" spending but it is just a budget category as all the $$ is still in the same pile.
You just described exactly what we do too :)
We decided on a fair "fun money" monthly allocation together. The "fun money" concept has saved us countless hours of arguments. Before we used to argue about him eating out at work or me going to happy hours. We spent far too much time nitpicking each other's spending habits on rather meaningless stuff that now we don't even discuss. We both have our "allowance" and it can be spent on anything, and that's that. No more money arguments. It's a total life saver of a system for us.
This is exactly our system. We've been doing it for almost 10 years, and it works great. I think it helps that my husband has basically no interest in finance, but he has the password to our Personal Capital account, so he can always check in if he's nervous. I would be very surprised if he ever has.
We are the same way! I let Hubs know whenever we hit a NW milestone and he is always surprised haha.
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Also, you are only "independent" of one another" psychologically. Legally what's yours is his and what's his is yours.
One account, all goes in, all goes out, life's good.
You are severely underrating being only psychologically independent. There are other reasons to have separate or semi-separate finances as well.
In terms of ease I totally agree 1 account would be nice, and that is what my spouse and I wanted to do originally.
Our financial priorities are aligned, we trust each other, and neither of us feels the other spends excessively. But I track every penny and seldom use cash. I can't stand not knowing where things are going. I want to put money into savings, spend less and optimize, then put more money into savings.
My partner wants to deal mostly in cash and will not track. WILL NOT. Doesn't trust cards, credit or debit, due to identity theft. My partner wants to put money into savings then spend freely without worry, because hey we are meeting and exceeding our savings goals.
Try tracking somebody else's cash when they don't save receipts.
I'll also throw in my partner feels more secure with us having separate accounts in case ID theft drains one account, we would still have the security of another. Paranoid? Maybe, but it's an easy way to alleviate that fear.
Combined finances would drive us crazy. So the psychologically independent piece can be important.
But to the OP try what you think will work. If it doesn't, feel free to change until you get something that works. You only need to be accountable to each other and whatever creates the least stress and hostility is best.
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Another communal pot here, but as a working couple who make roughly the same amount with aligned goals it seemed like a no-brainer for us.
One thing that's really great about combining finances is that you can focus your savings in the most efficient way possible. For example, say one spouse get's thrown into a higher tax bracket. You can choose to prioritize whichever tax advantaged account yields you the largest tax refund. Not that this couldn't be done with separate finances, but it certainly makes it easier.
Another fun thing is watching 2 paycheques come in.
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We just have a joint checking and a savings account. Everything goes there and every expense comes from there. Life is short, why complicate?
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We're married and have basically everything (except retirement accounts) joint. I manage retirement for both of us.
For me, as someone who has a history of "counting" in relationships (meaning I keep track of what other people do for me and make sure I'm not "getting taken advantage of") making everything "ours" has been extremely helpful. I think about our finances way less (in a good way) than I would if we were each kicking in to each bill. I even made my taxable vanguard account (to which nothing has been contributed since we've been together) a joint account.
Starting this fall, I'll make about 2x what DW makes. She's been SAHM for the last 2+ years.
As other folks have said, you can come up with whatever system works for you, but the most important thing is being 1) roughly on the same page and 2) able to compromise.
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We keep all income separate, pay for our own things, and split joint expenses right down the middle. We're big believers in 100% equal relationships, and neither of us has any interest in subsidizing the other. We've both had a variety of incomes over the years, and ave always operated this way out of principle. Sometimes that means one person end up with less money than the other. Tough shit.
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...even if you don't combine finances, if you don't have a pre-nup going into this marriage, it doesn't matter that you didn't fully combine them or you did some other breakout. In the event of divorce, it will be considered that all money earned or debts incurred by either party during the marriage was both "yours".
The post above is something everyone needs to consider going into a marriage. If there's a divorce, every dollar invested/saved during the marriage gets split 50/50 regardless of who earns more or who spends more. It's also important to consider that if you're the higher earning spouse you WILL owe your ex alimony unless you can prove that he/she cheated on you. I know most married people don't want to think about these types of things, but it can't hurt to know what would happen to your finances in the event the marriage doesn't work out.
The division of marital property and whether or not alimony is owed is highly dependent on the laws of the state where the divorce is filed, so these statements are not true for all jurisdictions, but I agree that people should definitely investigate what would likely happen in their jurisdiction in the event of a divorce.
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We started off dividing it by income but as our incomes converged we just started splitting it 50/50 as it seemed silly to do the math on a 55/45 split.
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How do you handle finances with an SO if one of you owns the house and the other doesn't?
I'm not quite sure what is fair in this situation and would love to hear how others approach it.
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BF (of almost 6 years) and I do 50/50 for joint/household expenses, which works out to most of our spending. We have a shared card that buys groceries, household "stuff," gas, (maybe insurance?), plane tickets, hotel rooms, and until recently restaurants*; we also have a joint account that pays the card as well as rent, electric, internet, (maybe insurance?) etc. We contribute equally to the account. Cell phones, clothes/shoes, individual eating out (work lunch, etc), individual travel, all stay in our own accounts/spending.
However, he's perfectly happy toning down his lifestyle to match mine; if when we were apartment hunting he'd insisted he needs pool/dishwasher/additional bedroom/granite countertops/etc (which would have priced us out of my comfort zone), I would have suggested he pay the extra cost of an apartment with those amenities. If he had a fancy food habit where my tastes were extremely simple, we might negotiate how to split that unevenly and fairly (as it stands, we have different but roughly equal food indulgences). Kids would complicate this immensely, especially if childcare hampered one partner's earning potential.
We do plan to get married (he just hasn't formally proposed yet), and when we do we've talked about doing joint pot+individual allotment system.
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How do you handle finances with an SO if one of you owns the house and the other doesn't?
I'm not quite sure what is fair in this situation and would love to hear how others approach it.
I'm not in this situation but I've seen it discussed on the forums, and IMO the fairest/cleanest option was charging rent (or, of course, *not* charging rent and just having them live with you, if that's ok by all). As far as rent amount, I would say it should be market rate (for a room or half the house/condo if small) or what the partner would pay living separately, whichever is less.
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How do you handle finances with an SO if one of you owns the house and the other doesn't?
I'm not quite sure what is fair in this situation and would love to hear how others approach it.
When we were in this situation, the homeowner paid everything related to the house, the other paid groceries and evened up with funding for an IRA. Each paid everything personal, joint spending was negotiated on a case by case. Sometimes covered by the higher earner out of fairness, sometimes covered by the lower earner out of convenience.
Now, we still have separate accounts, but we consider them one pot. We move funds back and forth to maximize savings/minimize fees, rather than to even things up.
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Ownership is split 50/50, payments are based on income including mortgage. We do have separate accounts since I do have a non-incorporated business that she shouldn't be liable for. Separate accounts have been working for us for over 22 years, but we both have rather practical than romantic views on certain aspects of marriage. We do have spreadsheets that record expenses going back all 22 years...
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Another vote for communal pot here. This question comes up on occasion and I can never understand how people do it any other way. With substantially equal incomes (say within 25% of each other), any method seems to work. When the income split is significant, I don't see any way working other than communal pot.
For example if one makes 2x the other (common situation):
Partner #1 = 50k
Partner #2 = 100k
You decide to split expenses according to income (1/3, 2/3). Let's really simplify and say this is after tax and after maxed 401ks, etc. Annual expenses are 100k, leaving 50k per year to be saved, which is great since 401ks are already maxed as well.
Partner #1 owes 33k towards expenses, and has 17k left to invest.
Partner #2 owes 67k towards expenses, and has 33k left to invest.
I can't get past this. Partner#2 is going to reach FI faster and overall have more power in the relationship due to the bigger bank account. Looks like eventual trouble for the marriage. And this is if both partners have the same goals. If one partner decided to blow all the remaining cash, I think the marriage would end up in trouble sooner. This is why I see communal pot as the only long term viable solution that works for any level of income.
Just because we don't ascribe to it personally doesn't mean it won't work. Many of the early retirement bloggers calculate separately and there are many stories around of couples retiring at different times.
The lower earner might have good reasons for wanting to be able to provide for themselves, older couples might be concerned about how their individual kids inherit, the possibilities are quite extensive.
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There's always debate around this, and I've been on both sides of the debate.
Let's take a step back and ask - what are your partner's long-term goals, what are your goals, and what goals do you share? How does marriage fit into your goals? Is marriage an agreement of exchange of favors, transactions that you'll attempt to balance, until death do you part, or does it mean something else to you?
I've seen some relationships where everything seems to be a transaction. "You owe me this, because I did that." In other relationships, you see more charity. "I know my partner works very hard doing that, so I try to always do this, so they don't to have to worry about it." Also, sometimes you see teamwork. "I really enjoy doing this, and I'm good at it, but my partner is much better at doing that, so they take full responsibility for it."
Now, a marriage doesn't have to be "the unified one" to be successful and mutually beneficial. However, the decisions around money (like all marriage decisions) should be arrived at together by looking at your shared (and individual) goals, and figuring out how to accomplish them. Trying to "split money fairly" is one approach, but to me, it sounds like the best approach if you each have largely independent goals you are working towards, and just want to use the marriage as a way to benefit each individual.
So before you choose an approach, what kind of shared goals do you have, and what kind of marriage do you want to have?
Excellent post.
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We do an income based split, which I think is the most fair whenever there's any significant difference in income.
(emphasis mine.)
Well, I'm not so sure about the "most fair" claim.
What if one spouse sacrifices their career prospects for the other's? Example: A military spouse who relocates when their spouse is transferred to a new duty station.
What if one parent drops out of the work force to care for the children? That's not only a short term income hit, it's a long term income hit. Just like saving for retirement EARLY is really important for compounding, that spouse is foregoing compounding on their raises and their network of connections. Should they be penalized in fun money for the rest of their days?
What if one spouse gets ill and can't work or loses their ability to be competitive at work? It's the luck of the draw, there but for the grace of God (or random events in the universe, your preference) go us all. Would you penalize your spouse in those circumstances?
What if one spouse gets injured at the beach protecting the kids or their spouse from a shark? (Don't laugh, my cousin put herself between a shark and her kids. She just got lucky and the shark wandered off.)
My spouse teaches at the university. This gives her a lot of flexibility in dealing with life's dammits that would otherwise require one of us to use one of our precious few vacation days to deal with. Should they not only have to spend their spare time meeting with the electrician, plumber, etc. AND get less spending money for the privilege, too?
Feel free to do what you (both) want when it comes to how you deal with this issue.
I for one would not marry someone who did not consider it one pot of money, indeed OUR pot of money.
(And also be responsible with it, of course.)
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One pot of money for us. Well, several accounts but all joint and equally owned accounts. 13 years ago when we got married he was happy to not have to deal with savings/investing/paying bills anymore.
Added: He makes more money (about 80K more than me) but it's always "our" money. It's the family money to accomplish our goals.
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I think it comes down to what works best for you, and you might not get it right the first (or second) time around. My husband and I have one bank account. All incomes and expenses go in and out of there, but that's not how we started out. It took us 3-4 years to figure out an arrangement that worked best for us.
My parents have a system that makes no sense to anyone but themselves. They have separate bank accounts, and expenses are arbitrarily split. My dad might pay for the power, gas, and water while my mom pays for groceries (but my dad buys groceries too if it's more convenient). My dad buys health insurance for the year, and my mom pays him back in cash monthly for her portion of the premium. One pays for internet; the other pays fo Netflix. Each is responsible for expenses from their own things (vet bills, car insurance or repairs, etc.), but if one is short funds, the other helps out financially. It's seriously bizarre, but it's what they have found works for them.
All this to say, it doesn't matter what way you split the bills as long as you both are satisfied with the arrangement. Communication is key. No sense in someone holding a grudge for something they perceive as unfair.
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We aren't married, so we keep thing separate. We earn the same income so split expenses roughly 50/50. SO owns the house so we tallied up what the mortgage and utilities average out to. I put half of that amount into a brokerage account for the SO. If we break up the money is his. If he were to die, the house would go to his kid and I get the money in the account. Otherwise the account acts as his emergency fund to deal with big household repairs. For non-household expenses, we just take turns paying. It's not exact and we don't keep a strict account or anything...it just sort of works.
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Been with SO just under two years. Since we aren't married, totally separate accounts. I make 2x what he does (but neither amount is high, we're talking 25k and 50k, not 50k and 100k or higher) and our rent and utilities run around 1500 per month, sometimes more sometimes less depending on how much heat/air conditioning we used. He writes me a check for 500 each month and also pays for our subscription services (Playstation Plus and Netflix). As another poster mentioned upthread, I pay more both because I make more and because I was the one who chose to live in an apartment outside of his budget (although it was less about granite counter tops and a pool and more about not wanting to live with rats, cockroaches and two or more roommates, which is what his budget would have gotten. No regrets). I don't nitpick about months when the electric bill is slightly higher as there are other months where it's lower than average, it all balances out. Groceries are split 50/50 and we trade off who pays for date nights. Even though I pay more overall and could whine about what's 'fair,' I keep in mind that we both come out ahead sharing expenses than if we were living on our own and I'm paying way less now than I did when I was single, not to mention being happier. I think that's an important thing to keep in mind when nitpicking over fairness and who pays more: sharing expenses is generally cheaper than living on your own, especially if you picked a fairly frugal partner.
If we get married (and it's looking more and more like it's heading down that road) this will almost certainly change. I much prefer the one pot approach with separate accounts for our own personal effects/gifts and treaties for each other, but since I've already been through one failed engagement I'm way too risk adverse to combine before marriage.
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My husband and I have been married five years, and we maintain (mostly) separate finances and pay bills according to income. He earns a LOT more than me ($175k vs $65k), so by using this method we are both able to max out retirement accounts and save in taxable accounts too.
We use a simple formula: because he makes 73% of our overall income and I make 27%, we pay 73% and 27% of most household bills and shared expenses, respectively.
There is always a lot of debate around split vs. combined finances, and what it might mean about your marriage if you choose not to combine, blah blah. For us, we are both very independent people, so having independent finances works best.
"By using this method we are both able to max out retirement accounts and save in taxable accounts too." Why couldn't you max accounts if you had a combined account?
You wouldn't have to waste time and do BS calculations of percentage of income just to pay an electric bill.
Also, you are only "independent" of one another" psychologically. Legally what's yours is his and what's his is yours.
One account, all goes in, all goes out, life's good.
Because if I had to pay 50% of expenses, I would not be able to max out tax-advantaged retirement savings and still save in a taxable account, too.
The "BS calculations" are really quite simple - we put all shared expenses on shared credit cards. Once a month we go over all expenses and plug relevent numbers into a spreadsheet that does the calculations for us. Then I write him a check for my share.
We are fully aware that in the eyes of the law, everything we have is shared, but the psychological benefits of maintaining some semblance of financial independence are highly valued in our case. The law will only be relevant if we divorce, which we hope and plan to avoid.
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Whatever way you decide, realize that communicating is a lot more important than the methodology you choose.
I married late and had already been established and independent. I think that drove why we kept our "old" accounts. We don't share joint expenses, we just divided up expenses. He takes the car insurance because it's his old insurance company. I take the utility bill. etc etc. Our expenses are very small. Our investments are the more important accounts. As long as we are both following the investment plan, we are good to go.
I make a little more than my husband but he has a military retirement and super cheap health insurance. So, he's probably "worth" more in FIRE.
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We have one bank account that both paychecks flow into. It would be a mess to try and unzip them.
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Married and common potters here. Soon after we married I became the SAHM, so all income was courtesy of DH, for the good of our growing family. He has no interest in finances, so I'm the family CFO. I'd have to press him to make changes necessary to contribute to employer retirement accounts, only because he hated being bothered to do it, but I couldn't do it for him. Once they were set up, I managed them. Eventually I opened Roth IRAs for both of us, after paying off our mortgage. I'm a bit sorry I didn't open one in my name earlier, to even up the split of retirement account balances, if only for tax reasons, but we still view the totals as "ours".
Now I'm working part-time, so he still earns more than me, but he also has access to all the benefits and I don't, so they come out of his paycheck (medical, dental, vision, HSA, 401k). Thus his take home is pitifully small, and mine pays a majority of household bills now. Things change over time, details don't really matter, it's all family money.
We tend to approach things from the viewpoint of what's best for all of us. One year there was a question of claiming DD3 as a dependent or not, and thus who got the AOTC, and who claimed scholarship income as taxable. I ran the numbers both ways, and it was most advantageous on whole to claim DD3 and the credit, but it meant she owed extra tax. I paid the tax bill - it was the cost of gaining a larger total family refund (and parent vs student split of AGI would affect future financial aid).
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I guess our system would be a nightmare to untangle for anyone but us. We didn't plan it that way - we've been together over 20 years, (not married) with each of us having separate accounts.
It worked well and still does, except that last year, we decided to change all our accounts to joint accounts, in case something happened to one of us.
It didn't start out that way, but at present, our system is slanted a bit in my favor - if you were to compare payments made by each of us.
That's because I slashed my fixed expenses and he is resistant to change, so his expenses have crept up.
Eventually he will see reason:)
In reality both incomes are "ours" and all expenses are "ours" with full access by both of us. We discuss big purchases, but we've split up the bill paying between us and even occasionally transfer money between our accounts. We each fund our own savings and investments too.
I could never deal with a partner that "allocates" my pocket money or questions my discretionary spending. He teases me about my jewelry purchases and I don't always agree with his spending on gifts for family and friends, but there has never been any friction due to money.
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It's all mine. :-o
No, really, we married young, we didn't have any money (or debt), I was a SAHM for a long time, and we've always just dumped everything into the same accounts. I pay all the bills. I run any big purchases by dh and if he's not enthusiastic, I rethink it.
He's not a very spendy guy. I complain about his coffee drinking habit, but that's about it. We've been married a long, long time now, and I don't think we've ever argued about money.
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Because if I had to pay 50% of expenses, I would not be able to max out tax-advantaged retirement savings and still save in a taxable account, too.
The "BS calculations" are really quite simple - we put all shared expenses on shared credit cards. Once a month we go over all expenses and plug relevent numbers into a spreadsheet that does the calculations for us. Then I write him a check for my share.
We are fully aware that in the eyes of the law, everything we have is shared, but the psychological benefits of maintaining some semblance of financial independence are highly valued in our case. The law will only be relevant if we divorce, which we hope and plan to avoid.
I respectfully think you're misunderstanding the concept of a "communal pot."
When you have a single pot, all the money is one. There is no, "I pay 50%, my wife pays 50%." It's all just one pot of money, and everything just gets paid from that pot. There are no percentages of anything, because it's just 100% "our" money.
For example, my biweekly paycheck is just $681 because I contribute so much to retirement accounts and our healthcare is through me. That technically wouldn't be enough to pay 50% of the bills, but it doesn't matter, because all the money from both our incomes flows into one account, all the expenses go out of the same account, all the credit cards are linked to that account, etc.
In short, having a "communal pot" has absolutely no negative effect on being able to max contributions to retirement accounts, and as my own example demonstrates, it actually helps both max because it combines the resources of both income earners.
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My husband and I have been married five years, and we maintain (mostly) separate finances and pay bills according to income. He earns a LOT more than me ($175k vs $65k), so by using this method we are both able to max out retirement accounts and save in taxable accounts too.
We use a simple formula: because he makes 73% of our overall income and I make 27%, we pay 73% and 27% of most household bills and shared expenses, respectively.
There is always a lot of debate around split vs. combined finances, and what it might mean about your marriage if you choose not to combine, blah blah. For us, we are both very independent people, so having independent finances works best.
This might be nitpicking (and this isn't directed solely at you, just using your example) - but I don't know if gross pay is the best way to determine how to split shared expenses. This ignores that one person may have a higher effective tax rate, or in some cases may not be eligible for 401k contributions or Roth IRA contributions, etc. If two people set a goal to be able to maximize retirement vehicles (such as 401k), I'd look at after-tax pay and then split based on that percentage. Just my $.02.
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How do you handle finances with an SO if one of you owns the house and the other doesn't?
I'm not quite sure what is fair in this situation and would love to hear how others approach it.
My SO owns our house. The mortgage and deed are in his name only.
I could have paid him rent, but neither of us really liked that dynamic on a purely emotional level.
He pays the mortgage, property taxes, and for any improvements to the house. I pay all the other stuff (utilities, groceries, gym, etc.). It works out well because he hates paying bills, so he's happy that he only has one bill to pay per month. I don't mind paying bills so I don't mind having a bunch of smaller ones. He pays less than if he were living alone, and I pay less than if I were renting an apartment. Dollar-wise, the split ends up being about proportional to our incomes.
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Before we got married, we had a joint account that we contributed to equally, and shared expenses were paid out of that account. Now that we're married everything is joint except retirement accounts. Some people feel that a "fun money" bucket for each spouse makes things work out better. We've never felt the need because we're mostly on the same page about financial stuff. We each spend money on our own frivolous things from time to time, but it's rare enough and in equal enough proportions that it never has become a problem.
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How do you handle finances with an SO if one of you owns the house and the other doesn't?
I'm not quite sure what is fair in this situation and would love to hear how others approach it.
My SO owns our house. The mortgage and deed are in his name only.
I could have paid him rent, but neither of us really liked that dynamic on a purely emotional level.
He pays the mortgage, property taxes, and for any improvements to the house. I pay all the other stuff (utilities, groceries, gym, etc.). It works out well because he hates paying bills, so he's happy that he only has one bill to pay per month. I don't mind paying bills so I don't mind having a bunch of smaller ones. He pays less than if he were living alone, and I pay less than if I were renting an apartment. Dollar-wise, the split ends up being about proportional to our incomes.
I will own the house and it is paid for. I think I'd feel bad asking for "rent", so perhaps a split like yours would be a better option.
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How do you handle finances with an SO if one of you owns the house and the other doesn't?
I'm not quite sure what is fair in this situation and would love to hear how others approach it.
My SO owns our house. The mortgage and deed are in his name only.
I could have paid him rent, but neither of us really liked that dynamic on a purely emotional level.
He pays the mortgage, property taxes, and for any improvements to the house. I pay all the other stuff (utilities, groceries, gym, etc.). It works out well because he hates paying bills, so he's happy that he only has one bill to pay per month. I don't mind paying bills so I don't mind having a bunch of smaller ones. He pays less than if he were living alone, and I pay less than if I were renting an apartment. Dollar-wise, the split ends up being about proportional to our incomes.
He's benefited from you paying all the bills, while his asset has been building equity and possibly increased in market value.
If you break up - do you get any of the home equity? If you're married, there are laws that govern that. If not, it seems like an unfair split since he would walk away with all the equity.
The other option mentioned was to pay rent, which would have had the same result.
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I've been married twice and have done it differently each time:
First marriage: We kept our accounts separate. We paid our bills separately. We split shared expenses evenly (housing, electricity, etc). Now: obviously this marriage didn't work out or there wouldn't have been a second one. And there were multiple issues (and equal blame all around). But we fought about money all the time. This is probably just indicative of other issues. But it really changed my mindset on things. I decided I would not do things that way ever again (if there was an ever again).
Second marriage (22 years and cruising): Everything is community property. If you make a buck, it goes in the joint account. If you spend a buck, it comes from there. We obviously have separate retirement accounts (because legally that's how it works) but neither of us really considers our retirement accounts as separate property. They're all "ours." It does help that in this marriage we were financially on the same page from the very start.
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Regarding only one person owning the house, we bought it when we'd been together less than a year and I have no interest in owning a house ever again, so only SO's name is on it. He pays the entire principal portion of the mortgage, and we split everything else - generally 50/50 but we'll probably change to proportional eventually. It works out to about the same I'd pay to rent a cheap apartment by myself, and way less than what I'd pay to live in a house this size unless I had more than one roommate. So I get a nicer place. He has more extra money to spend or save.
If it had worked out that I'd pay more than I'd pay in rent on my own, we'd have done it differently.
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He's benefited from you paying all the bills, while his asset has been building equity and possibly increased in market value.
If you break up - do you get any of the home equity? If you're married, there are laws that govern that. If not, it seems like an unfair split since he would walk away with all the equity.
No, if we broke up I wouldn't get any of the home equity and honestly don't see why I should. I'm paying less overall now than I would in rent (and less than I paid in rent before we moved in together). It would be a different story if I contributed to the down payment or was paying more than I would living solo. But it works out as a win/win for both of us this way, at least as far as we see it.
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We both work and all of our money effectively goes into one pot. However, we both have some individual items that are in each of our names (bills, credit cards, checking accounts) to maintain credit scores. We each also have a guilt free fun money yearly budget. Overall, it has been fairly straightforward and works well for us.
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I guess it really comes down to communication and what you agree to do.
Ive been married for almost 17 years and lived together 3 before that, and we combined incomes within months of moving in together. Communal pot. Ive been a SAHM for the past 14 years, which was a priority for both of us, and I manage our money. But that is what we both have always wanted, so it works for us.
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Because if I had to pay 50% of expenses, I would not be able to max out tax-advantaged retirement savings and still save in a taxable account, too.
The "BS calculations" are really quite simple - we put all shared expenses on shared credit cards. Once a month we go over all expenses and plug relevent numbers into a spreadsheet that does the calculations for us. Then I write him a check for my share.
We are fully aware that in the eyes of the law, everything we have is shared, but the psychological benefits of maintaining some semblance of financial independence are highly valued in our case. The law will only be relevant if we divorce, which we hope and plan to avoid.
I respectfully think you're misunderstanding the concept of a "communal pot."
When you have a single pot, all the money is one. There is no, "I pay 50%, my wife pays 50%." It's all just one pot of money, and everything just gets paid from that pot. There are no percentages of anything, because it's just 100% "our" money.
For example, my biweekly paycheck is just $681 because I contribute so much to retirement accounts and our healthcare is through me. That technically wouldn't be enough to pay 50% of the bills, but it doesn't matter, because all the money from both our incomes flows into one account, all the expenses go out of the same account, all the credit cards are linked to that account, etc.
In short, having a "communal pot" has absolutely no negative effect on being able to max contributions to retirement accounts, and as my own example demonstrates, it actually helps both max because it combines the resources of both income earners.
Dude, obviously I know what "communal pot" is, since this is how MOST married people do money. Anyone would have to be living under a rock to not understand the concept.
But as I've explained, in OUR relationship, maintaining separate finances and paying bills based on percentage of income works best. Therefore, as the lower-earning spouse, only having to pay 27% of bills means I personally have enough leftover to max out my 401k, IRA, and contribute to a taxable account as well.
It's fine if you disagree, but it almost seems like you're willfully misunderstanding and trying to "mansplain."
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Because if I had to pay 50% of expenses, I would not be able to max out tax-advantaged retirement savings and still save in a taxable account, too.
The "BS calculations" are really quite simple - we put all shared expenses on shared credit cards. Once a month we go over all expenses and plug relevent numbers into a spreadsheet that does the calculations for us. Then I write him a check for my share.
We are fully aware that in the eyes of the law, everything we have is shared, but the psychological benefits of maintaining some semblance of financial independence are highly valued in our case. The law will only be relevant if we divorce, which we hope and plan to avoid.
I respectfully think you're misunderstanding the concept of a "communal pot."
When you have a single pot, all the money is one. There is no, "I pay 50%, my wife pays 50%." It's all just one pot of money, and everything just gets paid from that pot. There are no percentages of anything, because it's just 100% "our" money.
For example, my biweekly paycheck is just $681 because I contribute so much to retirement accounts and our healthcare is through me. That technically wouldn't be enough to pay 50% of the bills, but it doesn't matter, because all the money from both our incomes flows into one account, all the expenses go out of the same account, all the credit cards are linked to that account, etc.
In short, having a "communal pot" has absolutely no negative effect on being able to max contributions to retirement accounts, and as my own example demonstrates, it actually helps both max because it combines the resources of both income earners.
Dude, obviously I know what "communal pot" is, since this is how MOST married people do money. Anyone would have to be living under a rock to not understand the concept.
But as I've explained, in OUR relationship, maintaining separate finances and paying bills based on percentage of income works best. Therefore, as the lower-earning spouse, only having to pay 27% of bills is what allows me to max out my 401k, IRA, and contribute to a taxable account as well.
It's fine if you disagree, but it almost seems like you're willfully misunderstanding and trying to masplain.
I am a woman and I didn't get how your split helped with contributions, either. Ready Set just beat me to it.
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My wife is a SAHM. Our paycheck is used to pay bills, fund investments etc. and each of us get an allowance to spend however we want.
Works great!
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Please don't comment on this thread to criticize how others choose to handle their finances. Provide your recommendation, include your reasoning, and move along. Those that disagree with you just have different reasons to choose an alternative, and no vested interest in changing how you do what you do.
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Communal pot here.
Step 1) we each max 401ks, ESPPs, HSA etc.
I pay health insurance for the family.
After all this, we have close to a 50/50 split remaining.
My paycheck has enough left over for us to live off of in a HCOL area.
My wife's entire check goes directly into savings/investments.
All bonuses, ESPP, RSU etc go immediately to savings/investments.
This works for us because we are then forced to live off of a single salary, and since we are now expecting our first child, getting use to living off solely my salary/insurance works for us!
We each play the credit card game. So all bills/purchases are just paid from our shared bank accounts. Working on the 2x Southwest CC 60000points offers now. Hellooo companion pass!
All large purchases we discuss together. Little stuff on Amazon or whatever, we just buy as necessary.
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Yet another joint account for nearly everything as we're married and view ourselves as a team. All bills come out of there. Investments are bought with the joint money and sit in a joint investment account of their own. Retirement accounts are obviously separate but tracked as one big pot. It's worked well over the years. I used to make much more than DW and now we're about even, but how we handled things never had to change. There never was a power dynamic since our viewpoint was one of being a team. No running tally or paying each other. We make a budget to reflect our joint goals and that's that.
We do each take a small and equal bit as fun money for private accounts, because it is nice to have a small private stash that you can use for things that don't align with your partner's goals. We have enough latitude in our normal budget that this doesn't get used much, but if I want to do something like go out for a drink with friends and it doesn't fit our going out money for the month, I can do that out of my own small pool of funds. That gives enough latitude that it's easy to keep the team mentality on the vast, vast majority of our income.
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We're not married, but when we moved in together we opened a joint account. Each of us deposits our paychecks in our own accounts, then transfers a set amount to the joint account monthly. Currently we're doing it 50/50, but I'm thinking of suggesting a move to proportional (I'm the higher earner) at some point in the future. At our income levels, having contributions be proportional would be important because currently I'm able to max both 401k and IRA and still have a bit left to invest post-tax, and he's not yet maxing pre-tax options. I want to be able to take more advantage of the pre-tax space.
If and when we do get married, I expect we'll keep the same type of system, mostly because we have different ideas about how we like to manage our investments, and it would take some of the fun out of the quest for FIRE if we couldn't each play with our investment accounts according to our own comfort. For instance, he keeps a small amount of silver, tracking the price and buying and selling occasionally, which would make me incredibly nervous. I prefer buy-and-hold, with periodic rebalancing.
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Dude, obviously I know what "communal pot" is, since this is how MOST married people do money. Anyone would have to be living under a rock to not understand the concept.
But as I've explained, in OUR relationship, maintaining separate finances and paying bills based on percentage of income works best. Therefore, as the lower-earning spouse, only having to pay 27% of bills means I personally have enough leftover to max out my 401k, IRA, and contribute to a taxable account as well.
It's fine if you disagree, but it almost seems like you're willfully misunderstanding and trying to "mansplain."
I honestly didn't even know if you were a man or a woman, but whatever. I can assure you that I think your position is silly regardless of your gender, age, religion, or whatever.
What I tried to get across in my last post is that I am the lower earning spouse by a pretty significant degree, and I still max all my retirement accounts and pay for healthcare. This is because what's hers is mine and what's mine is hers, so no further math has to be done.
In fact, the only reason you have to do financial cartwheels with percentage of income is because you have not combined your assets. In other words, because you're separate, you have to do percentage of income to pay bills so you can max.
I guess my point is that you still seem to be convinced that your system "allows" you to max. It does no such thing, and instead just makes you do a bunch more steps. Your position is simply mathematically and logistically incorrect.
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I guess my point is that you still seem to be convinced that your system "allows" you to max. It does no such thing, and instead just makes you do a bunch more steps. Your position is simply mathematically and logistically incorrect.
They are both maxing their retirement vehicles if I read correctly.
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Please don't comment on this thread to criticize how others choose to handle their finances. Provide your recommendation, include your reasoning, and move along. Those that disagree with you just have different reasons to choose an alternative, and no vested interest in changing how you do what you do.
Thank you for being a voice of reason, different values doesn't make one side wrong.
I've also enjoyed the comments that focus around talking to your spouse about goals and making sure you're on the same page.
There isn't one perfect way to run your finances, separate or communal you're choosing visibility or privacy and both of them involve different levels of trust that you need to work out with your partner.
A communal pot appears to be the favorite, and as far as I know that's been normal for decades. It sure hasn't seemed to be a panacea for divorce rates just as obviously as having completely separate finances isn't going to cure any issues a relationship has either.
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Anyone here have perspectives on this when the couple is older (say 50s) and have kids from previous marriages? I certainly understand each relationship is different and a communal pot seems to make a lot of sense when it is a younger couple first marriage situation. However, there are different dynamics when each partner has young adult/adult children from previous marriages and have retirement accounts/assets which have been accumulated over 20-30 years before the partners become a "couple".
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Anyone here have perspectives on this when the couple is older (say 50s) and have kids from previous marriages? I certainly understand each relationship is different and a communal pot seems to make a lot of sense when it is a younger couple first marriage situation. However, there are different dynamics when each partner has young adult/adult children from previous marriages and have retirement accounts/assets which have been accumulated over 20-30 years before the partners become a "couple".
It still depends on the couple. Communal pots are still featured at this stage, with the surviving spouse getting everything, hopefully leaving a will that does whatever the couple agreed to. Trust accounts with clear instructions regarding the children are another way to deal with this.
Since retirement accounts must be individual, many people use beneficiaries to divvy up these separate funds while using a communal pot for everything else.
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So much of this is based on the individuals in the relationship.
If you get separate accounts, one may feel that the relationship isn't in unity.
If you get communal pot accounts, one may feel that the other is overbearing.
Find out what your expectations are and what your SOs expectations are.
Try to discuss what each person feels is comfortable in terms of contributions. If you have no kids, talk about life if you were to have kids. Stay at home? Part time? How would that affect contributions and payment?
What happens when one person disagrees with a purchase?
Open up a line of communication and find what works best for you and your SO.
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We are married, so ultimately it's all a communal pot that we both have equal rights to/responsibility for. In terms of the actual day-to-day spending, we each have a big monthly expense that we are primarily responsible for (he handles rent, I handle our daycare payment...they are roughly equivalent), then we handle other expenses as they make sense when they come up. At the end of the month, we tally all our expenses into a shared spreadsheet. Anything for the household (groceries, activities done as a family, utilities) is split 50/50, anything specific to an individual (clothes, meals out without other family members) are left to that person. We keep a running tally of who "owes" how much and when the number gets large-ish the person who owes transfers some money to the person owed.
We do not keep a joint account or a communal pot of money that we both draw out of, I have heard too many stories of people not communicating/tracking joint accounts well and winding up overdrawn. My husband is listed as a joint owner on my checking account, but he does not use that account to cover any spending or bills that he is responsible for. It just facilitates transferring money (and I also like knowing that he COULD access my checking account without trouble if I were to die suddenly or something).
I think our system works well right now as we each individually make enough money to cover a typical month of expenses...so if my husband is for some reason unable to write the rent check one month, I have enough money coming in to cover it. I like also that our monthly tally includes ALL expenses, not just "shared" ones like rent, groceries, etc. If ER is a shared goal, you really need to know what the total outgoings are.
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Anyone here have perspectives on this when the couple is older (say 50s) and have kids from previous marriages? I certainly understand each relationship is different and a communal pot seems to make a lot of sense when it is a younger couple first marriage situation. However, there are different dynamics when each partner has young adult/adult children from previous marriages and have retirement accounts/assets which have been accumulated over 20-30 years before the partners become a "couple".
My husband and I are both recycled spouses; we're in our early fifties and we both have children, similar in age (all young adults now), from previous marriages. We've been married for nine years. My children have always lived with us and my husband - their stepfather - stayed at home and looked after them during their senior school years. My stepchildren live some distance away and although we saw a lot of them when they were younger we have only a fingertips-touching distance relationship with them now. They're all decent young folk.
While DH wasn't earning, a portion of my income went to subsidise his ex-wife's household, which is perhaps a slightly bizarre situation but it was only right that he should contribute something towards his children's upkeep while they were dependent, and we could otherwise have been accused of having made him unemployed to avoid his obligation to pay maintenance. Not saying I didn't quietly begrudge it, because I'm human and his XW stink-mouthed us both relentlessly, but it was the right thing to do. My XH was the opposite; he was happy to take the coats off his kids' backs to feather his own nest. They know this (for they're not stupid and could see what was going on) and take him as they find him.
I paid for our house, it is solely in my name, and as things stand my children will inherit it.
We've had a joint checking account since early in our marriage. Even when we've both worked, my income has always been much bigger. DH had walked away from his first marriage with nothing rather than exposing the children to conflict over money; I'd let my XH have most of our financial assets to stop him playing Courtrooms and Barristers for his own entertainment and let me get on with my life. We both had a lot of healing to do! When I suggested a joint account and gave DH free access to my income, I was faking a level of trust that I didn't feel, and it was a long time before he had the confidence to use the account. I'm totally secure about everything being "ours" now and we don't pick over one another's spending decisions. We do have separate retirement savings, but for planning purposes these are combined. DH leaves saving and investment decisions to me and knows I'm aiming for FIRE at 55 and intend that he should be able to stop work then if he wants to.
Looking back, I'm pleased at how far we've come on. There was a time when, if things had come adrift between us, DH would have walked away with nothing again and I'd have let him.
My mother frets that if I inherit from her and my father, and then predecease my husband (or die at the same time as him, in a car crash or something like that, since I'm older than he is and would be presumed to have died first), everything they worked for will end up in the hands of strangers - DH's children - rather than their own grandchildren. I've suggested that they circumvent this problem by leaving anything they want my children to have directly to them, or helping them out financially while they're still alive, rather than stressing about it.
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One aspect not discussed it that some people make more money not because they work harder, or have more training or education than the other person, but because our society has deemed that profession to be more highly valuable. That is highly subjective, of course, but something to take into consideration when splitting things on an income basis. Does the person who works just as hard in a lower paid field "deserve" less? (highly individual question)
THE notable example of this is caregiving. I work my ass off in highly emotional, very difficult conditions handling complicated medical terminology and concepts that take a lot of brainpower to digest. (luckily I have a science background). This work is often 24/7, and away from home in a hospital, more recently in a very stressful ICU. I get paid exactly $0 for this and between this and being a SAHM for a while, I will never get to the income level I could have been when I do go back to work.
My example is extreme, of course, but it applies to many SAHP or people who have to downshift or drop out of the workforce to care for others.
When I did work my DH made 5X more than me (I worked part time to help with our special needs son). We have always had 1 pot of $$. I manage it all. He spends more than I would like, but will pull back on spending if asked to.
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Please don't comment on this thread to criticize how others choose to handle their finances. Provide your recommendation, include your reasoning, and move along. Those that disagree with you just have different reasons to choose an alternative, and no vested interest in changing how you do what you do.
+1
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My wife and I have a joint savings account and pay our mortgage out of that. We split all of the bills up 50/50 and keep separate checking accounts. I manage the budget spreadsheet that we use to track net worth, savings etc. We both have the same financial goals so neither of us are worried about spending.
I would say the most important thing is to just make sure you are on the same page. My wife and I talk about our savings, investments, debt and anything coming down the hopper that might be an expense not budgeted for probably once every 2 weeks. No surprises makes it easier to develop the trust needed. Hope this helps.
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Please don't comment on this thread to criticize how others choose to handle their finances. Provide your recommendation, include your reasoning, and move along. Those that disagree with you just have different reasons to choose an alternative, and no vested interest in changing how you do what you do.
+1
While the comment was a bit harsh I do see a little of it.
Legally, if you are married there are NO SEPARATE BUCKETS. You pay taxes on one income as a family*, you have bills as a family and you have income as a family.
Any separation is pretty-much self induced, any complications, weird maxing schemes, or reasons why one person can MAX XYZ where the other cannot are entirely self induced.
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My personal example...
My wife, gets basically no paycheck despite earning just shy of 50k, because we max her HSA @ $6,700, her 401k @$12,000(all her company will allow), and she pays for all of our benefits. Her check is TINY.
If we tried to split it 50/50 or even the proportional 80/20 that it is, it wouldn't work. As it stands, combining everything enriches us to an unbelievable amount. My wife basically works tax-free! How cool is that?
I don't begrudge anyone for going with XYZ schemes if they think it works best. Though, lets not pretend that any of it helps make more money, I can't see a way that adding a wall increases your net worth other than mental benefits. Especially, with something like my situation.
I am basically putting money into HER 401k
*I understand you can elect to pay separate but higher taxes
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While the comment was a bit harsh I do see a little of it.
Legally, if you are married there are NO SEPARATE BUCKETS. You pay taxes on one income as a family*, you have bills as a family and you have income as a family.
Any separation is pretty-much self induced, any complications, weird maxing schemes, or reasons why one person can MAX XYZ where the other cannot are entirely self induced.
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My personal example...
My wife, gets basically no paycheck despite earning just shy of 50k, because we max her HSA @ $6,700, her 401k @$12,000(all her company will allow), and she pays for all of our benefits. Her check is TINY.
If we tried to split it 50/50 or even the proportional 80/20 that it is, it wouldn't work. As it stands, combining everything enriches us to an unbelievable amount. My wife basically works tax-free! How cool is that?
I don't begrudge anyone for going with XYZ schemes if they think it works best. Though, lets not pretend that any of it helps make more money, I can't see a way that adding a wall increases your net worth other than mental benefits. Especially, with something like my situation.
I am basically putting money into HER 401k
*I understand you can elect to pay separate but higher taxes
Well said, and exactly what I was trying to get across. This whole having separate but proportional accounts "allows me" concept is self-induced and FORCES you to make things more complicated than they have to be. If all those additional steps and calculations help you sleep better at night (even though they have no legal effect whatsoever), then that's fine. But don't sit and pretend like the math actually supports your method.
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While the comment was a bit harsh I do see a little of it.
Legally, if you are married there are NO SEPARATE BUCKETS. You pay taxes on one income as a family*, you have bills as a family and you have income as a family.
Any separation is pretty-much self induced, any complications, weird maxing schemes, or reasons why one person can MAX XYZ where the other cannot are entirely self induced.
------------------------------
My personal example...
My wife, gets basically no paycheck despite earning just shy of 50k, because we max her HSA @ $6,700, her 401k @$12,000(all her company will allow), and she pays for all of our benefits. Her check is TINY.
If we tried to split it 50/50 or even the proportional 80/20 that it is, it wouldn't work. As it stands, combining everything enriches us to an unbelievable amount. My wife basically works tax-free! How cool is that?
I don't begrudge anyone for going with XYZ schemes if they think it works best. Though, lets not pretend that any of it helps make more money, I can't see a way that adding a wall increases your net worth other than mental benefits. Especially, with something like my situation.
I am basically putting money into HER 401k
*I understand you can elect to pay separate but higher taxes
Well said, and exactly what I was trying to get across. This whole having separate but proportional accounts "allows me" concept is self-induced and FORCES you to make things more complicated than they have to be. If all those additional steps and calculations help you sleep better at night (even though they have no legal effect whatsoever), then that's fine. But don't sit and pretend like the math actually supports your method.
May I provide a word of caution assuming everyone lives in the same country and that your tax laws apply to everyone equally (Canadian RRSP's are individual and not family buckets of contribution room).
Also, "complicating" the matter by having two separate accounts isn't really an issue if you're comfortable with online banking in the modern era. With everything automated it's more of an artificial set of buckets to meet spending / savings goals anyways.
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Great subject, I've been polling some of my peers and figuring out what to do. We put it into action this morning!
Background:
Bought a fixer upper multifamily early this year to house hack (live there now, interior done, exterior this fall)
Got married early this summer
Incomes are fairly close but not equal
Similar spending habits... she is over the top generous, we are working on it!
Pre-marriage I made her an authorized user on one of my credit cards and we opened a joint checking account. We contributed equally to the joint account to cover rent/food/common expenses. I would not feel comfortable fully combining finances until marriage when they become legally combined regardless of account structure.
At this point, we are married. Consolidating all of our savings into 1 joint savings account. Consolidating our checking accounts into 1 checking account. Keeping a personal credit card or two each, and keeping our joint credit card. All money flows into the checking. All car payments (0.9%!!!!), mortgage, insurance, gas, food, and anything else for the two of us or the household goes on the shared card or directly from the checking. The personal cards are our "fun money" and we each have an EQUAL and firm budget for them each month.
We can both see exactly how much money we have, but still have the privacy of a personal credit card for when I need to buy some gadget that I really don't need, or when she wants to go out to dinner with the girls after work.
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Been with SO for 7 years.
She is 4 years my junior and was in school the first 3 years of our relationship. She chose a lower demand degree with a corresponding lower pay.
We split our rent 50/50 and pay individual expenses from our respective funds.
I pay for a lot more of our "entertainment" spending, such as vacations, eating out, movies, day trips, etc.
On average I make 2X what she does, thanks to busting my ass and being in the workforce 5 years longer.
I don't see us combining $$ into "one pot". We have totally different savings, investing, and spending styles. I'm very detail oriented and track every dime, she doesn't track at all. She is much more disk averse with her investments. I also want to encourage her to not rely on my income since we are not married. Since she has ownership of her funds, it motivates her in regards to career choice, spending, etc. I can't say for sure, but I suspect that if the money just kept piling into a joint account that motivation might not be as prevalent.
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Dump all your money into one account and pay all expenses from one account. Anything else is a psychological ploy to make you feel better about yourself, and it's basically worthless.
Make your life easy: one account; all income goes in; all expenses go out; trust your spouse and yourself to make smart, discretionary purchases; communicate about any large expenses.
BS....do what works for you.
DH and I have been married for 32 years and each have separate accounts and a joint account for common expenses.
We decide individually on how much to save for retirement, savings, investing etc.
We also make decisions together on common purchases and how much to save for these things.
We don't have any debt at this point in our lives and therefore have more money available for wants vs needs.
It has worked for us and I never really discuss it with anyone...who cares?
Who is anyone to judge someone's marriage and the way in which they set up their finances?
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A lot of people are also assuming that SO means spouse. I thought SO meant "Significant Other." There are valid reasons for not combining finances if you are cohabitating, but not married. However, the issues of how income is allocated to expenses still exists.
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Currently (living together, not married) - we both have individual accounts, as well as a joint account and joint card. The joint account is contributed to pro-rata according to our salaries, and our joint expenditures come out of that. We live in his condo, so I don't contribute to the principal of the mortgage, but everything else, we take from the joint account.
We are going to close on a piece of land together in September. At that point, we've decided that we will change to a one-pot deal for simplicity's sake. We'll be writing up a pre-cohabitation agreement, that will stipulate that if we split BEFORE having children, we each leave with whatever assets we brought into the deal.
Once we have children, we keep the one pot deal, naturally. If we break-up AFTER children, we will split everything 50-50 in order to keep things as comfortable and "even" for the children no matter with whom they're living.
Of course, these are situations that have not occurred yet, but it's how we've decided to organize things in advance.
As a note, we've been together 6+ years, we aren't married, nor are we likely to get married (although you never know). In Canada, as a poster above explained, retirement accounts are individual. However, once we mutate to a one-pot deal, we'll contribute into our retirement accounts from that one-pot. So theoretically, although each account is in an individual's name, the money going in is shared money. Our salaries are currently approximately 40% me, 60% him. That's not likely to change much, although the split might skew higher for him. However, I have considerably more assets to my name. So in the short term, I have more to lose, in the long term, he would have more. With our agreement, we both feel comfortable that no matter what happens, we're both protected and/or protecting the well-being of any eventual children.
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Well, I'm self-employed and own a business. My husband is an employee and a military retiree with a side gig. Tell me again how the tax burden is one family tax burden and there are no separate buckets.
All of my income and expenses stay separate. All of our sheltered investment accounts are separate including TSP, ROTH, i401k, 401ks, IRAs.
The generalizations that everyone just gets a paycheck and should put it in a joint account are too simplistic for all families.
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Well, I'm self-employed and own a business. My husband is an employee and a military retiree with a side gig. Tell me again how the tax burden is one family tax burden and there are no separate buckets.
All of my income and expenses stay separate. All of our sheltered investment accounts are separate including TSP, ROTH, i401k, 401ks, IRAs.
The generalizations that everyone just gets a paycheck and should put it in a joint account are too simplistic for all families.
I am not sure I understand your point. My income is my business revenue minus expenses, so the fact that I am self employed doesn't change how we manage our personal finances vis a vis how we did so when I was an employee.
On the other hand, I do not understand all these people insisting that it all automatically becomes "ours" when you get married. Even in communal property states, there are ways to shelter individual accounts. It becomes "ours" because you co-mingled it, not because you got married.
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Before we got married, we were living together and split most things 50/50. Rent and utilities money came out of my account and I tell him how much he owes me each month, I pay for groceries and he pays when we eat out (this is our pre MMM days so that split was probably 60/40!).
After we got married we made a joint account that's more of a travel fund but our finances are mostly separate. Now the husband takes care of all our bills and I pay for our groceries and Internet and the reason for that is just because of how things turned out. I take care of our grocery needs and I signed up for our internet so it ends up coming out of my account. We moved into his grandma's house and took over her bills so he's taking care of that. I got my credit card debt to pay and I don't want to involve him in my mess so I don't use his money to pay for it (but he doesn't mind and I'm too stubborn and the debt is almost gone).
I think in the near future when I take over our finances I'll have us put most of our money into the joint account and still keep some money into the individual accounts for personal things.
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We do a communal pot and it has allowed us to maximize things really well. I came into the marriage with no debt and about 10k in cash. DH had 55k in student loan debt and then was unemployed for months 3-6 of our marriage. If we hadn't had a communal pot, he would have had to take the first crappy job that he could to keep paying for his share of things. Instead he was able to go through a real application process and get a much better job.
We also would have been very very held back if DH had to spend $800/month for 10 years paying his student loans. By working together, we paid them off in 21 months.
I love the flexibility of the communal pot. It lets us each make career decisions in a long term view instead of out of fear. It also helps us stay in the team framework instead of keeping score. I make more right now, but I doubt that will always be the case and I know that if we have kids someday and I want to cut back on hours, we will figure out how to adjust our finances to make that happen.
I agree that there are a lot of ways to make it work depending on your situation.
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A lot of people are also assuming that SO means spouse. I thought SO meant "Significant Other." There are valid reasons for not combining finances if you are cohabitating, but not married. However, the issues of how income is allocated to expenses still exists.
We own a house together and are engaged. Not married yet though. Basically just don't want to have a wedding so not sure when we will actually get married.
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One pot in a joint account. We each get $75 in a personal account for fun money.
I completely agree with the other posters who've mentioned that you can both max out your retirements if you use one pot. The only examples I've seen that make any sense to keep separate are the 1 partner who spends cash, and the business. Spouses can still retire at different times. You don't lose your autonomy by sharing a bank account. You still have separate 401ks etc. besides, any decision about retiring should be discussed between partners.
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We've been "living in sin" (or so the right wing churchies would probably say) for 23 years.
We are both professionals who make a decent salary. We have always had separate finances.
But we've never really talked about splitting income for expenses.
We both make far more than we spend. I take care of the housing (mortgage, repairs, taxes) and internet, she takes care of pretty much everything else (phone, cable, gas, water, most groceries).
That's just the way it worked out. I don't think we ever had a formal discussion.