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Your relationship, your finances

In this article:

  • Keep your finances separate
  • Combine your incomes
  • Split everything 50/50
  • Divide expenses according to income
  • Know your property rights

Whether you’ve been with your significant other for one, five, or ten years, you’ve probably broached the topic of money. Maybe you’ve even had some heated debates! It’s only natural to butt heads when it comes to money management. Personal finances are one of the most common sources of disagreement between couples. Fortunately, with the right method, it’s possible to keep everyone happy.

Keep your finances separate

This approach is popular among young couples who have few shared assets. Each partner has certain bills they’re responsible for (e.g., cellphone, internet, electricity), but the rent or mortgage payments are more or less split in two.

As a result, you retain some financial independence, but may end up feeling cheated. Why? Because this method doesn’t take into account the couple’s respective incomes or their combined expenses. Without realizing it, you may end up spending more than your partner, even if you earn less. 

Keeping your finances completely separate also hinders household projects, such as buying a home, because each person is putting money aside without a shared long-term plan. Pooling your assets, on the other hand, allows you to generate more interest.

And what about unexpected costs? Without a joint emergency fund, you may find yourself reaching for your credit card more often than you’d like when unforeseen expenses come up.

Combine your incomes

This is one of the simplest and easiest approaches to money management. Both partners deposit all their income into one joint account, which is used to cover the bills, groceries, and insurance and mortgage payments. These shared funds also go toward each spouse’s personal expenses, like clothes.

Combining incomes works well for couples who don’t want the hassle of budget calculations and paperwork.  

But to ensure this method’s long-term success, you both need to be on the same page. If you enjoy spending sprees but your partner is rather thrifty, it won’t be long before tensions arise. 

When it comes to joint accounts, it’s essential that you trust each other implicitly. Most couples who opt to combine their incomes have been together for many years or have children. 

Split everything 50/50

This method consists in separating the couple’s expenses right down the middle. Each partner pays half of the household expenses.

Although this approach requires doing some calculations, it’s still quite easy to manage from month to month. Plus, in the event of a breakup, the division of assets is simpler.

However, splitting every expense in half isn’t ideal for couples with very different salaries and levels of debt. In such cases, it can create inequalities and lead to frustrations on both sides. 

For example, if your significant other’s annual income is $20,000 higher than yours, sharing expenses equally may seem unfair. The same is true if you have large debts (e.g., car, personal loan, line of credit, credit card). These substantially reduce your budget, making it harder for you to fulfill your financial obligations. 

Divide expenses according to income 

Couples with big differences in income generally prefer this method. It allows them to split their expenses in proportion to each person’s salary. 

For instance, if you earn $30,000 more than your partner, you might pay 60% of the expenses while they cover the remaining 40%. This way, your partner has more leeway for their personal expenses.

Remember, always look at your net income as opposed to your gross income when making a household budget. High-income individuals have a higher tax rate than low-income earners, meaning they give more to the government. 

Know your property rights

If you share a mortgage on a house—whether you’re paying 50% or an amount proportional to your salary—but aren’t the co-owner, make sure you’re legally protected.

If your name is on the mortgage but not on the deed, you will be held jointly and severally liable for the mortgage debt. In other words, if your partner stops meeting their financial obligations, you’ll need to make all future payments on your own. 

Of course, you’ll probably have the right to claim the amounts you paid to the bank on their behalf. But getting your money back may be a lengthy legal process.

To make matters worse, since you’re not the co-owner of the house, you receive nothing if your partner decides to sell. And if you ever break up, you’ll be the one forced to leave the residence, as it doesn’t legally belong to you. 

To avoid these types of unfortunate situations, you should consult a notary or a lawyer. They may advise you to purchase a share of the property and have an agreement of ownership drawn up, in which you set out in writing what happens to the house if you and your spouse go your separate ways. A cohabitation contract is another legal document that can help you avoid disputes and misunderstandings.

Key points: 

  • Keeping your finances separate gives you a certain amount of financial independence, but makes joint projects more difficult.
  • Combining your incomes is easy to manage, but can create inequities.
  • Splitting everything 50/50 is the fairest approach for couples with similar incomes and debt.
  • Dividing your expenses according to income is the best choice for couples who have different salaries.
  • If you’re sharing a mortgage with your spouse but aren’t a co-owner of the property, make sure you’re legally protected. 
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