Welcome to Taking Stock, a space where we can take a deep breath and try to figure out what the COVID-19 economy really means for our finances. Every month, personal finance expert Paco de Leon will answer your most difficult, emotionally charged questions about money. This year has forced many of us to reprioritize our finances, and there’s no clear road map for getting through the pandemic yet — but Taking Stock is here to help us figure it out together.
This month, we’re talking about what's actually "fair" when it comes to who pays for what in a relationship, especially when one partner earns more money than the other.
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My partner and I are finally thinking of living together. It's an exciting decision, but one thing that keeps bothering me is what’s “fair” for affording our joint lifestyle, including everyday bills and expenses, and even what apartment we should live in. I make about $50,000 more than he does, and he seems to be pushing for slightly nicer places, saying that we could afford it based on our combined incomes — and why wouldn’t we want to live in a nicer place? — but I think he also feels that my share of rent should be higher since I make more money. Personally, I'd rather live in a slightly less nice place and save more. And I feel that in general I am already paying for a lot more than he does.
I don’t know why this bothers me... but I think it does. Frankly, his quality of life would go down a lot if it weren't for me. And because his lifestyle now is pretty nice, I feel like he's not as motivated to get that next promotion or move on to a role that's better paying. Should I be expected to pay more for everything we do as a couple, just because my paycheck is bigger? I know this is a subjective thing, but how do I organize my feelings on what's actually fair between us without a build-up of resentment over time? Am I being ungenerous thinking of how much “investment” each of us puts into this relationship?
Dear Earning More,
Congratulations on this exciting new phase of your relationship. Living together allows you to have fun, new experiences together. It also means mundane stuff too — like figuring out a way to organize your mail, splitting household chores, and all the associated household bills. Sharing expenses is economical and, therefore, awesome, but figuring out how to do it with unequal income requires conversations you may not have had before.
I think the best way to approach relationships and money is first to understand your own feelings, anxieties, and issues about money. Then, with a compassionate ear, listen and try to understand your partner’s, and realize they may be different from yours. If you can both put the shoe on the other foot, I think you’ll have an easier journey to agreeing on a method for managing the joint costs that feel fair to you both.
Before you can be on the same team, get on the same page
I don't think you’re ungenerous by not wanting to cover more costs. You simply may have different ideas of what is fair. You and your partner are coming into a shared experience from different perspectives. For you, fair might look like an even 50/50 split. For him, it might seem fairer to split up costs based on each of your incomes.
Talk to your partner about what you’re feeling and try to understand what he is feeling. How would he feel and approach this if the situation was reversed? How are your ideas of fairness alike? How could you split things where both feel like you’re contributing and receiving equally? At what threshold would you both agree that the higher earner in the relationship should help subsidize their partner’s lifestyle?
How to cut the cake
There isn’t a right way to manage money with your partner. I’ve worked with couples who have kept entirely separate financial lives for over 15 years of marriage (and counting), and I’ve met couples who combined their finances early on. Here’s how to think about the practical aspects of sharing expenses.
• First, decide on which expenses will be split and which will be kept separate. Some couples split expenses that are truly shared, like rent, groceries, utilities, and internet. Other couples decide that joint expenses include bills that must be paid, like cell phones and pet expenses, even if the dog entered the relationship as your partner’s pet.
• A 50/50 split might work for couples who are just starting to combine their lives. When my wife and I first started to share joint expenses, we took this approach even though she earned more than I did. If you choose a 50/50 split, you might find yourself choosing to be generous with discretionary and fun spending because it no longer feels like an expectation. Instead, it feels like a choice you're making that benefits you both. On the other hand, a 50/50 split might not work when one partner earns significantly more. It may leave the person who earns less feeling financially strained if they can’t save or allocate enough to pay down debt.
• Selecting expenses that each of you will pay for is another method some couples use. For example, one of you agrees to pay for rent, and the other pays for everything else. This might work for unequal incomes, but it can feel a little bit like a free-for-all if there isn’t any budgeting, tracking, or regular discussions about how either of you is feeling.
• Another popular method is to set a proportional amount of your incomes (for example, 35% of your net paycheck) for joint expenses. With a proportional split, the larger earner pays more, but the amount is relative to their ability to pay. For example, if your take-home pay is $5,000 a month and his is $3,000, and you both agreed to kick in 35% of your pay to go towards your joint expenses, you’d contribute $1,750 and $1,050, respectively. As long as your partner’s financial situation isn’t too strained, this method could allow you both to feel like you’re contributing and gaining equally. It also imposes an agreed-upon budget constraint, or price cap, on your apartment hunt.
Look at these options together to assess which feels like a solution to keep financial stress to a minimum.
Schedule money dates
I am a relentless evangelist of regularly scheduled finance time. For couples, scheduling money dates is a way to ensure you prioritize managing your money together, keeping communication open.
The benefits of scheduling time to talk about and review finances are twofold. First, it gives each of you time to prepare the things you’d like to discuss. Let’s say you want to propose splitting expenses 50/50, or you’d like to suggest setting up a joint savings account. You can look into how you’d like to frame the expense conversation, find savings account options in advance, and practice how you’ll approach these discussions.
Secondly, when you both know well in advance that you’ll be discussing the often-challenging subject of money, you can both prepare to go into the conversation calmly and coolly. Juxtapose this with the alternative — after you come home from a long day at work, your partner brings up the topic of money. You might feel ambushed, flustered, unprepared to discuss money, and closed off to finding a solution that works for both of you. It’s a likely recipe for a money mishap.
If you’re regularly checking in, sharing feelings, and listening to each other, you will be able to work through your challenges. You’ll find it’s easier to bring up thornier subjects like asking your partner about his career and work ambitions, because you're both in a regular practice of addressing your concerns. Regular, clear communication of this shared experience is a surefire way to feel heard, accomplish your goals, and drastically reduce the chance of resentment. You can start on a monthly basis and add more if you need to.
Always communicate changes
Although my wife and I split expenses 50/50 for many years, there were times when each of us earned less than the other and the higher earner picked up the slack towards joint costs. We talked through these periods candidly to allay fears. These conversations covered values and specifics — about paying each other back, income goals, savings plans, and discretionary expense cuts. The important thing to remember is there's a risk you may never get 'paid back,' but communicating keeps our fears in check and allows our relationship to grow and our financial plans to remain aligned.
The arrangement you agree to today may not be the exact arrangement you have in a few years. Be open to a changing situation. If you agree to a 50/50 split, but the difference in who pays for what continues to grow, being able to communicate and revise your approach can help you get ahead of building resentment.
It would be so much easier if there were one single, correct way to split expenses. We could all just accept the rules and tell our feelings to kindly sit down because the logic of joint finances has been decided for us. Learning how to agree on the sticky subject of money can help strengthen your relationship. Sorting through you and your partner’s feelings about money is something you’ll continue to work at regularly in a long-term relationship. This is the stuff that #relationshipgoals are made of. Your willingness to face it is awesome.
Your finance friend,