Sharing expenses in a relationship, whether it’s with your significant other or a roommate, can be tough.
For your individual expenses (student loans, cell phone, credit cards, etc.), I recommend paying those yourself.
With the joint bills (mortgage/rent, utilities, cable, groceries, etc.), you will need to determine a fair and equitable way of handling them.
This will entail sitting down and discussing some of the following options with your significant other.
Splitting Bills Based on Income
Let’s start with the best option that ensures both individuals are paying an equitable amount towards the joint bills.
This requires splitting the bills based on individual and joint income.
Start by taking the gross (before tax) yearly income of both parties and add them together.
Then take the larger income of the two and divide it by the total combined amount.
This will then give you the percentage that individual #1 will contribute to the joint bills.
Subtract that percentage from 100 and you will have the percentage for individual #2.
Let’s look at an example:
Joe and Jan are living together.
Joe makes $45,000 per year as a school teacher.
Jan makes $65,000 as a principal.
Together they bring home $110,000.
The next step to take is to divide Jan’s $65,000 by the combined income of $110,000. This equals about 59%.
In this scenario, Jan would pay for 59% of each joint bill and Joe would pay the remaining 41% (100% – 59%).
I highly recommend opening up a joint checking account to pay for these joint bills.
By splitting the bills this way, one person can not accuse the other of having extra funds to play around with at the end of the month.
Based on your income, you are paying your fair share.The most equitable way to split bills is based on income. You're paying your fair share that way. Click To Tweet
If for some reason one of the individuals pays for a joint bill and it cannot be paid out of the joint checking account, you’ll need to make sure that the second individual is adding more to the joint checking to account for this. An example would be health insurance if you’re both on the same plan.
To make this calculation MUCH easier, I’ve created a spreadsheet to help you determine what each individual should contribute to the joint checking. Here’s a screenshot:
If you didn’t download the calculator above, here’s your second chance. Included with the spreadsheet is an instructional video on how to use it. Don’t miss out on this spreadsheet before I begin charging for it!
Grab Bag Method
Based on my experience, I believe that this one is the most popular.
However, I think it’s the most ineffective.
This method entails just picking certain joint expenses and saying “I got it!”.
So, one person might be in charge of paying only the rent while the other picks up the remaining expenses.
Sometimes you may not even pay close to the same amount as the other person.
I feel that this method is ineffective due to the fact that you do not have a hand in every expense.
In other words, you may not even know what they other person is paying for and how those expenses are generated.
You are not doing yourself a favor because if the relationship ends, you may not be as prepared to handle all of the expenses (or how to be effective in reducing them during a budget crunch).
One of the simplest ways to split bills is evenly.
All you have to do is look at the bill amount and divide by 2 (or more if you have multiple roommates).
Once you have the amounts figured out, nominate someone to handle the bill paying process.
I recommend opening a joint checking account to handle all of the joint bills.
As you’re paid, send your portion of the bills to this joint checking account.
When it’s time for the bills to be paid, the money will be readily available.
If you’re unable to get a joint checking account (i.e. roommates), you may want to nominate certain individuals to pay certain bills and then just have the others reimburse as needed.
I don’t recommend having someone pay all of the bills.
You may find out that your roommates are bad at paying back their fair share. 🙁
* * * * *
The previously mentioned methods are just a handful of the options out there.
These just happened to be some of the more popular ones.
You and your significant other will need to find something that works for both of you and is agreed upon.
I would not recommend combining all accounts and sharing all expenses unless you are married (or thoroughly committed to each other).
This is due to the fact that some relationships just do not end well.
How do you and your significant other handle expenses?
Please share in the comments!