The other day, I received a question from Tiffany regarding sharing expenses with her significant other. Here is what she asked:
“I graduated from college about a year and a half ago. I got my degree in engineering, so my income is pretty substantial. I don’t have any consumer debt or a mortgage, but I have a ton of student loan debt…about $95K.
My boyfriend and I have been in a cross-country relationship since we graduated, but are planning on moving to the same city in a few months once we get jobs there. He doesn’t have any consumer debt either, only a small amount of student loan debt. He has offered to pay more of our expenses when we live together since I have so much debt (we make about the same salaries).
I guess my question is…is that fair? Should I take him up on this offer or should I insist to split 50/50? I really don’t want my stupidity to become his burden.”
In Tiffany’s email, she said that her boyfriend would like to pay more of the household expenses so she can pay more towards her student loan debt. This is a huge offering by her boyfriend and it should be looked at carefully as I suggested to her in my email response outlined below:
“I think my response to your question boils down to how comfortable you are with accepting the help. If your significant other is able and willing to help, I see no problem with it. I do not think that it is selfish, etc. for you to want to pay off your student loans faster.
The only problem that I can see stemming from a situation like this is possible resentment from the other party. I have seen situations like yours where one individual contributes more to the pot while the other spends recklessly, etc. The other partner then feels like they are being taken advantage of. However, based on your email I get the sense that you are very good with spending, credit cards, etc. If that is the case, I just do not see it being that much of an issue.
In conclusion, if you see yourself spending the rest of your life with this individual (sorry if that scares you), I say go for it. However, if you are having doubts about the length of the relationship, etc. you may want to demand the 50/50. You do not want to get several years into this plan and then feel like you need to reimburse him.”
Now, Tiffany’s question is fairly specific but it got me thinking about all of the other non-married couples (or roommates, etc) out there.
For your individual expenses (student loans, cell phone, credit cards, etc.) I recommend paying those yourself unless you have an awesome significant other like Tiffany above. With the joint bills (mortgage/rent, utilities, cable, 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.
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 are 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 are 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 do not recommend having someone pay all of the bills because you may find out that your roommates are bad at paying back their fair share.
Another method is to split the bills based on 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 will contribute to the joint bills. Subtract 100 from that percentage and you will have the percentage for the other individual. 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 bill and Joe would pay the remaining 41%.
Personally, I think this is one of the fairest ways to split bills. By doing it 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.
Grab Bag Method
Based on my experience, I believe that this one is the most popular. However, I think it is 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).
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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? Are you using one of the methods above or have you made your own hybrid method? Please share in the comments!