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Yours, Mine, and Ours – Deciding Who Pays the Bills

This is a post by Kathryn about splitting household expenses among spouses.

Before we were married, Brian and I were invited to my supervisor’s house for dinner. Shortly after arriving, her husband came home, briefly greeted us and opened the mail.

“Look at the size of the phone bill!” he complained. “You spend so much time talking to your sisters on the phone and I’m the one who has to pay for the phone bill.”

She retaliated by saying, “Well, I’m the one who pays for the groceries, and you are spending too much of my money on food!”

Talk about awkward. We spent the rest of the evening in pleasant but slightly strained conversation while I couldn’t stop thinking we were eating her food.

After we left, Brian turned to me and said, “If we ever get married, let’s share our money.” I agreed on the spot and we never gave it a second thought.

Twelve years later we still have a joint account. All our money goes into it and all our bills get paid out of it. This is what works for us. The goal is to find out which system will work best for you and your partner.

There are a number of ways couples handle their finances.

Option A – Percentage System

Each person has their own account and each pays a percentage of their income towards the bills, usually into a joint account. For example if one spouse makes $60,000 a year and the other makes $30,000 a year, one would pay for 2/3 of the bills and the other would pay 1/3.  Some people swear by this system. Most of the couples I’ve talked to who use this system figure out the total amount for bills and have a joint account where they each deposit their portion of expenses and bills. The remaining is for each person to spend as they wish.

The advantage to this system is that each pays an equal percentage of their income. The disadvantage comes with what remains. Say the person making $60,000 had $20,000 remaining after household bills and the person making $30,000 had $10,000 remaining. That’s a substantial difference in spending money. How do they then split date nights? Vacations? What happens if one of them decides to stay home with the kids for a few years or work part time to save on childcare? Does the higher income earner simply always have more spending money? Do the figures change every year depending on income? What about a spouse that has a variable income?

Option B – Separate the Bills

In this case, each spouse pays for different bills out of their own account and there is no joint account. He pays the mortgage. She pays for the food and utilities. The advantages of this system are the simplicity of each being responsible for certain bills and only needing to keep track of his or her own account and what they owe. The disadvantages can sometimes crop up at another life stage. It seems to work for many couples. Yet when I’ve met with people who divide their money this way there is often an underlying tension of unfairness.

In many cases, the partner with the variable expenses (food, heat, hydro, electricity, phone bill, etc) feels like they have less control over the budget. This is a system that often starts to fall apart after the arrival of children. Just when one spouse is on parental leave and living on a portion of their income, the child’s expenses are added to the mix. Do they continue to divide the costs of the child? What happens if one spouse stays home as the primary caregiver to the children and has no income at all? Does the higher income earner pay all of the expenses and give the at home spouse an allowance or a salary for childcare and housework? These are some of the issues you and your partner might want to discuss when deciding how to divide and share expenses.

Option C – Split Bills 50/50

In this scenario a couple will divide everything right down the middle. Everything is 50/50. In some cases they split all the bills individually. In other cases they figure out the total number of bills every month and each owes half. I’ve met with couples who use this system and while it may have worked when they first agreed to it, unless their incomes are nearly identical and neither of them decide to go back to school or take a parental leave, it’s a system that falls apart fast.

The advantage is ‘fairness’ which in a surprising number of examples was the reason cited for going this route. The disadvantage is ‘un-fairness’ where the lower income spouse is sacked with a higher percentage of their salary to keep the household running.

Option D – One Joint Account

In this system, there is one joint account for everything. All earned funds go into the account. All bills are paid out of the account. The advantage to this system is its simplicity. There is no yours and mine, only ours. There are also many disadvantages to this system. If one spouse is a saver, and the other a spender, the whole issue of fairness arises again. If either partner has financial control issues, having only a joint account can be a nightmare for the spouse whose every purchase is questioned and scrutinized.

Option E – Joint and Personal Accounts

In this scenario, all earned income goes into a joint account from which household and children’s expenses come out every month. Spouses also have their own personal account. Every month, as a part of the overall budget, an equal set amount gets deposited into each partner’s account from the joint account. Those funds are for all personal expenses including clothes, recreation, sports, hobbies and anything else that isn’t a basic need.

The advantages to this system are that all bills are paid jointly out of a pool of earned income, regardless of who earned it and each spouse gets an equal amount of money to spend or save freely however they like without having to obtain permission to spend money from the joint account. The disadvantages are keeping track of three different accounts. It won’t matter so much if you have a no fee account but the cost would add up quickly if you have three separate accounts each with their own bank fees.

Option F – The Dictator System

I’ve seen this scenario twice. This is where one partner has control over all of the finances and pays the other partner an allowance in cash. In both cases the partner in charge of the money also required a detailed spending with receipts to show where the other partner’s spending money went. In one case, it was a couple in their seventies and she had never had her own bank account. She resented it but didn’t know how to change it. In the other example, it was a young couple with kids. His income was much higher but she was the ‘money manager’ and felt that the only way she could control the finances was to put him on a strict cash budget and scrutinize his every purchase.

There are few advantages to this system other than the simplicity of one account. The disadvantages are numerous. One person is the controller and the other person is controlled. This tends to breed resentment. It also doesn’t give the spouse the opportunity to build their own credit, manage their own accounts, and know how to handle the finances if something were to happen to the other partner.

Conclusions

Research shows money arguments are one of the main contributing factors to divorce. Somewhere between falling in love and choosing dishes for the wedding registry, couples need to sit down and come up with a plan for how they will handle their finances. It doesn’t matter which option couples choose, so long as they both agree and feel comfortable with the plan.

For those of you with wedding bells in the future, you may want to use these possible options as a discussion starter. For those of you already in long term relationships, it may be time to re-evaluate the plan just to be sure it’s still working for you both.

Which system do you use in your household?

Kathryn is a regular contributor on Million Dollar Journey and has a passion for personal finance. She volunteers her time as a money coach meeting with ordinary Canadians, teaching them the basics of budgeting, no fee banking, saving for the future and other basics of personal finance.







57 Comments, Comment or Ping

  1. 1. Kirk S.

    I am single, but my parents used the unbelievable system where my father paid for all the monthly bills and mortgage, and my mother paid for gifts, Christmas and investments. My brother and his wife do it a little differently: my brother pays for the mortgage and investements (the fixed expenses…he’s the saver) and his wife pays for the variable expenses (food, heat, etc.). Although their salaries are similar, he much prefers this because he has little variability in his monthly expenses so he can plan.

  2. 2. Lori

    My husband and I (no kids) have an arrangement somewhere between D and E. We each have individual accounts, and a joint account (all three are no-fee). We track our purchases primarily by using credit card. Though we’ve never verbalized this as an agreement, we generally check with each other if we plan on making a personal purchase over $50-100 (except around Christmas and birthdays!) for ourselves or the house.

  3. We throw everything into a joint account and pay everything from there. Luckily, we are both pretty similar in our spending so it’s not an issue where one of us is spending more and the other isn’t happy.

    Those other systems (especially the “allowance” one) look fraught with all kinds of complications and stressful times.

  4. 4. The Reverend

    One account (in fact, a Manulife One account) that everything goes into, and everything comes out of. Short, sweet and simple.

    Unless there are verifiable addiction issues or something, I don’t see why all couples don’t do this. If you can’t trust your spouse, who can you trust?

    Maybe I’m naive.

    Edit: Happily married 3 years. No kids.

  5. 5. Mike

    My wife and I use Option E. All of our money goes into one account and we each get a set amount monthly for discretionary spending. This way we are sharing all of the “us” expenses like mortgage, food, bills etc and we have our own money to spend on personal things. This works well for us. My wife likes to go out for lunch/dinner with friends a few times a week. I like to golf and play other sports. Neither one of us can complain about this spending because it comes from our personal cash.

  6. One account, dole out spending money as needed or use debit card/VISA. Pretty much discuss all purchases over $100. Why make things complicated.

  7. If one spouse makes more than the other, the lower income spouse should invest their income and the higher income spouse pay the bills, including the taxes of the lower income spouse. This will ensure more income is taxed in the lower income spouses’ hands.

    Keep in mind that the lower income spouse should invest using their own money, that is, the source of the funds cannot be a gift from the other spouse.

  8. 8. guinness416

    We’ve used option B for a decade or so with no arguments or issues, just tweaks as our respective incomes have changed over time. Our savings and investments are the percentages we agree and are automatic debits to joint accounts on payday. Personally I have no time or interest in patrolling the bills my husband pays or his discretionary spending – if he wants to blow it all on beer this weekend that’s up to him.

    You can overthink this stuff in my opinion (and make it into a “my system is better than yours” thing – the inevitable I-trust-my-spouse-more-than-you-do comments are already coming in!). As long as you’re both saving/investing a good portion of your salaries and your system is low maintenance you’re in good shape, I think.

  9. Princess and I use a variant of the C option. We split each bill, but not always 50/50. We’ve been doing that for 5 years and it works fine for us.

    Our reason for going that way is because we have different financial and personal situations. She has 3 grown-up kids, while I have none. She has previous debt to get rid of, while I have my own mostly paid off.

    On top of that, when we bought a house, my income was quite a bit higher than hers was. Had we split 50/50 on the house, she would not have been able to afford it. So we split the ownership of the hous 60/40. Structural expenses for the house (i.e. maintenance, renovations, municipal taxes) are split using those proportions, while living expenses (i.e. heating, phone) are split 50/50. Grocery is variable, with Princess paying more than I do to take the kids into account.

    Another reason for us to keep our money separate is inheritance. Because her children are not mine, it’s better to keep things separate. If we were to die, her part of the house would go to her kids, while mine would go to my parents.

    Not the simplest solution, but it works for us! We are lucky that we don’t have any problem talking about money, even though we have different spending habits. :o)

  10. 10. Sampson

    My wife and I are full-on scenario D. It works because both of us share a similarly high degree of frugal-ness.

    I’ve always had a question for those splitting expenses with kids? I know that if my wife and I paid separate for kids (i.e. food vs. clothes vs. education) – which I know some who do – how is this split? If I was in charge of clothing my kids, they’d be wearing a whole lot of hand-me-downs.

  11. 11. Traciatim

    I really like to use the 50/50 split, mostly because I feel like the person that makes the most should get to enjoy what they make. You simply have to manage things in a way that the 50% from the lower income spouse isn’t going over their limits of expenses.

    For instance if you have someone that makes 50K and someone making 40K as a couple, and you are buying a house that shouldn’t be more than 30% of your family income you take 2 * (40000 * .30) and say that your housing shouldn’t be more than 24000 a year, or 26% of the family income. This way the person that makes more can pay for the nice cell phone that they wanted, as long as they pay for it themselves. Only shared expenses would be split this way.

    Obviously this doesn’t work if one person is making 55K and the other has a part time jop for spare cash making 15K :) . . . but I bet in a lot of cases this would work out for lots of people and I think is fair.

  12. 12. Oil Baron

    We have used option D for 8 years and it is working well for us. I’d say what matters most is that we have similar financial goals and spending habits. We have a rule of not making larger ($100) purchases unless we think about it for a few days. Other than that, we have no rules about buying anything. If you want it, get it. I admit that when we start wanting too much it falls a bit towards option F.

    I have trouble understanding how a couple can have a happy marriage if both spouses have different standards of living. Maybe some of these other options would work if incomes were effectively the same.

    There are good times and bad times. I’d hate to see the high income having a good time while the low income has to scrape by. There were a couple years where I was working and my wife was going to school. I doubt we’d still be married if I’d lived it up while expecting her to scrounge for food. You are in a “partnership” for a reason.

  13. 13. Mat

    We use Option D because we make nearly identical incomes (I pull in less than 5k more than she). So it works well, we keep completely separate finances, and all bills are split 50/50 unless we have a reason to do otherwise, and whatever we have left is ours to spend as we please. That being said, I keep very detailed personal finance spreadsheets for both of us, so as a couple we are always both aware of each other’s financial situation. So no surprises can occur.

  14. 14. Xenko

    The system that most closely matches what my wife and I use is E, except that the “personal” accounts only exist on paper, in our budget. We each have an allowance for the month that we can spend on whatever non-necessities we want (clothes, books, movies, etc.).

    Our incomes were very different to begin with (they have since become approximately equal), but it didn’t matter since WE are married so it doesn’t matter who makes the money. We both work the same amount of hours, and we both work hard, so from that perspective we are both contributing equally time wise; it just happens that some employers are more generous than others.

  15. 15. tom

    We are Option D all the way, with a few small additions. We make quite different salaries (I make approximately double what my wife makes). We put everything into one pot and pay all the bills out of it. Those bills include an emergency fund, a ‘new car’ savings fund, a car repair/maintenance fund, food fund, an RESP fund, an RSP fund, and quite a few others (this is all just tracked in a spreadsheet -> believe me it’s very low maintenance. We also give ourselves $50 each per week for clothing and eating out. That way, I don’t have to feel guilty about going out to lunch a couple of times a week, and my wife doesn’t have to feel guilty about buying $80 shoes. We take turns getting new cars every 5 years and try to keep them relatively frugal (~$20k). For any larger purchases like furniture, appliances, home upgrades, that comes out of any money left over (actually, it’s in the ‘extra money’ fund :) ) and we both have to agree on it. We have never over the 8 years we’ve been married had arguments over money with this system.

    I know what some of you might think – that it’s unfair if you make more for you to have the same spending allowance as your lower-income spouse, but we don’t see it this way at all. My wife has more flexible hours at her work, and can leave more easily in case the kids are sick or have doctor’s appointments. And when finances take a hit, like during her maternity leaves, we take equal hits to our spending allowances to compensate. Everything is equal, and IMHO when you’re married that’s the way it should be. I personally don’t believe that either partner should get any less or any more than half the financial inflow into the household. But of course this is probably unrealistic, since most people (outside this blog at least) can’t manage their own finances, nevermind trying to manage two peoples’!

  16. We share every penny. This isn’t perfect since it means we don’t necessarily have any of our “own money”. My wife doesn’t work so having separate $$ is not an option.

    Ideally I’d like to have most of the money shared and then we each get an equal “allowance” which we can spend on whatever. At the moment we don’t really have enough money to do this.

    Traciatim – I don’t understand your point that the higher income spouse should enjoy a better standard of living – do they get to go on a more expensive holiday while the spouse goes camping? :)

  17. 17. Mark

    My wife & I have been married for a little over 15 years now & although I make a little more than twice her salary, its all in the same pot & we pay the bills from there.
    In the beginning of our relationship she had mentioned that we should have seperate bank accounts & we do but its basically so that any gift purchases are kept “secret”.
    As most of the people who have written in, any purchase over 100$ is discussed and agreed upon (my wife is a shoe & pursehalic sometimes :)
    When a friend of mine found out about this he questioned my reasoning mostly because I also have a stepson that came into the equation;
    Like I told him, my marriage is a package deal & although my wife doesn’t make as much as I do, it doesn’t mean that she contributes less to our relationship… I think it helped him review his arrangment with his wife…

  18. 18. nobleea

    We have a combination of D and E. We have two joint accounts (one that used to be mine and one that used to be hers). Plus we each have our own credit cards. On the budgeting/cash flow software, I just merge the two bank balances together. Who cares where the money came from? Families are communist “From each according to his ability, to each according to his need “. Can you imagine if it was a capitalist system? Well little johnny, you got an A on your homework, so you get steak and lobster. But little billy only got a C, so you only get mashed potatoes.

    So it should be with finances. All the money goes in to one pool. Spending is done so as to advance the family’s goals.

    What happens once kids arrive and one parent becomes a stay at home parent? With separate spending, do they not pay any bills anymore? or get any spending money? Maybe they get an ‘allowance’ (some will find that degrading). Either way, it could breed resentment.

    IMO, to have separate accounts and have your money and my money is a result of so many divorces planting the seed of doubt, so people want an ‘out’ just in case.

  19. 19. James

    We have a single account, everything comes out of it.

    It’s a tad annoying to sneak a gift purchase in, but usually just try to sneak it into another purchase and hope my better half doesn’t notice the extra few bucks on that transaction…

  20. 20. Kathryn

    Re: Gift purchases. Good point. We usually buy each other’s gifts with cash so the gift stays a surprise even though the cash has come out of the joint account.

  21. 21. Sampson

    I’d be interested to understand how demographics plays a role in which strategy is adopted. Most of the late 20′s to mid-30′s DINKS I know have separate accounts. I expected to see more of that here, but have no idea what the demographics profile of readers/posters of this blog are.

    In the past, a more traditional family would have the ‘man’ pay the majority of expenses since the wife was stay at home or probably earned less. In this day I’ll be gender has much less effect – I’ll be the first to admit my wife earns more than me ;)

  22. 22. mjw2005

    Fascinating reading about everyones “system”….I always find it funny when couples come up with these elaborate budgeting systems..he pays the groceries…she pays the phone bill….We splite the bills 60.2% for me 39.8% for her…how do you keep track….Remember your married….if you ever got divorced it wont matter that you made $50,000 more than your spouse…he or she will get half…and that is how it should be….

    Traciatim – I hope your single…if your married my crystal ball is telling me that I see a divorce in your future with the system you propose…

    We personally fall into the One Account…”whats mine is yours” system…All our income goes to one account and all our bills come out of that very same account….Simple and easy…We give ourselves an allowance of cash to blow on whatever we see fit…

    Unless one of you has a severe spending/gambling/addiction problem I don’t know why people would NOT use something similar to option D

    I loved that quote noblea ““From each according to his ability, to each according to his need “

  23. 23. Up North

    We use the joint and personal accounts system, or “public” and “private” money as we call it. We each contribute a set amount each month to the joint account so that each of us have the same amount left over in our private accounts (a couple of hundred bunks for clothes, hobby items, etc.). My partner and I have been living together for two years and using this system the whole time. It’s great – we’ve never fought about money.

    At first, I was a proponent of the one joint account system at first, but her logic against it was “I don’t want to feel guilty about spending $80 on new jeans every once in a while”. Both she and I are pretty frugal people so, yes, guilt would definitely ensue on both sides if we ever felt like we were spending the other’s money on strictly personal items. We already feel enough trepidation spending our own money!

    I think the main reason our system has worked so well is that is not hard and fast. Sometimes money’s tight and I’ll put extra into the joint account if I have it lying around. She’ll do the same. It’s about being fair, be sensible and sharing. Kudos to the above comment regarding ability and need.

  24. 24. Amy

    My husband I do B. I’m 26, he’s 28, with a kid on the way. I make almost double what he does. Since the beginning of the marriage we have worked oposite shifts, so we only see each other late at night (after 11pm) or on the weekend. Because of this we could never go to the bank to set up a joint account, so we didn’t. When we first were married we together came up with a budget and then divided the bills/savings to whoever could pay them. We each keep track of our own money (we found we like to do it differently,and would probably drive the other crazy if it was all in one account) and then at the end of the month (or two) we review each others account to make sure that we are still within our budget. We keep each other informed about any purchase we might make throughout the month so when we sit down to review there are not any surprises. We have always considered all the money ‘ours” and we work together to accomplish our goals

  25. 25. Dave

    The arrangement that my wife and I have is, I pay all the bills, being the higher income earner, and she saves and investment (lower taxes) her income for any out of ordinary expenses, vacations, etc…
    We just started budgeting this year to divide up where the saves go and try to reduce some of the ordinary spending.

  26. 26. bob

    FT,
    Sampson sparked an idea – any way to do a poll to see what the blog’s demographics are? Like age, married/single, income range, net worth, etc? Would be very interesting to know what your readership consists of. Would be even more interesting to have a forum section to continue these discussions past the usual day-of-posting. Not trying to tell you how to run your site – just some ideas! :)

  27. 27. InstruMike

    My wife and I have been using option F for about 8 years. I’m 41 and she’s 38. We’ve been happily married for 14 years. I make a decent living and she stays home and raises our son and takes care of the house. We have had a joint account since we moved in together about 16 years ago. I also have a ING savings account for our emergency fund/ vacation/ savings. She worked full time making about a third of what I make and stopped working about 5 years ago. I’m frugal and she’s not. We found that we were barely making ends meet and never had enough money when it came to emergencies ( needing a new appliance, car repairs etc…). Once we created a household budget and adopted the “allowance ” system, everything fell into place. She was the one who suggested this type of system as she knew she wasn’t very good at keeping track of her spending. She withdraws her cash every payday and is able to keep track of what she spends much more efficiently, forcing her to budget effectively. It has completely removed the strain of arguing whenever we were short on money. Of course we’ve had to fine tune this over the years and make adjustments and sacrifices when necessary. Its worked very well for us. So far… there haven’t been any resentment issues and we’re much happier now that we know we’re living inside of our budget. If she needs more, we talk about it and come up with a compromise. I take care of all the finances like paying the mortgage and all the monthly bills and she buys the groceries, clothing, toys, presents etc. and has a little left over for herself. We normally split things like eating out, recreation and hobbies. When she does go back to work, things will inevitably change and I suspect we’ll be using something more along the lines of a combination of options E and F.

  28. 28. Elaine

    My husband and I are on the percentage system – he makes 57% of our money to my 43%. Date nights and vacations are all out of the joint account, so no confusion there. Basically anything we do together or that benefits both of us. Things I buy out of my own account are clothes, lunches at work, personal things, bike gear, etc.

    We have the opposite of your example though, I have the lower income but more personal spending money since he owns a car.

  29. 29. dee

    My husband and I do basically D with a small hint of E. We’ve been married 4 years and have one kid.

    As soon as we moved in together (engaged but not married) we opened a joint bank account and everything went in and out of the same place. At that time, I was in school and he was earning a really good income (3X my grad student stipend) and HE felt that it would be really unfair if he had more money to spend just because he made more money. My being in grad school and getting a higher degree would benefit us both financially in the future. He just really felt that we were in a partnership and it was for the rest of our life, so whatever was currently happening wasn’t necessarily going to always be happening.

    Now we’re both working full-time. He still earns more (only about %20) but both our paycheques are deposited into our joint account. We each get a cash ‘allowance’ for no questions asked spending, we have a weekly cash amount budgeted for ‘household’ expenses and we have agreed on amounts for emergency savings, short term savings, education savings and retirement savings.

    I think, generally, the system works for us because we have similar financial goals and levels of frugality. Sometimes I think financial problems in a couple aren’t necessarily the system that they decide to use but that on a more fundamental level they don’t agree about spending priorities.

    We’ve been really lucky.

  30. We’re the joint account. We have seperate credit cards and credit lines to build our ratings but all pay cheques go into the one chequing account and all the bills are paid from there.

  31. 31. Kathryn

    CanadianFinance ~ Great point. We also have separate credit cards to build and maintain our credit ratings but they get paid out of the joint account as you describe.

  32. 32. Yaw

    Me and my wife use Option E, with no fee accounts. Anything bought with our personal accounts is never questioned, and all bills/neccessities come from the joint account.

  33. 33. mfd

    My fiance and I use option C for the time being. We calculated a budget when we first moved in together and each pays 50%. When kids come along we’ll most likely flip over to option D or E.

  34. This was a really enlightening read. I’m not married yet, but my boyfriend and I have to figure out what we want to do before the time comes. For now, we’re kind of winging it. Since we’re not in the woo-ing phase anymore, we spend a lot less of stuff like restaurants/dates, gifts, and so on.

    I’m not sure which option we’ll pick, but these provide a lot of good choices. Thanks!

  35. 35. chococrazy

    Tax Resource (post 7) described what we do 100% and wrote it so clearly that I will just copy and paste their two paragraphs, but I’ve added a note at the end :)

    If one spouse makes more than the other, the lower income spouse should invest their income and the higher income spouse pay the bills, including the taxes of the lower income spouse. This will ensure more income is taxed in the lower income spouses’ hands.

    Keep in mind that the lower income spouse should invest using their own money, that is, the source of the funds cannot be a gift from the other spouse (my note: unless it’s a TFSA, in which case a spousal gift is fine – but that account is tax-free anyway).

  36. 36. nobleea

    “d the higher income spouse pay the bills, including the taxes of the lower income spouse. This will ensure more income is taxed in the lower income spouses’ hands.”

    I don’t understand this comment. Isn’t it just semantics? The lower income spouse can’t get their employer to stop taking off ALL taxes. How does it ensure more income is taxed in the lower income spouse’s hands? I mean, I can understand gains from the investments, but that’s not going to be much compared to the regular taxes.

  37. 37. Mountain Man

    We use option “E” . I like to build up my slush fund over a few months and buy something big, and she likes to buy a lot of smaller things. It works great for us.

  38. 38. chococrazy

    nobleea: If we’re talking about income tax withheld by the employer – the lower income earner can fill out a T3012 and prove to the employer that he/she makes regular RSP contributions. Less tax will be held on his/her pay cheques, meaning less of a tax refund. IF there is a balance owing, the higher-earning income spouse should pay the tax man – leaving more money for the lower earner to invest (taxed at a lower bracket). I think that’s what Tax Resource meant by that. It’s true that there’s no way for the higher earner to pay for ALL the income tax.

  39. 39. Peter B

    One of the posts asked about age so my wife and I are 31 and been together for about 12 years. When we first moved in together we had separate accounts and rent and bills were split 50/50. At the time we were both going to school full time so it made sense. Shortly after this arrangement we opened a joint account (PC Financial is great when you are a student!), and put our 50/50 bills into this account. My parents always argued about money because they had separate accounts and certain bills each would pay. With four kids this setup did not work well so I vowed to myself that I would not do it this way.

    Fortunately for me my wife is also good with her money so we kept our individual accounts from university and put all our money into the joint account and ‘paid’ ourselves an allownace no matter who made the most money.

    The setup has worked great since although sometimes I need to be reminded to open up the purse strings because we can afford the things we want every once in a while.

  40. 40. amit

    We use Option D for all practical purposes and a variation of option E for tax purposes. So, for all practical purposes, what’s mine is hers and vice-versa. But, when it comes to calculate taxes, all our savings are on her account, as she is the lower-earning spouse, and all expenses are mine. So, her salary goes directly into her savings account, while all our expenses (mortgage, groceries, credit card bills, car loans, etc. come out of my account). Of course, since none of our expenses are tax-deductible at the moment, none of this matters, but should I (the higher-income spouse) die, this will matter, and she won’t have to pay much taxes from what’s owned by me – my savings account will be very less, while her savings account will have all our savings.

    Every asset that we own is owned by both of us jointly – car, home, rental property. Both of us have life insurances – for me it’s a higher amount as she would need more to supplement my income.

    Should she start earning more than me – could happen from this year due to our jointly owned business, this will change, and we will shift to being 100% option D and all expenses will come out of joint account, while all our savings accounts will be converted to joint accounts.

    We have been happily married for 9.25 years.

  41. 41. amit

    One of my close friends used Option F, and when he died last month, his wife is in a mess. None of the bank accounts were joint accounts, none of the properties had her name on it. She is going through a hell of a time, especially in a place like India where the beurocracy is pretty strong, and every bank or police official expects a bribe to do your work. She still hasn’t received the insurance money, there is a long list of lenders on her door and since she was kept out of the household finances she doesn’t even have access to any of their savings funds. Truly an eye-opening situation.

    I wish people take care of their finances by giving a sound thought about what’s going to happen should one of the couples die unexpectedly.

  42. 42. Andrew

    We use E, only in reverse.. All our income and such is deposited into our own personal accounts. We then have a joint account for all expenses and shared purchases. An equal amount is transferred automatically from our personal accounts to the joint account after each payperiod (every 2 weeks).

    Whenever the bills exceed what is available in the joint account, (or there is a big purchase), we each transfer over an additional amount sufficient to handle it. Been doing this for 11 years now and it works pretty well for us.

  43. 43. Gates VP

    Thank you for elucidating the steps. However, all of these points are actually just stages in the evolution of a system.

    At the end of the day, the law requires that 50% belongs to each party. So the joint account is that natural evolution of any married system. All long-term couples end up at (D), if not mentally then at least legally.

    But look at it from the start to see the evolution.

    The simplest method is (B), separation. “You take these, I take those”. But the method has no long-term staying power. The bills will change, needs against those bills will change. Plus, most couples move into a big purchase at some point, and this is not really “split-friendly”. “I pay the mortgage, you pay the car” doesn’t really scale when you need a second car or a big repair comes around. So it inevitably leads to…

    (C), 50/50 split. Now, the couple simply have to agree on the bills and then they both dump money in the pot. This is easier, it’s not “my car” and “your groceries”. It’s “our” stuff. Of course, now that we’re both paying for “our” stuff together, it’s time for…

    (E), joint and personal accounts. Now we can manage our own finances and let the partner help manage the “group finances”. Of course, the 50/50 split that we’re using to manage will inevitably break down. Stay together long enough and someone is going to get a bigger raise, lose a job, go back to school or have a kid. This inevitably leads to …

    (A), percentage split.

    Now, one of two things happens. By this point, the couple are typically married (or equivalent to married). Whether by common-law, child-bearing or actual marriage. (All of which basically imply that resources are now shared equally)

    Once you’re into the equal sharing of resources, then the notion of (E) becomes kind of futile. So you slowly start drifting towards (D). You become joint on each other’s accounts, you close the extraneous accounts and you start moving money together.

    The only real problem that remains is that you don’t like how your partner spends “your” money. Couples inevitably disagree on discretionary purchases. So that’s when you get to option…

    (G) – Joint accounts and “Adult Allowances”.
    It’s kind of like (D) because all of the money is shared.
    It can technically be done without separate accounts (just cash). But really, post marriage, the “separate accounts” are nothing but a convenience, a personal piggy bank.

    But AFAIK, this is the end of the line for partners.

    Everything is still shared, but couples get to fund their own hobbies from their “personal spending”. It makes “taking out your partner” into something really special. B/c you’re actually sacrificing your money for the week.

    Thanks for the great post. I would like to propose that (G) be added to the list :)

  44. 44. Wealth Manager

    We have person/joint bank accounts, investment accounts and credit cards.

    Individual paychecks into personal accounts (employer requirement; we both work for FI’s) and we keep $100/paycheck each for “whatever we want” and the remainder all goes into the joint account. The joint account covers food, mortgage, bills, clothing etc. The personal accounts get used mostly for gifts and personal items which we deem outside the norm for joint money use (have never had an argument about this last point in 8 years of marriage so far! Many cases we use a “top up” approach so only some personal money is used).

    We each have individual credit cards for those gifts and personal items mentioned above while the joint credit card is used for virtually everything we can put on it (for the points, purchase security, and additional warranty) and pay out of the joint account (balance paid off monthly).

    We also have individual investment accounts – primarily due to ease of transfer in/out of personal/joint accounts but also to make tax reporting a little easier (less of a headache than 60/40 splitting gains and such). As well as these, we have brokerage based RRSP accounts, TFSA accounts and a joint family RESP account for the children.

    The only area we could improve upon is non-RRSP/non-TFSA investment account contributing. As my wife and I are roughly 60/40 in salary, the “higher income earner paying the bills” as noted above would be slightly more tax efficient. Then again, with the TFSA now being an option, this isn’t going to be that big of an issue since we really won’t have much at all left over for standard investment accounts after maxing RRSP’s, the RESP and TFSA’s!! Accomplishing all that is a feat in itself.

    Excellent thread here – really enjoyed reading all of these.

  45. 45. InstruMike

    My situation would be closer to G than F. We both have “allowances” and as I don’t make the same amount of money every payday, my allowance will vary to a point and anything left over is considered shared and will usually be put towards debt/investment or entertainment/recreation.

    A follow up to amit. The house is in both of our names. The car and about half of our RSP is in her name through spousal contributions. She also has a small non-registered dividend paying investment account and is in the process of opening a TFSA.

    Wealth Manager: I have also contributed $2500 per year to RESP for 2008 & 2009. That government grant of 20% for each year is great. We both have our RSP’s with discount online brokerages (Credential Direct) and I have a maxed TFSA (ING) which I use as a combined emergency fund/savings account. My mortgage is up for renewal in July and I’m considering starting the Smith Manoeuver (I’ve read the book) for a non-registered investment account but haven’t completely made up my mind yet.

    I have a question about TFSA’s if anyone can help me. Does the maximum amount of $5000 accumulate yearly?

  46. I think that joint accounts are the thing to do.

  47. 47. Oil Baron

    InstruMike: “I have a question about TFSA’s if anyone can help me. Does the maximum amount of $5000 accumulate yearly?”

    Every year you can add $5000 (adjusted with inflation to the nearest $500) to your existing account, plus any amount you’ve taken out in the past.

    An example: If you put in 5000 now, and take it all out in August, you get to put in 10000 in January. If you don’t take any out, you can still add 5000 new.

  48. 48. DK

    Chococrazy,

    Re post # 38, I think you mean T1213. The T3012 is for something else entirely.

  49. 49. chococrazy

    Thanks for the correction DK… that’s what I meant :)

  50. 50. Elbyron

    I’ve lived with my girlfriend for nearly 4 years, and we’ve never fought over money issues. We kept one spreadsheet for expenses such as mortgage, cable, insurance, and other housing stuff. The values were updated every few months, totalled, and then split 50/50. Since I own the condo and hold these accounts, I pay the full amount of these bills. A second spreadsheet was used to record “our” purchases, such as groceries, restaurants, household, recreation, and vacations. Usually this is based on our credit card statements. Again, the costs are totalled and split evenly. The housing and purchase balances are added together to determine who owes who and how much. One of us then pays the other by making a payment to the other’s credit card. Maybe it sounds complicated, but it worked out nicely and provided us a really good way to do our annual budgeting. It was also quite fair since our salaries are fairly similar. If our relationship were to fall apart, financial issues would be easier to sort out.

    The above is in past tense because things changed when I proposed last September. As Gates pointed out, it is really a system that needs to evolve. Holding individual credit cards and bank accounts starts becoming a pain, as is keeping up the spreadsheet every month. Our first step was to apply for a new joint credit card. By combining all our spending on one card, we can accumulate points much faster. But the real benefit is expense tracking – all our purchases tracked in one place, thus providing a budgeting alternative to the spreadsheet. We only use cash or debit when absolutely neccessary, so that we know where our money is going. So far we’ve just been alternating paying the credit card bill, which obviously isn’t fair but we plan to merge our bank accounts anyway so it doesn’t matter.

    Right now we’re still in transition, making sure our old credit cards don’t get any new charges, and still maintaining separate bank accounts. The goal is to eventually end up in option D. Even though I’m a saver and she’s a spender, reviewing the credit card statement together keeps her from blowing too much on frivilous things like a new purse every month. Yes, every purchase is scrutinized (for both of us), but this is not “a nightmare”, it is just a way to ensure we stay on budget. The key is to avoid criticism and blame – and don’t force your partner to justify every little thing! As long as a guilty conscience can keep her spending under control, I don’t think we will need to resort to option E.

  51. 51. Cowtowngal

    Personally, my husband and I use Option A: the percentage system. I know that many extol the Joint Account system and for those for whom this works, I say congratulations. For me, I need to control the money that is left – it’s emotionally tied into my base as an individual. This has worked well for us but we are contemplating a family and the thought of living on an allowance doled out to me by my husband terrifies me. Ah well, small steps.

    I’d like to comment on Option F: the Dictator System. My friends work on a modified Dictator system. In this situation, his salary is substantially lower ($55K to her $95K), and he controls all the money. Rather than have even an allowance, she is admonished not to spend a penny (!). As you say, this leads to deep resentment and she understandably has occasional spending fits where she’ll spend enormous amounts on their children as a proxy to herself. In turn, this leads to enormous levels of disparity: he has a growing collection of high-tech toys; she dresses at Superstore; her daughter at Aritzia.

    I am told that this setup is her way of compensating for being more successful.

    Thanks for the article – well-written and enjoyable.

  52. 52. Happily Married

    We use a combination of C & E with our own twist added.

    My husband and I (no kids)- earn approx. the same amount (some years I earn more, some years he does- but it is usually within 10% of each other).

    We each pay for different bills so that it works out to paying 50/50. Then we make a big picture budget (i.e. if our goal is to make extra mortgage payments of 25,000 that year and also to put aside 15,000 for a renovation or travel etc, we build up those accounts based on who has the money first in their account after expenses & RRSP/investment contributions are paid – we both get paid a base salary plus commission and bonuses -paid out at different times of the year which is why we have the first paid, first to contribute rule in our “goal acount” – the goal account doesn’t always work out to be 50/50 in terms of what we each put into it every year but we don’t care since it is a financial goal – not a bill).

    We pay ourselves first so whatever is left once the bills & savings & “goal” funds are paid, is up to us to spend. We do not go over each other’s spending habits.

    We have 1 joint VISA. I pay for what I spend on the Visa and he pays for what he spends (if it was a joint purchase, then we split it).

    We have 2 joint chequing accounts. I am the leader of 1 of the accounts (the one that has my pay cheque going into it) and he leads the other (his pay cheque goes into it). We can both see what the other is spending (so it prevents me from going on a crazy shopping spree- I need the accountability to him- it is not that he doesn’t trust me- he has never questioned my account).

    Another reason we keep the accounts separate is because I personally feel rewarded by sticking to a budget- (as you may have noticed, i was not always good at budgeting and would spend more than I earned), now I know that I have self control.

    We have said that this is a temporary solution. In another year, we are going to only have 1 joint account- it was more about teaching myself control & responsibility. I feel that I am on my way of mastering my finances.

    We are each responsible for investing in our RRSPs- we each use the ETF couch potato strategy so there is no confusion over what to buy in our portfolios or when to buy either.

  53. 53. LakeTown

    Our scenario keeps changing. We were both students when we got married, so pretty much split things 50/50. I graduated first so then my husband continued to contribute a fixed amount to the monthly expenses, and I took on any new expenses (car, gas, insurance, entertainment, cell phone, etc.) When I went on maternity leave for a year, hubby continued his fixed contribution, and I handled everything else. Now hubby is stay at home dad making no income, so of course I pay for everything now.
    We have a joint account which the mortage and most of the house bills come out of. Then we both have our own separate accounts which we are free to spend as we please. Even when he is able to contribute, I am always the one who physically pays the bills. He is pretty hands off, every once in a while I show him a budget of what is coming in and out each month as a reminder. The arrangement probably does not make sense to most people, but he knows I will pay the bills, and what little money he has, I don’t care how he spends it. He does not ask, or worry about what I spend because he knows I have the financials under control.
    The one idea I have been toying with is an allowance of sorts. Since he is at home making no income perhaps I should give him a little cash so he does not have to ask me for $ if he wants something. I have not even brought the discussion up yet, just thought it was interesting that it was listed in the above options. I don’t want him to feel as a child waiting for a handout every Friday.
    I realize we are fortunate enough that my income can support our family of 3, so finances are not a stressor in our marriage. Of course we have some interesting discussions about the topic and our views do differ at times. Sometimes when I am feeling grumpy I resent that I have to carry the load, but then I remember that I value my son being able to have that extra time with his father, and I can’t put a price on that. So, we have to make a few cut backs, that is what we agreed to, and hey, I didn’t marry him for the money!

  54. 54. Norm

    Kathryn
    I agree with your share it all system. After 47 years together my wife and I have never had a problem with money. All accounts are joint for survivor benefits.
    No arguments about money but I guess we both had a childhood in the 30′s that made us recognize the value of money.

  55. 55. ASDF

    We are DINKS in our mid-30s and she earns a bit more than me. I pay all the bills (mortgages, bills, credit cards, everything) and am usually left with very little at the end of every month. She is the saver and saves all of her paycheck – so we save just over 50% of our combined income. We use credit cards for everything, and review them to see how our spending is and if we need to slow down spending at all. I even try to squeeze out RRSP and TFSA contributions out of my salary.

    I’ll call this Option I – as in I pay for everything.

    Works really well for us, but we haven’t heard of anyone else doing the same.

  56. 56. Sick of the Whining

    Option B or C works for me, which we use a combination of both, we take some bills on personally, and we split some bills 50/50. I don’t think that the percentage method or the joint account plus personal account methods are fair to the higher earner. Hear me out. I’m all for sharing my money with my spouse. If my spouse ever needs money from me, I give it up with no question. The problem with the percentage method and the personal/joint account plus equal spending money methods is this…Spouse A is the higher earner who makes $80,000 per year. Spouse B is the lesser earner who makes $60,000 per year. Why does Spouse A earn more money? Spouse A went to college and then grad school, with the hopes of one day earning enough money to not only provide for a family, but also to enjoy some of the luxuries that life has to offer. Spouse B decided nah–grad school is not for me, I’m satisfied with my $60,000 a year income which I can comfortably live off. Why should Spouse A be penalized by paying a larger percentage of the household bills, leaving Spouse A with less money to spend or invest the way Spouse A wants, simply because Spouse A fell in love with and married Spouse B who has no desire to ever earn more money? I see people on here talking about what is fair. That my friends, is totally unfair. Spouse A is limited to living off of the same disposable income as someone who did not work as hard as Spouse A in order to be able to afford to splurge on some things. As long as Spouse A is responsible for the household and puts in his/her part and makes wise investments choices to benefit the future of both spouses, then Spouse A should be allotted a larger portion his/her own money that he or she earned because Spouse A earned it when Spouse A worked hard…Spouse A should be allowed to buy a little more than Spouse B. If Spouse B wants to buy more stuff or wants equal disposable income, then Spouse B needs to implement a plan to go back to school or become more ambitious in seeking a higer paying job. Any other plan is similar to redistribution of wealth, penalized more for making more. Geez.

  57. 57. Marsha Poole

    Feel like a roommate instead of a wife

    I wish I could chime in on what my husband and I do together with finances, but we do NOTHING. Been dating off and on for 13 years and recently got married June 2012 with problems starting off the bat due to my sick mother. I have a 13 yr old daughter who’s father stays out of work a lot so child support is not always constant. When it is regular it goes straight to her private school with nothing to spare. I also pay her health insurance. My new husband does not want to put me on anything (checking account, health, car, cell phone, beneficiary, etc.)! I don’t feel like we are even married. I don’t make near as much as he does (my company has not given raises in four years) yet he resents the fact that I can’t contribute as much. I do good to pay all my bills and needs of my daughter. I clean his house and cook, but I am not considered as equal. I live an hour away from work so a lot of the money goes towards gas. I do buy groceries, eats, presents for his family members on birthdays, Christmas, etc., yet it’s not good enough. Don’t even sleep in the same bed due to his sleep apnea and he not wearing his Cpap machine. I feel like a roommate and it’s very hurtful and insulting. I made him my beneficiary immediately and changed my name. He’s done nothing to show he is married. Still no wedding pictures downloaded off disk and it’s been a year since we got married. Sorry, just discouraged.

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