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.
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.