If relationships are about sharing, isn’t combining your finances the inevitable, last step in a mature relationship? Not at all. According to a recent survey, half of us maintain separate bank accounts from our partners. If you’re always fighting over shared expenses, splitting finances might be worth it for you.
The downside to shared finances
Good communication and trust is important in a relationship, and that can include pulling a complete U-turn on your financial planning if it’s simply not working out. Pooling your income and expenses has its downsides, which include:
- Lack of financial independence: A joint checking or credit card account can be as much hassle as coordinating between split accounts, especially if you aren’t 100% simpatico about what’s allowed when it comes to discretionary purchases. Even if you agree to a fixed monthly spending budget for each person, the rules can be easier to ignore when the money is coming out of an undivided pool of income. Some couples prefer separate accounts because they can impose a a hard cap on individual spending (assuming each party covers any shared expenses first).
- Unwanted scrutiny over purchases: You might think you’re okay with partner’s spending habits, but over the years, their bone-headed impulse purchases off of Instagram might get on your nerves. You also might want some level of privacy for holiday presents, or even, say, buying butt acne cream from Amazon.
- Different spending goals: One person in a partnership might want to pay down debt more quickly than the other person, which can lead to arguments about what might be perceived as unnecessary spending. If you’re at odds over spending priorities and feel like you need a referee, splitting your expenses might be worthwhile.
- No back-up plan: If your relationship goes south and you find yourself going through a breakup, peeling apart smooshed-together finances can be very stressful. For some people, ensuring that they will have financial autonomy in the event of a contentious break-up offers essential peace-of-mind.
It’s worth mentioning that if you’re married, your finances are already legally merged, which means your spouse’s income is now effectively yours as well. That said, it’s still worth keeping separate accounts if it means fewer fights over budgeting.
Common ways to split your finances
Couples often maintain a checking account for shared expenses like rent or utilities while keeping separate bank accounts for their own personal spending. Each person can set up auto-payments from their personal accounts to the shared account, covering their portion of the expenses. Expenses with a more variable cost, like food, can be tallied at the end of the month and then paid off via deposits to the joint account, or both people can agree to contribute a ballpark amount to their shared account and make good on any overages later.
When it comes figuring out how much each person should pay, there are a few approaches you can use based on your respective income levels.
Sharing equally: A split of all expenses down the middle is easy to calculate and ideal when both people earn roughly the same amount of money. Of course, this approach can be much less fair if one-half of the couple serves as the stay-at-home caregiver to children, or one person is in school and the other is fully employed.
Proportional sharing: Couples with disparities in income often share their expenses as a percentage of income, so that if one earner makes 70% of the household income, they cover 70% of the expenses (e.g., if rent is $2,000, they’d pay $1,400).
Proportional by usage: This variation accounts for usage of expenses, so that high earners don’t feel punished by their partner’s slovenly spending habits. You might keep proportional sharing for fixed expenses like rent, with smaller bills like cable TV or data plans paid by the person who uses them more. This can apply to discretionary spending, too, if it goes beyond an agreed-upon threshold. Splitting finances in this manner requires some extra negotiation and careful tracking, but it can also be more fair for all parties.