Most couples with a disparity in income either split cost roughly along salary lines or have shared expenses. The idea is that you’re a couple, not two individuals.
I think there are no “right” or “wrong” answers to this, but different things will work for different couples depending on their circumstances. You need to come to an agreement with your partner that you both feel okay with, and that doesn’t lead to one of you resenting the other. That’s what it comes down to.
**Disclaimer – This article was originally published as a post on Reddit and here’s the link to the complete thread there. I’ve only posted it here so that it’ll be useful to the readers of Personal Finance Freedom. Thanks to the original authors and due credit to everybody.
But a few considerations to keep in mind might be:
The Basic Stuff
How long have you been together? Do you see this as a long term relationship in a forever kind of way, or do you think you might break up in a year or two?
How much you join or pool your finances really depends on whether you actually see this working out in the long term.
Nobody has a crystal ball, sure.
But it’s a decision you really shouldn’t rush.
Take it slowly enough to make sure both people are comfortable with each step. Rushing it too much and you may end up regretting it if things fall apart.
But if you really do see each other as life partners, regardless of marital status, then consider joining your finances.
Think about it: Would you really want to live vastly different lifestyles as a couple? When you retire, do you anticipate one of you living the life of ease while the other struggles? Of course note. So somewhere along the way, you’ll end up moving from a “mine and yours” to “ours” consideration.
Income Disparity For Couples
If it’s a case of a couple who earn similar money, then 50/50 can feel fair.
But if one person makes a lot more money, then the discussion starts.
Personally I think the advantage of a percentage split is that it allows both people to maximize their lifestyle at any given time, without unduly burdening the lower income earner. But that’s not the only option.
Some couples live off one salary and bank the rest.
Some couples pool everything and just pay everything from one common pool. Others will adjust the percentage that they contribute based on who is picking up the slack in other ways, for instance, the higher income earner will contribute more to the expenses.
But the lower income earner who has more free time might do more of the household chores.
It’s kinda up to you to find a system that works, and adjust as you move through life.
At What Point In Life Did You Meet Your Significant Other?
For couples who met young and started out together, maybe they feel like they both came into the relationship with very little, and “built” their lives together.
In many cases, one partner made sacrifices to allow the other to get ahead, like staying home with young children while the other partner grew their career, or working extra so the other partner could go back to school.
These joint decisions normally lead to a sense that what the couple has in terms of money or assets belongs to both of them, because they built it together.
On the other hand, couples who meet a bit later, once their careers and finances are more established, might have a different view and be more inclined to keep things separate.
If one partner comes into the relationship with a sizeable amount saved up, and the other has nothing and also wasn’t involved in any way in the first one’s success.
It’s understandable that the first partner might feel uncomfortable just forking over half of what he/she has.
The Legal Stuff For Couples
If you’re not married, then the laws of whose money belongs to whom will vary based on how long you’ve been living together and, to some extent, what province you’re in.
For instance, In Quebec, there’s no such thing as a common-law marriage for the purpose of division of assets.
So even with unmarried couples who have been together for decades, then “what’s mine is mine” and “what’s yours is yours” stays the case.
On the other hand, this may be different in other provinces.
Are Kids Involved?
This changes the equation a LOT.
If you have kids together, and/or if one or both of you have kids from previous relationships, then you need to figure out what’s fair here.
For couples who are paying child support or who maintain joint or full custody of kids from a prior relationship, how comfortable are you with your partner sending some of “your” money to their kids or their exes.
Likewise, if you have expenses for children you have together, presumably they should be shouldered by both of you.
For couples who meet later in life, perhaps after their children are grown, there’s also the notion of inheritance to take into account.
What happens when Mom dies, and Dad meets someone new and suddenly the estate belongs to her and her kids, instead of to his kids?
Especially when there are major assets involved, it’s a discussion that should involve a lawyer.
Maintaining Financial Autonomy
I can’t emphasize this one enough: Whatever method couples choose even married couples they should each keep some accounts and credit in their own individual names that isn’t joint. Always.
Say you get divorced later in life.
There are women (and some men, but mostly women) all over Canada who can’t get credit because thy have no credit history, since everything was in their husband’s name for the length of their marriage.
Nobody wants to believe he’s going to have that mid-life crisis and leave you for a younger model, but honey, it happens all the time. Keep up your own credit history.
Furthermore, what if one partner dies? The joint assets and accounts are often frozen for a while after the death of one partner or spouse.
If you don’t have an account solely in your name, you may have trouble paying the bills until the estate is settled.
And, more pragmatically, two adults shouldn’t have to babysit each other on every tiny little purchase.
Obviously this will vary based on how tight your budget is.
But if you trust one another, you should each have some financial independence and the ability to spend on things without getting your partner’s permission.
Even if it’s just to be able to buy your partner a birthday present without them finding out.
The Practicalities Of Being Couples
Personally I recommend maintaining three types of accounts: Yours, Mine, Ours.
Some couples deposit all their earnings to their personal accounts, and then transfer a pre-agreed amount of money each month to a joint account that is used to pay the household bills and expenses.
Everything else, they keep and manage separately, including expenses, bills, and long-term savings.
Alternately, if you’re ready to merge your finances more, you can flip this: Deposit all income and earnings to the joint account. Pay most expenses and bills and long-term savings from there, but transfer a pre-set “allowance” into each individual partner’s account each month to spend as they wish.
Are you planning to spend the rest of your life with her.
Let’s look at it like this then assuming your 50/50 split. You’ll have excess money, whereas she’ll spend all her money on basic expenses.
Especially as you get older and more expenses become shared (house, kids, etc). You’ll either be able to lead a completely different lifestyle than your partner. (you drive a Lexus, she drives a broken down Beater) or you’ll be able to save for retirement and she doesn’t, or some combination.
Then as you hit retirement, she’s poor, she has no income except government and you have a ton of money for retirement. So what happens then? She eats cat food and you have lobster? You go on vacation, she stays home.
IMO, when it comes to long term relationships with an income disparity you either split expenses based on income or you’ll lead a life that has inequality in your very own home. I just don’t see how it can work.
Now, if one person makes, $100K and the other $200K, sure you can split 50/50 and it’s not going to have the same issues, this only applies assuming one person is on a lower end salary.
Please let me know your thoughts and comments below.
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