Hi everyone! I hope your week is going well so far. I have a special treat for you today!
I’m still catching up after FinCon and being thankful that I haven’t been in a car for the past two days, so I am very glad to be introducing you all to the wonderful Melissa over at Sunburnt Saver.
She is here to talk about how to split your household bills when you move in with your significant other! As some of you may recall, back in our old apartment, R and I split everything pretty much down the middle. We went with the “his and hers” option Melissa discusses.
However, when we relocated back in April, we made the decision to combine our finances. It has really simplified our lives (financially and otherwise), but I know it’s not a decision many come to early on.
That’s where Melissa comes in. She’s going to highlight 3 ways to split the household budget with your significant other, so read on to find out what she recommends! And then go check out her beautifully designed blog and show her some support, okay?
Are you thinking of moving in with your significant other, or are you planning on moving in with your spouse? It might not be the most romantic thing to think about, but before you take the leap, it’s time to have the money conversation. You two will need to talk about how to split your household bills after moving together, once you’ve determined what bills you two have and how much you both owe on a monthly basis.
First Step: Know Your Own Monthly Income and Expenses
The number one thing couples fight about in relationships is money. Unfortunately, much of this is because couples didn’t talk about their finances before moving in together. Don’t be a statistic! Take an hour or so out of your blissful day together to discuss finances now, before you have your first big fight (and trust me, you’ll have one. Just don’t let it be about money!).
The first thing you will want to do is determine your own monthly income and expenses. When B and I moved in together, I didn’t actually know how much I spent each month. Before we sat down, we both went over our individual expenses and came up with a ballpark estimate of how much we spent on our own ‘stuff.’ This includes the variable expenses, like gas, groceries, and personal products. For more information on structuring your budget, you can check out my post on how to set up a budget from scratch.
We then determined how much we brought in monthly. From there, subtract out the expenses and voila, you have savings! You can go further and determine if you want to have a joint savings account, but for the purpose of this post, we’ll stop and get on to determining who pays what.
At this point, you will have to make a decision that has plagued hundreds, if not thousands of couples before: do you combine your finances, keep them separate, or do a mixture of both?
Option One: Ours
Option one is generally seen as the option that (some) married couples choose: combining finances entirely. This is generally seen as good if you don’t have a whole lot of debt, or if one spouse is planning on being a stay-at-home-parent.
This option is preferable if you don’t have a lot of debt (student, consumer, or other) because one person isn’t taking out, say, $400 a month for ‘his’ student loans or ‘her’ consumer debt. Taking that much out for one person’s debt can build resentment, so joining your finances completely is best seen as an option for those who are pretty much equal.
Tip: Before combining finances entirely, talk about everything. In fact, this method should probably be called ‘are you absolutely sure you’re on the same page? No seriously, check. Write it down.’ The thing about combining finances completely is that your spouse sees everything you buy. Everything. Every little hair tie, salon visit, iPhone 6 Plus purchase, hair gel, underwear, etc.
Again, this is fine, but you and your spouse/SO should discuss this ahead of time and either set up a ‘fun money’ amount that you can both spend, no questions asked, or you should determine how much you both want to save monthly.
By setting up a fun money maximum ($50, for example) or determining how much savings you have to have by the end of the month, this allows for a little ‘play’ in your budget to accommodate those one-off purchases (like hair ties or underwear that you randomly need), or for things you like to splurge on (like a visit to the salon or some new accessory for your gadget).
Option Two: His and Hers
The ‘his and hers’ option means you both keep your finances completely separate, but you split the household bills equally (or based on who makes more) and pay for your ‘assigned’ household bills.
This option is generally for couples that have just moved in together, or marriage isn’t on the horizon, but that’s not necessarily true anymore. More people are using the ‘his and her’ option, partly out of convenience (no opening a joint checking account) and partly because they just don’t want to combine finances.
For example, B and I have been together almost 5 years, and marriage is on the horizon, but we’re not sure we will ever combine finances. For me, I grew up watching one parent control the purse strings, because my Mom was the stay-at-home parent, and I told myself I wanted to control my own money, even if I made mistakes along the way.
For his part, B grew up with two working parents who combined finances and didn’t argue about money, and they taught him really great money skills from a young age. Due to our different, but complementary backgrounds, we came into the relationship wanting to retain our autonomy.
Tip: Prioritize who will pay bills, and still talk about how much money you want to save monthly. For us, B owns the house, so he pays the mortgage and all bills associated with owning a house (electricity, gas, water) – we split those bills equally, and I transfer money from my bank account to him electronically. B doesn’t care about owning a phone at all, while I love my phone and data plan, so I pay for our phones entirely. Since I make a bit more, I’m fine with that ‘extra’ expense, since it is one I’d have for myself regardless.
Caveat: With this option, you both have to be responsible for your bills, but especially the ‘big bills’ payer. B has a monthly reminder on his phone and computer that reminds him when the mortgage and electric bills are due (our two biggest expenses), and he reminds me to transfer the money over to him. This means I have to be extra responsible too, because as the one not actually paying the bill, it’s easy to forget to transfer over money. You have to think of it as another bill to pay.
Option Three: His, Hers, and Ours
Option three is the ‘Goldilocks’ version, and it can go one of two ways: either you both have a ‘his, hers, and ours’ checking account, or you have a ‘his, hers, and ours’ savings account. You can have both a savings and a checking account too – lots of options with this!
A lot of people find the ‘his, hers, ours’ option the easiest, and it is helpful because both people can see exactly how much things cost every month.
With the joint checking account option, you and your spouse/SO transfer in however much your bills are that month. If your electric bill that month was $200, you would transfer in $100 and so would your spouse/SO. You can base the amount you transfer in on a percentage of how much you make, too – like the ‘his and hers’ option. If you make less, you and your spouse/SO may agree that you take on one fewer bill, or pay less to the rent or mortgage payment.
Tip: In addition to being helpful because both people can see how much the bills are every month, if both of you hate paying bills, this option lets you take turns paying bills out of the joint checking.
A joint savings account can be helpful too, and you can set it up for a variety of things: if you’re engaged, the joint savings account can be your wedding fund, or if you’re already married (or engaged/dating), it can be your emergency fund/emergency household repairs fund/travel fund. I’d advise against your joint savings account being a retirement fund, though, simply because you’ll want a better return on your retirement funds than what a bank savings account can offer you.
Melissa blogs at Sunburnt Saver about personal finance, with an emphasis on saving, for young adults. With a background in finance and budget, Melissa is passionate about using her skills to help other young adults make smart money choices. Join Melissa on her journey to avoid debt (and sunburns) and navigate life after college! Read more at www.sunburntsaver.com.
Which option do you and your spouse/SO use? If you’re single, what have you used in the past or which option would you want to use in the future?