Did you know that 24% of people consider their partner to be irresponsible with money? Worse still, a massive 62% of couples regularly argue over finances.
That’s according to a study by Royal London, the insurance and pensions provider.
Another study claimed that money worries are responsible for up to 40% of divorces, with the first working Monday of the new year dubbed ‘divorce day’ by lawyers. The theory is too much spending over Christmas pushes couples to the brink until one of them snaps.
Now I don’t want to sound smug here, but me and my fella literally never fall out due to finances.
That’s not because we are super rich – oh how we dream of being super rich – but because we have a water-tight plan when it comes to money management. And crucially, we are both happy with it.
It’s fair, it’s simple, and it gives us the freedom to spend independently without impacting the other person.
Want to know how we do it? I’ll tell you.
Keeping Things Fair
When we decided to move in together, I was anxious, because I knew we would need to have ‘the money’ conversation.
My other half is a pretty sensible chap, but he was quite spendy when we were out and about and we hadn’t chatted about finances before. For me though, it was going to be super important if the relationship was going to last. I had to be able to trust him financially.
So we went to the pub after a flat viewing, and I tentatively broached the subject.
Happily, he had been worrying about it too, and after laughing at ourselves for a few minutes, we identified that fairness was what mattered most to us.
Luckily for us we earned similar salaries, so it was easy enough to split our outgoings 50/50. If that’s not your situation I have a solution for you a little later on.
We also wanted our system to be simple. We took a ‘set and forget’ approach so it was all taken care of in the background.
Here’s what we did.
Joint Account for Bills
We worked out our monthly outgoings, added 10% on top, then split that figure down the middle. Then we set up direct debits for our half of the bills to go into the joint account at the start of each month.
All of our joint bills (so excluding mobile phones, gym memberships, etc.) come out of that account by direct debit a few days after our money goes in. That leaves just enough to cover food and petrol.
The amount we calculated for food and petrol took some tweaking as they are never exactly the same. But after a few months you get a good idea of your weekly spend, and that additional 10% covers the more expensive months.
We made sure to use a joint account that gave us cash back on regular spends too. This won’t make you rich, but over the year it adds up and can help at Christmas, for example.
Or, you can add it to your savings pot.
Regular Savings and Emergency Fund
If you can afford to save as a couple it’s a really good idea. Even if it’s just £20 a month.
We have a savings account connected to the joint account. We put a small amount in there each month, but on top of that, anything left in the joint account at the end of the month transfers across into our savings account.
This allows us to build an emergency fund for unexpected ‘surprises’, like the car needing new tires or paying a plumber to fix a leaky radiator valve.
This is money to forget about. Let it grow slowly, and don’t touch it unless you really need to. It’s a safety buffer that can totally save the day, and it’s such as stress buster too.
Plus, you can earn interest on these savings so they actually make you money!
Individual Spending
Since our outgoings are all taken care of with that single direct debit at the start of each month, whatever we have left from our salaries is ours to do what we like with.
If I want to buy lunch from Pret every day of the week it doesn’t make a difference to my partner, and if he wants to blow £150 on shots for him and his mates that’s his business. Not that either of us do those things very often!
The point is, we have separated our incomes into joint money and individual money. And we have systems in place for controlling spending and protecting ourselves from unexpected bills.
It means we can get on with enjoying our lives however we want to, and we almost never have to talk about money, which means we never argue about it either.
We both feel like we have financial freedom, but at the same time we are honouring our financial commitments to each other.
Which Bills Should Couples Split?
You will have to decide on this for yourselves. Most are pretty obvious, but there are some grey areas.
One place we found a bit of a weakness in our defences, was food shopping.
I go through a lot of posh crisps, and I don’t like own brand varieties. But crisps aren’t an essential food item are they, so what happens there? My other half likes Lucozade and drinks approximately 35 gallons of it every week – why am I paying for that?
Some of you might think this is petty, but we separate our food bill into essentials and extras. So any snacks, sugary drinks, booze, special face cremes etc. are paid for by the person who wants them. Only meals and household essentials are paid for from our joint account.
It’s not difficult to manage. Keep things to one side in the trolley and pay for them separately. Use the appropriate debit card to pay for the food shop, then put your snacks through and use your personal debit card for those. You don’t have to be militant about it.
Other bills that might not be as clear cut are Netflix or Amazon Prime, gym contracts, phone bills, club memberships, and that sort of thing.
You need to decide between yourselves what’s best here. For example, if you are both members of the same gym and pay the same amount, it’s just as easy to pay from your joint account as it is from your individual accounts.
However, if one of you has an Xbox game pass and the other has no interest in gaming, that bill is on the Xbox owner, not on both of you.
We have Netflix and Amazon Prime and both come out of our joint account because both of us want those subscriptions. I wouldn’t want to pay for half of his exorbitant mobile phone bill though, because while he just has to have the newest expensive tech I’m using an old Samsung on sim only.
What If You Earn Different Amounts?
This is where things can get tricky.
We came across this issue when I first became pregnant. I was going to go on maternity leave and my income would be drastically reduced. Was I still expected to pay 50% of everything despite earning so much less?
This would no longer be a fair system, as I would have no money left for myself, so we made a simple adjustment.
- Calculate total joint earnings for the year
- Split based on percentage
- Each pay the proportionate percentage of outgoings
So step 1, we worked out what I would earn for the year I was off work, then added that to my partner’s salary. This gave us the total amount of money we would have to live off for those 12 months.
Step 2, we worked out what percentage of that total amount each of us was contributing. Let’s say his salary was 65% of the total and my maternity income was 35%.
Step 3, we split our outgoings 65/35 instead if 50/50 for that year. Anything left in our accounts was ours to spend as normal.
In other words, my contribution to bills dropped by the same percentage as my income.
It was pregnancy that made us re-think our approach, but this system can work in any situation where incomes are significantly different. If you earn £70k but your partner only earns £30k, split your bills 70/30. You won’t feel held back and your partner won’t feel constantly skint.
Some people split things by category instead. So one person pays the mortgage and the the other person pays the utilities, for example. I don’t like this approach as it isn’t as fair, and it doesn’t feel like a team effort either. There is room for resentment to creep in and arguments to follow.
A proportional split is definitely the best way to go.
The Problem With Relying on Joint Accounts
We have a joint account, so I don’t have an issue with them per se, but the way many couples use them is a recipe for disaster.
Some of our best friends live out of a single joint account (plus a few credit cards 😬😬😬). Both of their salaries go into it, and all of their bills come out of it. They both have debit cards for the account and use it for their grocery shopping as well as their day to day spending.
In other words, there is no control over what gets spent. And guess what?
They regularly run out of money before the end of the month.
It is impossible to manage your budget if all your cash is in one pot, especially when two people are spending from it without communicating properly.
I have lost count of the number of times one of them has complained about the spending habits of the other.
“Why have you spent £68 in B&M!?”
“We needed loo roll.”
“£68 worth of loo roll!?”
“I bought some candles as well, and some plants for the garden. Oh and a picture frame for that postcard your Mum sent us.”
“Why? I don’t get paid until Friday and the council tax is coming out tomorrow.”
“Well why did you spend £16 in Costa last week when we’ve got coffee at home and you own 8 different travel mugs?”
I get stressed just thinking about their money conversations.
Joint accounts should have a place in every couple’s money management setup, but they shouldn’t be start and end of it.
Be smart. Protect yourself form needless arguments. Split your finances.