8/20/2012 2:15 PM ET|
Unequal pay? How to split the bills
Couples and roommates can divide up living expenses in various ways, but if the method isn't working, you might need to try another approach. Just keep a few guidelines in mind.
Whether you're roommates or lovers, there's no one right way to divvy up living expenses. You need to hear that, because a lot of people will tell you otherwise.
They'll insist everything should be split 50-50 or that couples should combine all aspects of their finances, or that expenses should be split proportionate to income.
The One Right Way folks live in a black-and-white world. Out here in the Technicolor universe, there are all kinds of complications. Here are just a few situations my readers have reported:
- You're roommates, and you've agreed to split expenses evenly. But one of your roommates works at home and keeps the heat blasting all day, driving up the utility bills. And since he's around all the time, he's eating more of the jointly purchased food.
- You've moved in with your honey and agreed to split expenses proportionate to your income. But now you're out of work, and your honey is chafing at having to pay most of the bills.
- Same situation, but you agreed on a 50-50 split. Your beloved has tons of disposable income, and you're going in the hole every month. Resentments ensue.
- You're married and agreed to share and share alike. But you're constantly arguing about how much is spent at the grocery store, whether to cut the cable bill and if it's time to replace your aging appliances. The person who's making less feels he or she has less power in the relationship, which exacerbates the tension.
- You're married and are contributing to a household expense account in proportion to your incomes. But one of the expenses paid out of that account is an obligation occurred before you got together -- your spouse's child support, for example, or credit card debt. The idea that you have less of your hard-earned money to spend because of this is starting to eat at you.
The one thing these expense-sharing scenarios have in common: They're not working. If you're living with an expense-sharing scheme that's causing problems, it's time to re-examine your assumptions and your approach.
You might just need to reframe the problem. Instead of focusing on expenses and income, for example, you could focus on what's left over.
"After trying every imaginable way, finally what's worked for our decades-old marriage is a residual method," one of my Facebook fans wrote when I asked how joint expenses are managed. "Each party deposits enough into (the household account) so that both are left with an equal amount of disposable income. So regardless of the income, both are left feeling squeezed or flush in equal measure. And no one is secretly envious of the other's higher (or) lower contribution."
Whether you need to try a whole new method or just tweak the one you have, here's what you should keep in mind:
If one of you has a problem, everybody has a problem.
Resentments tend to spill over and spoil relationships.
"There's nothing worse than not being happy with the financial situation when you're living under the same roof," said Annamarie Pluhar, the author of "Sharing Housing: A Guidebook for Finding and Keeping Good Housemates." "You're in a community with other people. You want to live a life that feels good with and about each other."
Assuming all parties are rational and reasonable, you should be able to work out an arrangement that everyone agrees is fair -- as long as everybody is willing to compromise. (If someone isn't rational and reasonable, the bigger question is: Should you be living with this nut case?)
Don't be that person. You know the one: the person who whips out the calculator at the restaurant and starts figuring everybody's share based on what each one ate and drank. "OK, you had the premium beer, and I had the tap water, so you should pay $5.25 more, plus a 15% tip on that amount . . ."
Life's too short to demand proper accounting for every dollar spent. You don't want to be a doormat, but a little flexibility and generosity can go a long way in preserving relationships, Pluhar said.
But do track your expenses. That said, it's hard to come up with a fair arrangement if you don't really know what you spend. If you're moving into a new place together, you'll have to estimate the various expenses (shelter, utilities, food, etc.). Even if someone is moving into an existing situation, expenses can change after he or she arrives.
Tracking expenses for a month or so should give you a good baseline from which to craft a cost-sharing plan. How you go about dividing those expenses will depend on your relationships and your financial situation, but it's best to work out some kind of agreement before you move in, especially with roommates.
"The primary reason to have roommates is because it's economically advantageous," Pluhar said. "Everything needs to be clear and agreed on in advance."
Decide whether usage matters, or income, or both. If you're in a committed relationship, dividing expenses by income may feel appropriate, with the one making 70% of the income paying 70% of the bills, for example. In roommate situations, that can feel weird, but an even split may not be truly fair if one person gets the master bedroom with en suite bathroom and another gets a tiny room with no closet. Sites such as Splitwise (which is also an app for iPhone and Android) can help you figure out a more equitable split. The roommate with the lower income can be assigned the smaller space. Splitwise also can advise you about how to handle other vexing roommate matters, such as long-term guests and your roommate's over-every-night girlfriend.
Consider some trade-offs. Not every contribution has to be monetary. The roommate who works at home, for example, could chip in more for the utility bill, or he could offer to take care of the housecleaning. Someone who's laid off could do the same or take responsibility for fixing the evening meal. Again, your approach may differ based on the relationship and the situation.
"You have a choice whether you're going to be generous or whether they need to find another place to live," Pluhar said. Even if you decide to carry a roommate or a lover financially, you may want to think about how long you're willing to do so, she added.
Limit your overhead. If you're lovers rather than friends, don't add financial pressures to the already-tricky emotional task of combining households, advised Beth Kobliner, the author of "Get a Financial Life: Personal Finance in Your Twenties and Thirties."
"If one person makes significantly more money than the other, there's temptation to live in nicer digs," said Kobliner, who advised against upgrading. "What often happens is that the wealthier partner carries rent, but this can add other pressures."
Instead, consider finding a place that's affordable for both and then split everything else, Kobliner said.
"This will help you start off the relationship on equal footing and enable you to test the waters as financial partners," Kobliner said. "As the relationship becomes more serious, or if you're married, you might be looking at expenses from a household perspective rather than an individual one. Then you may want to create a new account to cover shared expenses like rent and food, even if you have 'yours and mine' accounts for other items."
And speaking of which:
Think through your urge to merge. Half of married couples combine all of their finances and have only joint accounts, according to a Harris Interactive poll, while 18% have only separate accounts. The rest combine the two approaches, perhaps with a joint account for household expenses and separate accounts for no-questions-asked spending.
All of these approaches are valid. I hear from long-married couples who swear by keeping their finances all in one pot, strictly separate or a mix of both.
"The whole point should be to combine resources, not have them remain separate," wrote Ka-el Damone Jordan of College Park, Md.
But Susan Wells of Fort Dodge, Iowa, wrote that separate accounts "work great for us."
"I like having it that way and so does my husband. I feel free to do whatever I want with my discretionary income and so does he," she wrote. "I don't have to hide what I spent on my new sweater if I paid for it with my own money. I know women who do hide that stuff and it's not right. That hiding says more about a marriage than having separate accounts!"
If you're considering keeping your finances separate, think about how you'll create and finance joint goals, like saving for retirement and vacations.
If you're planning to merge your accounts, consider how you'll handle any obligations that predate your relationship.
Imagine, for example, that your beloved is short on the child support payment one month or needs to pay for her kid's orthodontia. If you're OK with your partner dipping into your joint vacation fund to pay these expenses, then merging everything is probably fine. If, on the other hand, your right eye started to twitch at the mere thought of such a raid, then perhaps your honey should set up separate checking and savings accounts to cover these bills.
I'll also put in a pitch for having joint accounts with slush funds on the side. That's how my husband and I approach it. Julie Fulcher of Snellville, Ga., likes this method, too. She and her husband contribute 80% of their combined incomes to a household account, with the rest split into separate accounts for each.
This approach "works out really well for debt management, variable bills and keeps us talking about finances," Fulcher wrote, "without picking apart me spending money on hair, nails, etc. and him spending money on football, video games, etc."
And peace in the home, whether you're roommates or something more, is a wonderful gift to share.
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