How do couples split finances?

Finance and romance don’t always go well together, with nearly three quarters of Australian couples clashing over money. There are several different methods available for couples to consider when splitting their finances, each with their advantages and disadvantages.

Keeping finances separate 

While many couples consider combining their finances when they start living together and/or get married, others choose to mingle their lives with one another, but not their money.  By maintaining separate bank accounts, each partner can be responsible for their own income and expenses, without treading on the other’s toes.

Keeping each partner’s accounts at arm’s length like this can be helpful for avoiding potential disagreements, and may make dividing assets simpler in the event of a relationship breakdown or divorce.

However, separate finances can also make it more difficult to combine resources to achieve financial goals. For example, applying for a home loan with two incomes may mean you can afford higher repayments, allowing you to borrow more money and get a bigger budget to consider a greater variety of potential property options.

Joint accounts 

Opening a joint account allows couples to easily pool their incomes into one bank account, so they can manage their household budget and achieve their financial goals together. And when all the income and expenses are coming into and going out of the one account, this can help simplify your money management.  

However, blending finances like this can lead to issues if one partner is less responsible with money than the other, or if one partner takes advantage of the other’s finances. And once your finances are combined, disentangling them can be a little trickier in the event of a relationship breakdown or a divorce.

Splitting half and half 

One of the simplest ways to divide the responsiblity for bills and household expenses is to split them in half, and have each partner take care of 50 per cent.

However, this may not seem as fair as it sounds in all cases. For example, one partner may earn significantly less income than the other but still has to match their divided expenses, or if one partner may buy products and services that the other partner doesn’t really use, but still is expected to help pay for.

Some alternative options to a 50/50 split could include:

Percentage split by income 

Even in dual-income households, one partner may earn more money than the other from their job, investments, and other revenue streams, which can sometimes lead to tension in a household.

Some couples choose to acknowledge this by splitting the responsibility for household bills and expenses based on income. So if one partner brings in 60% of a household’s wealth while the other earns 40%, a $200 gas bill may be divided between them so one partner pays $120 and the other $80, for example.

Percentage split by usage 

Some couples split their household expenses based on how much each partner uses the products and services being paid for. For example, if one partner regularly binge-watches TV while the other prefers to read, then the responsibility for the Netflix subscription bill may fall upon the couch potato.

Going through your household budget to divide expenses like this may take more time and effort to organise, and could potentially lead to relationship tension if there are disagreements over who should be paying for what.

Making a plan 

While the best options for managing your money as a couple may depend greatly on your situations, it’s important to think about and discuss your potential choices and consider planning a budget rather than only “going with the flow.”

Some couples choose to set the ground rules for money in their relationships early on, so there’s less room for misunderstandings. This can avoid extra complications later, which can be valuable in cases such as splitting finances in blended families where it’s important that everyone is looked after.

Some couples also choose to consider worst-case scenarios when it comes to money by drawing up a prenuptial agreement when they get married. This document will define how the couple’s finances will be split if they later divorce – though there may be room to make some changes or challenges later on, depending on the circumstances. 

Much like making other financial decisions such as selecting a bank account or a home loan, it’s important to compare a variety of potential options and consider the advantages and disadvantages before making any decisions about splitting your household budget with your significant other.

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