Couples and Money: The Proportional Sharing Method

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If there’s one topic that’s probably more sensitive than people talking about their money, it’s how they split their money with their partners. I am swayed by the method proposed by this post – Why Couples Should Split Expenses By How Much They Make by Tracy Moore.

Let’s say Partner #1 makes $7,000 per month and Partner #2 makes $3,000 per month. That means Partner #1 makes 70% of the total income and Partner #2 makes 30% of the total income. The proportional sharing method would have Partner #1 pay for 70% of the total expenses and Partner #2 makes 30% of the total expenses.

Result: If the household expenses are $5,000 per month, Partner #1 pay $3,500 per month (70%) and Partner #2 makes $1,500 per month (30%). Why not any of the alternatives?

You can act all day long like you don’t mind supporting someone, but you do. You can act all day long like you don’t mind being completely subsidized by someone else, but you do. You can act all day long like you don’t mind going halvesies even though she makes $50k more than you do, but you do. And so on. You can pretend to throw everything together in a blind pot and pay everything out of it, but if the one who makes less spends more, and believe me, they always do, you’ll care.

I should disclose that my wife and I don’t do this, and we’ve always just put everything into a single pot and spent from there. However, I don’t think what works for us will work for everyone. First, we married relatively young with minimal individual net worth. (I did work really hard to pay off my student debt so I could at least start us out on a positive number.) Second, we both agreed to the communal pot idea from the beginning. I’ve always figured that if somehow we divorced, we’d just split whatever assets we had down the middle anyway even if I earned more. Third, although our incomes both varied, we never went through a prolonged period where one person was unemployed and resentment could possibly build up. We have both worked consistently the entire time, even after transitioning to working less than full-time and watch the kids the rest of the time.

In the end, I do know that both sides have to agree that the setup is fair. Our choice to both work and both take care of the kids was definitely a conscious decision to pursue our idea of “fairness”, although I know that setup isn’t possible for everyone. That’s why, for a couple that is starting out with a history of being on their own financially, it seems like this idea of proportional sharing is a good starting point for an open discussion.

Do you think there is a better “default” method for merging finances if you’re a couple with different incomes?

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Comments

  1. Glad to see this post. My wife’s and my incomes are slightly more spread out than the example in your post – probably close to 80/20. We never thought to split everything precisely like that, but we sort of do that in a rough manner in practice. I pay for almost all groceries and restaurants, and nearly everything we both buy on Amazon. She’s a teacher aide, so during the school year we split the mortgage what I’m now realizing is about 65/35 and then I cover the entire thing during the summers when she has no income. Things like electricity, gas, water bills, internet, cell plan, spousal discount gym membership we split 50/50 during the school year, and again I cover 100% during the summer. When there’s a costly home improvement, I pay a larger portion, usually about 75%. No complaints from either of us after many years, but I’ll definitely show her this post and get her thoughts. Thanks.

  2. The Frugal Millionaire says:

    Another interesting post, thank you Jonathan. In my first marriage, our income was roughly 60/40, and we kind of figured out this formula on our own…so each could have savings, retirement funding, and pocket money at the end of the week.
    That relationship ended, and as I got involved with another, things were fine for a long time. We got engaged around 2000, at which time her freelance business dried up and went away due to industry changes and no fault of her own. Well, we had a few bad years there. I resented getting up early every morning, commuting, etc., etc. because her very specialized skills weren’t easily transferable to other work, leaving mostly retail clerking opportunities (min. wage), which she refused to do.
    I gladly stepped up to pay the essentials, like utilities, prop. taxes, groceries, etc., but always felt resentment when she wanted money for new curtains, and things like that, feeling she was spending “my hard-earned money”.
    Make no mistake…money is power, even in a relationship.
    Happy now, we survived those bleak years, but I offer this as a discussion point…how does proportional spending work when the ratio becomes 100/0? Might be something to address. Regards!

    • Right.. I’m wondering how this works if one partner stops working to stay home with the kids. I guess when it’s a 100/0 split, things are a bit different. There’s lots of history for that model (back in the 1950s, for instance) but lots of other things were done far differently back then, as well.

      In that case, it’s not about who’s *paying* for shared expenses, but perhaps about how much of the total income does each one get for their own discretionary spending?

      • The Frugal Millionaire says:

        Brad, you are absolutely correct. Caring for children is definitely a full-time, albeit unpaid job…and I will assume the decision to have children was a shared decision, and I’m sure sharing finances would be discussed at some point in the process.

        If the child caring spouse worked, there would be a great cost for child care that would need to be considered as well.

        Perhaps pay the bills and expenses, try to save a little, and split what’s left? BTW, anybody who can afford a stay at home spouse and children on one income doesn’t need my advice…congrats!

        • Patrick says:

          Umm, that’d be me then 🙂 but I love to read and consider advice.

          We actually discussed this long before we were even engaged. We both came from stay-at-home parent households and agreed that doing the same for our children would give them the biggest benefit.

    • George Segal says:

      When one stays at home and takes care of children, that can be considered as contributing the equivalent child care cost. There is also opportunity cost of lost income which may be higher than the child care cost.
      If one partner quits a job to stay at home and take care of kids, they must be considered as contributing
      their lost income. Since most good jobs include a retirement contribution from employer, the working partner must contribute to the retirement of the non working partner (such as spousal IRA or otherwise)

      Each person should contribute something so they feel empowered and ownership
      even if they make very little.

      If both partners make a lot compared to the expense (ie each partner can afford to pay half and still have discretionary income) and share the house work (say DINKS) they they may make different money but the partner earning less may want to consider paying 50% so they do not feel subsidized.

      There are many states like CA which are community property states where on separation the resources
      are split down the middle by law so there is no choice allowed or required.

      High income couples can have a separate account in addition to a joint account. In CA if a separate account is used to pay joint expenses then it is considered “Commingled” and is fair game for splitting down the middle on separation

  3. My wife and I must be in the minority as we pool all the money. IMHO, you should work on having the same financial goals not who pays what. In the end, if you and your spouse agree on a financial arrangement then all is good.

    • We are in a similar situation. Years ago when we had just gotten married we had separate bank accounts and my friends made fun of me. Fast forward to a few weeks ago when finances came up with some co-workers and they looked at me like I had 3 heads when I said we had one shared checking and one shared savings account. The concern seemed to be that their wives would spend all the money on clothes…. fortunately for me, my wife is actually quite frugal and I often have to convince her it’s OK to buy that pair of shoes or shirt that she likes!

      That said, our income is split roughly 70/30 but have never really thought about who is paying “their share” of the mortgage and other bills.

    • The Frugal Millionaire says:

      I agree that it is hugely important to have the same financial goals, I would probably never connect with anyone who didn’t share mine .

      I would elaborate to add that it is equally important, unless agreed upon beforehand, to have both parties contribute equal efforts, regardless of income, towards achieving those goals. When THAT doesn’t happen is when tension can begin.

  4. Jonathan,

    You mix a few terms as if they are equivalent – couples, partners, married. The issues are different in my opinion.

    If you are married, all money should go into the same pot. The couples should discuss what amount of impulse spending is allowed by each, how much savings is mandatory, and no major purchases/decisions without the other spouse’s agreement. The all the usual expenses are paid from the general pot. It is not necessary to do an income split as to paying expenses, because as you pointed out, in a divorce in most states their is a 50/50 split, assets and debts.

    Anything outside of a legal marriage, if there is a committed relationship, SHOULD use your formula, as there is no legal protection under the law in general, and it does not put an undo onus on one partner’s solvency over the other. So this arrangement is fair until a formal union, recognized by the state, is carried out.

    Anything less than a committed relationship, such as roommates, should NOT use this formula – one should agree in advance what the arrangement is, 50% of everything is reasonable, and it is irrelevant if one earns more than another. If one roommate cannot afford the arrangement, then they need to seek other lodging.

  5. Proportional does seem like a good default option. Now if only it would also address the issue of paid vs unpaid work in the context of splitting expenses in a relationship.

  6. Everything my wife and I own or earned during our marriage is jointly owned – community property. There were times one of us earned 100% of the income but we each owned 50% once received. All expenses were paid from our equally owned accounts.

    I feel we have equally contributed to the community. When I earned 100% of our income, my wife was dedicated to raising the kids and managing the household. When I retired before my wife, I assumed most of the household chores and fixed the meals. During our marriage our household responsibilities adjusted based on the demands of our outside work, not based on the percentage of income we made. I made a much higher wage, but that was possible because of the support I received from my wife. I don’t remember ever really sitting down and discussing this approach with my wife. I think we both just saw that was how our parents ran the household and followed their examples.

    This has worked for us for 41 years, so I expect we will stick with it. Everyone’s situation is different and people need to develop their own ways to lead their life with a partner. I have heard that the way to have a successful relationship is to strive to contribute more than 50% to the relationship and feel good about it.

    • Heather says:

      I love this: “The way to a successful relationship is to strive to contribute more than 50% to the relationship and feel good about it.” Such a good tenet to live by!

  7. My parents and older brothers just have duel accounts, no split, etc.. I feel bad that society has changed so much and the divorce rates are so high that people now have to have separate accounts, split %s, assigned bill responsibilities, etc..

  8. There’s a lot here in your question. One point I’d bring up is that the wealth (or overall net worth) brought into a relationship also makes a difference and should be talked about between a couple. If one partner has some unearned income and dividends that could be used instead of affecting the cash flow, that brings tons of possibilities, but also decisions. For instance, we use some appreciated stock for donations. It makes sense because we don’t pay capital gains when gifting to a non profit. But, then, the thank you, often comes to one person from the organization. It’s not in both of our names (despite our letters stating that it is indeed from both of us), making one person feel left out. That’s just one example, but just pointing out that it goes beyond cash flow as well.

  9. Stuart Weissman says:

    Heck, we consider it one pot. All I ask is that she tells me when she makes extravagant purchases so I don’t question it when the credit card bill comes in.

  10. I earn 5x more than my wife yet I advocate the communal pot.

  11. Great post! My wife and I share the same bank account so whatever we make is our money. It did take a lot for me to get used to this arrangement. I’ve been blessed to have a spouse who is frugal and updates me before purchase without me asking to. She just grew up seeing her parents do it this way. It has help us tremendously.

  12. I showed this article to my wife and asked her to spend less bc it’s 100/0 but then got slapped in the face .
    Oh well. Love , right??

  13. I recently created a free online calculator (https://budgetduo.com) to help couples split up their shared expenses (based on income, 50/50, or a more of grab bag method). It’s basically an online version of a spreadsheet that my wife and I have used for years. It’s especially helpful in situations where couple have disproportionate incomes. Anyways, thought it might be helpful to folks reading this article!

  14. Great topic !

    Dual earners same basic high-end income. No money issues ever really after 15 years. Keys to success:

    Joint CC for daily family expenses split down the middle.
    Monthly budget estimate based on previous year actuals. We each pay half all household bills.
    Joint savings account we each contribute 25% of our monthly income.
    Our work-related 401K’s/Pensions loaded to the hilt – could retire now under 45 if we wanted and use our savings to ride us the next 10 years prior but why quit if you love what you do?
    The rest do with as you please. She can spend all her discretionary on her me kids whomever she pleases. Same with me. This no arguing about a purchase.

  15. gabrewer says:

    I’ve found over the 27 years of our marriage, that this has been a dynamic and fluid situation requiring continual adjustment. There was a period where my wife, making somewhat less than me, had access to a workplace retirement plan when I did not. In return for her contributing the maximum she could, I readily agreed to make up the reduction in her spending money out of my paycheck. She good naturedly referred to this as her “allowance”. I saw it as fair arrangement in order to sock away tax-deferred funds — with matching contributions from her employer — for our retirement.

    We’ve always had a joint checking account which is “mine” and a joint credit union account which is “her’s”, but with a certain “equilibrium” that certain household expenses will be paid out of each. Proportional ? Probably not, I’ve never been inclined to do the math. But we do generally agree on the same financial goals and focus, which has made it work for us.

  16. My spouse and I were committed to each other from the very beginning–and we felt that our finances should reflect that. For those desiring a ‘covenant’ marriage, I believe that jumping in and sharing things equally is important to the process (rather than holding anything back). We consider ourselves a team in all respects–all of the money belongs to the team. We have benefited from this arrangement for 30+ years and would never have done it any other way. It takes good communications about goals and spending–but a truly great relationship is built on good communication, anyway. Money is important, but not the MOST important thing.

  17. If you’re married, I don’t think that the proportional method is a good idea. (..although I acknowledge that everyone needs to do what works for them.) I think it overemphasizes the value of money, and may cause the very resentment it claims to cure.

    All that stuff in the quote from the post you mentioned is just wrong, in my experience. Whether you mind supporting someone or being subsidized by someone has more to do with the quality of your marriage than any “universal truth.”

    My wife and I put everything into a communal pot, and then we each take a fixed monthly amount that we have agreed upon and put it into our own, private accounts. Spending from the communal pot is a joint decision. Spending from our private accounts is “no questions asked.”

    The key here is that we each chose the dollar amount we are allowed to take each month. It’s not the same number — she makes less, and takes a bigger amount each month. We chose the number based upon what we each felt we needed, and adjusted it over time to make sure it worked.

    For us, the secret to marital bliss was in having those separate accounts where we can save or spend as we wish, with no complaints. It eliminated almost all arguments about money, as we largely agree on our common expenses, and we each have no say in the other’s personal spending.

  18. My partner (of 12+ years) and I follow a similar approach. For us, it’s always made more sense to only split the fixed costs proportionally (rent, recurring bills), but the ‘daily’ living costs 50/50. Things like groceries and so forth, those are generally consumed equally and would likely be the same regardless of our income discrepancies. Whereas, the big lifestyle expenses like rent, are more directly determined by our income level. Granted, we got together as established independent adults and I think we both value that ability to be independent.

    But this is the thing, I’ve never understood the idea of a partnership, whether you call it marraige or not, somehow means you need to merge your entire life as if you become one person. I don’t see the world that way. I find it strange that so many people say things like ‘this is how it should work if you’re married’. This has more to do with the people involved than tradition. It’s one of the reasons I dislike marriage as a concept, because it tends to drag so many useless rules and expectations along with it.

    Also, as others have implied, everyone should be aware of, and take in account, your legal rights when deciding these things. Even if not officially married, there are sometimes legal protections for long-term partnerships (eg. defacto, common law marraige, etc), depending on your location.

  19. Heather Moore says:

    I loved reading the comments on this thread! It shows the diversity of your readership. I personally quit my six-figure job to become a SAHM to our 3 kids (who are now 2,4,6). So our income is 100/0. My husband and I are closely aligned financially-speaking (I don’t think I could have married him otherwise). We both are huge savers (or me quitting my job probably wouldn’t have worked). We chose to do a communal pot from the beginning. I am the frugal one, I do all the bills and manage all of our accounts; essentially I’m the financial CEO. (Read: He doesn’t have to worry about me spending our money on clothes. I have to be forced to.) I enjoy this relationship. I also think handling the finances does give me a bit of power over the standard stay-at-home-parent, even though I’m not the one earning our income (and I do mean “our” — the amount of work I put into raising our children is immense), I never feel slighted in the least, and I know where every cent goes, so it helps me make better informed decisions.

    Here’s the thing though — even if I kept my job, we’d be around 55/45 or 60/40 by now. And we still would do a communal pot. I personally can’t imagine dividing everything based on what you make, because it doesn’t take into account all the other things that each partner does (usually the lesser earner is the one picking up the kids or staying home when they’re sick because their job is “more disposable”). It just wouldn’t make sense to me personally to try to put a value on how much our contributions are worth. No matter what, I would strive for an equal partnership. But I’m sure this plays out much differently in couples whose financial goals don’t align.

  20. Hmm… we split it 50/50 although we aren’t married & our income ratio is more like 55:45
    one reason is it’s just simpler but other reason is its fair. The household expenses I think for a working couple should be roughly evenly split otherwise its like a penalty on the one making more money.
    Now if one sits at home to take care of a child, a whole different ballgame.
    btw i think if daycare costs are significantly less than the lower earning spouse, I think both should keep working

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