One thing people always shy away from is usually money conversations.
Being lovebirds, especially in a serious relationship is not just about butterflies and emotions.
You should set different goals in a serious relationship, and financial ones should not be left out of the picture.
More specifically, how to handle shared expenses in a relationship.
It’s not exactly the most romantic topic, but trust me, it’s essential.
Money issues are one of the top reasons couples fight, and we don’t want that for you.
We want you to be the couple that everyone envies, not the couple that’s constantly bickering about who spent too much on avocado toast.
Without doing too much, let’s analyze how to handle shared expenses in a relationship.
Preamble To Handling Expenses In A Relationship
1. The All-Important Money Talk
First things first, you need to have “the talk.” No, not that talk. The money talk.
This is where you both lay out your financial cards on the table.
Here, you discuss your income, debts, savings, and financial goals.
You will understand each other’s financial situations and be able to make joint decisions about handling shared expenses.
Also, you get to know how you understand and handle money best.
It’s mostly not a comfortable conversation but it is the basis of a healthy financial relationship.
The quicker you do it, the better.
2. Set Clear Expectations
Once you’ve had the money talk, it’s time to set clear expectations.
Will the bill be split?
How will you split the bills?
Who is taking care of what?
How will the bills be taken care of?
Will you have a joint account or keep things separate?
These are all important questions to answer.
Setting clear expectations will help avoid misunderstandings and arguments down the road.
Don’t assume or expect either of you to take responsibility for what was not clearly resolved.
Don’t wing it or go along guessing without clarifying things.
3. Budgeting Together
No matter how you choose to handle shared expenses, budgeting together is crucial.
You and your partner should create a budget that includes all of your shared expenses.
This can include rent, utilities, groceries, and any other bills you both contribute to.
Sit down together and go over your individual incomes and expenses.
From there, you can determine how much each person should contribute to the shared expenses.
Make sure to leave room for savings and personal spending as well.
Make sure you’re both on the same page and adjust your budget as needed.
This will help you stay on track and avoid surprises.
How to Handle Shared Expenses in a Relationship
1. Splitting the Bills: The 50/50 Approach
After having the money talks and clearing expectations, we are now on the real topic of handling shared expenses in your relationship.
One of the most common ways to handle shared expenses is the 50/50 approach.
This means splitting everything down the middle.
Rent, utilities, groceries, you name it. It’s fair and straightforward.
It is not a factor of one person earning above the other.
Rather, it is a mutual understanding that everything will be divided equally.
However, this approach may not work for every couple.
Some may feel like they are contributing more than the other or resentful if one partner earns significantly less.
This is why the conversation on expectation is a must before embarking on this.
2. The Proportional Split
If splitting expenses 50/50 with your partner doesn’t quite suit your financial state, the proportional split method presents a better alternative.
This strategy allocates expenses based on each partner’s income, providing a customized approach to financial management as a couple.
Look at a scenario where one partner earns 60% of the total household income and the other 40%.
With the proportional split method, their contribution towards shared expenses mirrors these percentages, allowing the higher earner to contribute more.
This approach encourages a sense of equity and fairness, particularly beneficial in cases of significant income disparities.
The proportional split eases financial stress and builds an atmosphere for growth.
It respects each partner’s financial input and ensures no one feels excessively burdened or undervalued.
This method proves especially useful for managing regular bills, achieving financial objectives, or saving for joint ventures like vacations.
3. Creating a Joint Account
Some couples find it easier to manage shared expenses with a joint account.
This involves opening a bank account specifically for shared expenses, such as rent, groceries, and utility bills.
Both partners contribute an agreed-upon amount each month to cover these expenses.
For this method to work, you need to establish clear guidelines and communication regarding the joint account.
Both partners should have equal access to the account and be involved in any financial decisions made with the shared funds.
Also, you should regularly review the joint account and make adjustments as needed.
If one partner consistently contributes more than the other or if there are disagreements over how the money is being spent, It becomes a point to address issues at that moment.
4. Keeping Separate Accounts
On the flip side, some couples prefer to keep their finances completely separate.
This can work well for those who value financial independence and want to maintain control over their own money.
Each partner maintains their own individual accounts and takes care of their own expenses.
However, it’s important to establish boundaries and make sure that neither partner is taking on an unfair burden in the relationship.
For instance, if one partner makes significantly more than the other, it may be necessary to split expenses in a way that is fair and proportional.
Additionally, communication is key in these situations to ensure that both partners are on the same page about financial responsibilities and goals.
It’s also important to periodically review individual finances and make adjustments as needed.
If one partner consistently spends more or doesn’t contribute enough, it may be necessary to have a conversation about budgeting and finding a balance that works for both parties.
And don’t forget, keeping separate accounts doesn’t mean avoiding discussions about money entirely open communication is still crucial for maintaining a healthy relationship.
5. Emergency Fund: The Safety Net
When all other methods fail to prevent financial conflicts, an emergency fund is the last line of defense.
An emergency fund is a separate savings account that should be used only for unexpected expenses or emergencies, such as job loss, medical bills, or major home repairs.
This method is not just for one party to put money in the account.
You actively have to contribute enough as a couple to build up the emergency fund.
It may require some sacrifices in your current spending habits, but having this safety net can provide peace of mind and prevent financial disagreements in the future.
Discuss with your partner what expenses qualify as emergencies and how much you both agree to contribute each month towards building up the fund.
For instance, you decide that the fund you’re pooling together will have the goal of 3 months’ worth of expenses.
Having this safety net can greatly reduce the stress and strain on a relationship when faced with financial setbacks.
You should also come up with a plan for replenishing the emergency fund after it’s been used.
In every serious relationship, there will always be that point where expenses will be shared.
You cannot seem to avoid these things but what you should always be on the lookout for is how to prevent financial disagreements in the future.
It’s always best to have an open and honest conversation with your partner about money matters.