Finances can be a source of conflict in relationships. In fact, disagreement over money is known to be one of the most common causes of failed relationships.
However, if you are in a dual-income relationship (both you and your partner are making money), you’re in an advantageous position. By pooling portions of your earned money together, you can afford a higher standard of living and achieve your combined financial goals faster. At the same time, by keeping a portion of your finances separate, you can each use your own hard-earned money to treat yourselves to the things you like, rather than having to consult with your partner.
In this case, the key is agreeing on what your shared expenses are, how much you should be spending on them, and how they should be divided.
Here are the two best methods for dual-income couples to manage their finances:
Method #1: Pay shared expenses from a joint checking account
Opening a joint checking account doesn’t mean combining all of your money. When I tell people that I opened a joint account with my partner, they can be quick to assume that I’ve given up all financial independence. This isn’t the case. I still have my own checking and savings accounts, and so does she.
Our joint checking account serves one purpose only: to pay for our shared expenses.
Determine your shared expenses
Shared expenses are associated with goods or services that you and your partner both benefit from.
Some common shared expenses include:
- Rent
- Utilities & Wi-Fi
- Groceries
- Dining out
- Gas/Fuel
- Car payments or insurance
- Subscriptions (Disney+, Amazon Prime, etc.)
- Household supplies
However, the items on each couple’s list of shared expenses may vary. Other possible shared expenses could include a mortgage, a phone plan, car payments, pet care, or childcare. If you’re not sure what your shared expenses are, take a look at what each of you spent money on in the past month and think about which goods and services were beneficial to both of you.
Estimate your monthly shared expenses
Once you’ve agreed on which expenses are “shared”, figure out your collective spending on each expense. For fixed monthly expenses like rent, Wi-Fi, or streaming services, this is straightforward. For things that vary, like utilities, gas/fuel, groceries, and dining out, you’ll have to estimate. If it’s something you’ve already been paying, you can base your estimate off of the average of your previous months’ spending. If it’s a new expense, you’ll have to come up with your best guess. When in doubt, overestimate how much you will spend. It’s better to have money left over than run out of money.
Here’s an example of a shared expense budget:
| Expense | Monthly Cost |
|---|---|
| Rent | $1,500 |
| Groceries | $600 |
| Dine-in & Takeout | $400 |
| Car insurance | $220 |
| Gas (utility) | $50 |
| Electricity | $50 |
| Fuel | $300 |
| Total | $3,120 |
Of course, make sure your total estimated shared expenses don’t exceed your combined monthly take-home pay.
Split your shared expenses fairly
Once you’ve estimated your shared expenses, it’s time to figure out how to split them fairly. Everyone has a different definition of “fair”, so here are a few methods you might consider:
- Split the total shared expenses based on income
To do this, simply multiply the total of your shared expenses by each person’s percentage of the total combined income to determine the amount that each person owes toward shared expenses. For example, if you earn $50K and your partner earns $25K, then your total combined income is $75K. Since 50,000/75,000 = 0.67, you would pay 67% of the shared expenses (and your partner would pay 33%). - Split the total shared expenses equally
In this case, you and your partner would each be responsible for half of the monthly shared expenses, regardless of how much each of you make. - Split shared expenses based on usage
You might consider this method if one of you benefits significantly more from a particular shared expense. For example, if you share a car and one person drives significantly more than the other, perhaps that person should be responsible for a larger portion of the fuel budget. - Mix and match the above methods to your liking
Every couple is different, and you may find that none of the above methods is perfect. Rather than using one method for all expenses, you and your partner could consider using different methods to split each expense.
While you’re figuring this out, you can easily visualize everything by creating a table like this:
| Expense | Monthly Cost | Partner A | Partner B |
|---|---|---|---|
| Rent | $1,500 | $1,000 (67%) | $500 (33%) |
| Groceries | $600 | $300 (50%) | $300 (50%) |
| Dining out | $400 | $268 (67%) | $132 (33%) |
| Car insurance | $220 | $110 (50%) | $110 (50%) |
| Gas (utility) | $50 | $25 (50%) | $25 (50%) |
| Electricity | $50 | $25 (50%) | $25 (50%) |
| Fuel | $300 | $150 (50%) | $150 (50%) |
| Total | $3,120 | $1,878 | $1,242 |
Once you have the total amounts that each person is responsible for contributing toward the monthly shared expenses, you should compare those amounts to each person’s total monthly take-home pay. Will each person have a reasonable amount of disposable income after contributing to shared expenses? If not, you may want to lower your budgets or modify how you’ll split the expenses.
Fund the joint checking account
Time to pool your money together! Before the first of each month, each of you should send your portion of the monthly shared expenses to your joint checking account.
Now, you have 2 options for paying your shared expenses:
- Use a debit card that charges the joint checking account directly
- Use a credit card that you are both authorized users of, and pay the credit card bill from the joint checking account.
Using a debit card is the safer route, but my partner and I prefer to use a credit card so we can earn points and use those toward other mutually beneficial expenses – like a hard-earned couples vacation!
If you are worried about accidentally overspending, consider adding $50-200 to your budget as a “buffer“.
Do a retrospective
At the end of the month, take a look at how much you actually spent on each shared expense category, and compare that to how much you budgeted for that category. If you underspent or overspent significantly in a particular category, you may want to consider adjusting your budget for that category the next month.
Also check to see how money remains in the account at the end of the month. If it’s less than your buffer amount, it means you overspent, and you’ll have to replenish the buffer in the next month.
Pros and Cons of Method #1
| Pros | Cons |
|---|---|
Method #2: Reimburse each other for shared expenses
This method is a lot less organized, but let’s face it, not everyone is so meticulous about their finances. Here’s how this method works:
Determine your shared expenses
Talk to your partner and think about which expenses are beneficial to both of you. Some examples may include groceries, car insurance, or rent.
Figure out how you’ll split those expenses
Similar to method 1, you’ll have to figure out how you want to split your shared expenses. Again, you may choose to split the expenses equally, based on income, or based on usage.
Request reimbursement from each other
At the end of the month, take a look at both of your debit/credit card statements and determine which expenses were shared ones, based on how you define shared expenses. Then, Venmo request each other for the amount owed, according to how you decided to split expenses. It might make things easier if one person pays for all the shared expenses and the other person just pays them back.
Pros and Cons of Method #2
| Pros | Cons |
|---|---|
Author’s choice
Regardless of which method you decide to use, you and your significant other will likely accomplish more together than you would individually.
Personally, I prefer (and use) Method 1, because I’m very meticulous about my spending and savings goals. I like transferring my portion of the shared expenses out of my bank account before the 1st of each month and knowing exactly how much I have left to spend on myself, save, or invest. I also think cohabiting couples in a commited relationship (or marriage) shouldn’t have to constantly pay each other back for things. By agreeing on a budget and paying shared expenses from our joint account, I feel that my partner and I are aligned in our finances and the lifestyle we’re creating for ourselves.