Sharing expenses within a couple is one of the most requested topics in my Instagram community (@Elleinvestit), whose audience is 80% young people under 35.
Although there is no “magic formula,” I will share three methods for separating expenses in this column.
50-50 formula
This is often the formula preferred by young couples who have few shared commitments. They live together, but don't yet have a long-term project together. According to a study by Professor Hélène Belleau, two-thirds of couples who work 50-50 say they have equivalent salaries [1].
I also often do vox pops on my Instagram page and one of them recently focused on splitting expenses within a couple.
Several women told me that they insisted on splitting half of everything with their partner, even though their partner earned twice as much as them. For them it means being financially independent. I do not agree. I believe there is a difference between financial independence and financial justice. Let's look at the prorated formula.
Proportional formula … based on retirement savings
Another way to separate expenses is to make expenses prorated or in proportion to each spouse's income.
According to financial planner Chanelle Montpetit, we should talk about prorated income after retirement savings. She gives the “classic” example of a couple where one spouse works in government and has secured retirement funds, while the other spouse is an entrepreneur. “In this situation, the business owner spouse must first be able to contribute an amount to their RRSP before coming into income to calculate each person's contribution shares,” the planner says.
Chanelle Montpetit Financial Planner Photo from Planifica website
In other words, everyone needs to be able to put some money aside before they can contribute to shared expenses.
Ms. Montpetit also adds that the pro-rata formula based on retirement savings can be a good starting point for couples who are unsure which method to use, as long as the income gap is not too large.
“Everything in common” formula
According to a survey conducted by Hélène Belleau, 54% of couples in Quebec use the income sharing method [2]. On the other hand, in a recent poll in my Instagram community, only 18% of respondents said they had adopted this method, while 43% chose 50-50 and 39% chose proportionate. The “all-in-common” method is therefore less popular among young people.
I would also add a caveat. I wouldn't necessarily recommend a joint account for 100% of income and expenses, as I believe this practice goes against the idea of financial independence for each spouse.
Additionally, let's take the example of Marco and Jeanne, who use the “all-in-common” formula and have a single shared account. If Marco decides to buy Jeanne roses for Valentine's Day, does he have to pay for them using their joint account?
I therefore recommend keeping between 10 and 15% of your income in a separate account instead, including for buying flowers on Valentine's Day!
A word about family allowances
For couples with children, we must not forget the payment of family allowances, which can amount to hundreds of dollars or more per month and are not taxable. These amounts can be deposited into the joint account or, if possible, into the children's RESP.
Good thought and above all good discussion!
In total:
50-50 formula: Generally suitable for couples with similar incomes and/or few shared obligations.
Proportional formula: can be a good starting point for couples who have no idea how to divide shared expenses.
Formula “Everything in common”: may be suitable for some couples, especially those who are married or have a long-term commitment, such as children.
[1] Book “Love and Money: Survival Guide in 60 Questions”, p. 39.
[2] Book “Love and Money: Survival Guide in 60 Questions”, p. 57.