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What you need to know about managing your budget as a couple

There’s a tailor-made option for every couple!

By Dominique J. Favreau

Personal finance blogger

Everyone knows that money is a taboo subject in Quebec, even more so when love gets tangled up in it. Couples need to talk about money not just to avoid creating tensions, but to make sure each partner is comfortable with the financial choices of the other, and that they share a similar view on their budgeting as a couple.

Who pays for what? Does one person make more than the other? How do you divvy up the car expenses, mortgage, grocery bills and child-rearing costs? How do you handle a new partner's existing debt? Lump it all together, keep it all separate, or opt for a mix of the two?

No worries! Sooner or later every couple has to get past these questions. In fact, just asking them is a good sign. When you consider that almost 1 in 2 couples have at one time fought over money, bringing the subject out in the open can actually simplify things. There are so many ways to manage your money together as a couple that you are sure to find a tailor-made approach that fits your values and your lifestyle.

How to broach the subject of money as a couple

When a couple sits down to discuss money, the subject can be approached from two angles, sharing the savings or sharing the expenses.

One common pot

The key tool in saving together of course is the famed joint account. The trick is to figure out how much each partner will contribute on a regular basis, and you're good to go! Practically all your expenses as a couple can be paid directly from the account.

A joint account is practical when you really don't want to discuss whose turn it is to pay the mortgage or the Internet or how to share an unforeseen expense. A joint account is also perfect when you want to do some long-term planning for specific projects or for the family, so any extra money that accumulates is automatically considered common savings. It's no wonder the vast majority of couples who have children or own property opt for this formula.

By contrast, a joint account absolutely requires a high level of mutual trust, because the money in the account belongs to both partners and can be spent by either.

To each his own

In this formula, each partner keeps his or her money in their own bank account. The expenses, however, are shared, meaning each partner pays his or her portion of the rent or mortgage separately as well as a share of all the monthly recurring bills.

This way of doing things however means each partner has to take responsibility for paying his or her share of the expenses. This is an approach often taken by young couples who are still renting and for whom most expenses are for the most part simple and foreseeable.

In this way, a certain amount of financial independence can be maintained, but may require periodic rebalancing of payments when they add up unequally. Keeping track of all the bills to be divided can sometimes become an extreme sport! Budgeting apps or even a good old Excel spreadsheet can become an indispensable tool for keeping things balanced.

That was the best solution for Catherine and Sabrina who opted for a joint credit card. They use it to pay shared expenses, without having to combine their pay cheques. "We made this choice 100% to simplify things. At the end of the month, we divide the balance owing in two. We don't have to worry about when one person or the other gets paid and we combine our margins of safety. At the same time, we're racking up points we can use to travel together."

3 ways to manage your budget as a couple

After deciding whether you want to share savings or expenses, it's important to agree on the amount of each person's contribution to the couple's budget.

The 50-50 budget

This is the formula favoured by over half of all couples. Each partner contributes 50% of expenses or savings for the couple, regardless of his or her salary or personal expenses. This works out well as long as the partners have similar incomes, but also similar debt loads. Otherwise, it can become difficult for one partner to match the other's lifestyle if his or her obligations are weighing them down.

This approach also lets each partner maintain a certain level of financial independence, and it's easy to keep track of what belongs to whom.

It's the approach that Joanie and her ex chose, as they wanted to pool their savings to pay expenses, but also to finance longer-term projects: "When we separated, it was easy to divide everything up, without a whole lot of grief, and we were able to close the joint account quickly." The same goes for Yves and Ginette, who each had children from previous marriages when they met. When they combined households, they naturally decided to start sharing everything 50-50, including family expenses. Fewer headaches and more time for renovation projects.

On the other hand, it's important to reassess the 50-50 split if one of the partners has a change in income, for example, if they take parental leave or experience a job loss. In that case, an open and frank discussion is called for.

Make a budget prorated to income

Quite often, partners have unequal incomes that lead to differences in the kinds of lifestyles they lead. A budget that's proportional to income can be a good option for these couples. Each partner contributes what he or she can, and the two of them move forward together toward their common goals, like buying a house. This has the tremendous advantage of taking the pressure off the partner with the lower income.

That's why a lot of married couples, like Benoit and Maryse, choose this option: "When we got married, we considered our future projects but also our retirement together. It was obvious our wallets were going to merge at some point if we wanted to arrive at the same place at the same time, so we did it right at the start."

Of course, people need to account for each partner's tax bracket, as what really matters in a budget is income after tax. Best to do all your calculations with your take-home pay.

Pooling everything in a single budget

Some people would rather build a single estate for the couple, especially families. Pooling all income and expenses becomes their best option. When couples plan projects over the very long term, pooling everything makes managing the budget even easier. There are no expenses to split and all the savings benefit both partners.

That's why a lot of married couples, like Benoit and Maryse, choose this option: "When we got married, we considered our future projects but also our retirement together. It was obvious our wallets were going to merge at some point if we wanted to arrive at the same place at the same time, so we did it right at the start."

Pooling everything however, takes a lot of confidence in each other and a common long-term vision if you want to avoid unpleasant surprises. What's more, if you're not married and you choose this method of managing your money, think about seeing a notary to draft a cohabitation agreement which will spell out the terms in case of separation.

Accounting applications

To simplify budget management, you can use applications that do some of the work and help reduce anxiety while providing you with an overview of your expenses.

Whatever your choice, frank, open discussions help both partners gain the confidence and peace of mind to push ahead on the projects you plan as a couple, today and into the future. In all cases, you should think about keeping a part of your discretionary income for yourself, because, even when you're in a couple, each of you has your own unique tastes and desires.

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