Should couples be paying the bills on an equal basis or should the man carry all of the household’s expenses himself? Remember the lesson from our religion classes that says, “couples who pray together stay together?” If we were to apply that to the domestic scene in the 21st century, we’d vary it a little and say, “couples who spend together, pay together.”
We think it’s fair. If husband and wife work and earn decent incomes, then why can’t the expenses be shared 50-50? First of all, sharing the bills eliminates resentment on the part of one spouse. Second, spouses become more aware of where their money goes and if the expense should be maintained or eliminated. Third, both spouses take equal responsibility for major ticket items like the mortgage, car payments, insurance and health and dental bills. By sharing the financial burden, both husband and wife are “in the know” and hence will both be responsible for any expensive mistakes. Money-handling is a huge responsibility, and if something goes wrong, at least both spouses can take the blame.
There’s that oft-repeated line about marriage being a true partnership. True partnership includes money management. We’ve seen women who crack under the pressure because their husband passes away and they suddenly have to take over the finances. They never learned how to balance the check book or keep track of certain recurring expenses during the year. What do they do? They hire a financial person to do it for them; we wouldn’t be surprised if that financial planner charges an arm and a leg.
Early on in the marriage, husband and wife must get their feet wet when it comes to household finance. It’s like getting a basic financial education hands-on. Why throw away precious dollars to third parties when you can be a DIY’er?
Paying the Bills: How to do it Together
This is where you can put your creativity to work. Choose a quiet evening and have a pot of coffee on the side in case your discussions (and arguments) will take up a good part of the night. We can think of a hundred other ways for newlyweds to spend an evening, but a bit of “awareness raising” for the household finances counts during the early stages of a marriage. Two heads are better than one!
- A good starting point is to add both your net incomes. This is the amount that will define how and which bills will be paid in the order of priority;
- Create a list of recurring items that must be paid regularly: student loans, debt of all types, rent (or mortgage), utilities, insurance and miscellaneous expenses (gifts, subscriptions, dental bills);
- On a separate sheet, establish target dates for paying off certain bills. For example, if you have credit card bills, write down “credit card A = $4,000 = will be paid in 12 or 18 months.” This is similar to goal-setting. It forces you to meet your targets. If you intend to pay off this particular credit card amount, avoid using the card in the meantime by putting it away where you don’t see it;
- Decide if you wish to use your bank’s online payment facility (great way to save on postage!). If so, you will need to share passwords;
- If after paying the bills there is some money left, put this into a joint savings account and call it your rainy day or emergency fund. Most financial advisers however recommend that you automatically fix a percentage of your income – say 5% - and tuck that amount away immediately into your rainy account fund, even before paying bills. This is what they call “paying yourself first.” Realistically, this isn’t possible when young individuals in their late 20s or early 30s are starting out in life and holding their first jobs. Usually, nothing’s left because a chunk of the budget goes to paying off student loans. We leave this to your discretion. You can choose to save an amount and put it away before paying the bills or after paying the bills. You and your partner should discuss this.
- You now have a budget you can work it. Make every effort to respect it; otherwise a budget is just a piece of paper. It paints a clearer landscape of where your salaries will go. If you don’t earn the same salary, it’s only fair that the higher earner pays a higher percentage of each bill. You can decide if you’ll go 50-50, 60-40, or 70-30. So if the rent (or mortgage) is say, $1,000.00 a month, the split will look something like this (assuming the husband is the higher earner):
Do this for the rest of the expenses until the financial responsibility is finalized and defined down to the last detail.
If one spouse gets lucky and is promoted at work and receives a salary increase, then the budget must be reviewed and then revised, if necessary. As the marriage matures and grows (the children come, a second vacation home is purchased, a second and third car become necessary), then expenses will logically increase. The idea is to keep a lid over unnecessary spending until the family’s financial situation is on a more solid footing. It is easy to step into the big black hole called debt. When you’re not looking, it turns into a hideous monster that will control you. This is why it is financially healthier for both spouses to pay the bills together. One can veto the impulse buying of the other!
“Hon, I’d really love to have that giant plasma screen in our living room.”
“No. We still have to pay off the lawmower. And the new washing machine.”
When it comes to spending, manage your marriage like a House of Commons or Congressional debate. The system of checks and balances established by both spouses will prevent a deficit from happening.
Paying the Bills: Get the Total Picture
It isn’t enough to work out the responsibility of paying bills based on your take home pay alone. Eventually, as you make it to your fifth or tenth wedding anniversary, you will have a different scenario. It is likely that you and your spouse may venture into the investment market and purchase stocks and bonds or establish a sideline business. Most full time female employees sometimes have a bakery business or sewing business on the side to help contribute to the family income and also because it’s always a good idea to be prepared for a corporate downsizing. By dabbling in a small business on the side, the impact of a sudden loss of job won’t be too much of a burden.
As you re-work your budgets, ensure that you have all your assets clearly written down. These assets should include your tangible properties, cash, and your pension or retirement plans set up by your employer. In the United States, it’s typically the 401(k) plan which many employees, after leaving their job, take with them and re-invest in other instruments or use it to finance their entrepreneurial ambitions. In Canada, it’s called the registered retirement savings plan (RRSP) to which the employer contributes a certain percentage of the employee’s annual income and interest earned is tax-free. Some Canadians take these RRSPs with them when they leave a job or have it rolled over to their new employer’s plan.
So when you and your spouse are creating lists of assets and liabilities, be sure you include your money in your employer’s coffers. Also include any inheritance or cash gifts you receive, as well as collections of art and paintings. These matter when you’re number-crunching your estate!
Plan not only for budgeting purposes, but also for your future. You can learn from each other so that when one spouse dies, the other isn’t left in the dark…groping.