How To Share Expenses and Stay Friends

Goal: Find a way to quit fighting with a roommate or loved one over whose turn it is to pay which bill and stop late fees from piling up.

How to Get It Together in 5 easy steps:

1. Once paid, save all bills in the same place for 3 months.

2. Go through the three-month supply of paid bills to establish a list of regular expenses.

3. Make a list with each bill, the average cost and the day of the month it is due.

4. Choose who will pay which bill.

5. Create a joint checking account to pay household bills with direct deposit covering each person’s share. Automate the direct deposit and bill payments so that the account is funded and bills are paid on time.

Why It Works:

No one enjoys paying bills. When you’re sharing a home with someone it can get a bit fuzzy as to who is paying which bill each month. With roommates it can get even trickier if you’re breaking down a bill into two or three parts. Instead of arguing and collecting from each other, this approach helps get the bills organized and paid.

Split Expenses Equitably, Not Equally

Many friends and couples gravitate towards a 50-50 split of expenses when they move in together. The benefit is almost never a 50-50 gain. Unless both people make exactly the same amount, the 50-50 split absorbs all the cash flow of the lower-earner and increases the savings and play money of the higher-earner. So split the household expenses equitably, not equally. If one person earns $40,000 per year and one person earns $80,000 per year, split household expenses 30/70 – one third of expenses to the person earning one third of the household income and two thirds to the person earning twice as much. This way, each person will still have enough cash flow for debt repayment and savings.

Caveat: This doesn’t apply to personal expenses, just household expenses. If one person wants an ipad or a spa vacation, each person has to come up with the cash themselves.

Once the decisions have been made as to how much each person will contribute to the household expenses, set up a joint account to automatically pay the bills. Then use direct deposit to fund the account on a regular basis. For people on 26-pay period schedules (paid every two weeks), twice a year there will be a third direct deposit into this account which helps build up a backup emergency fund for, you guessed it, household emergencies.

This approach focuses on what the household needs vs. personal spending habits, creats an equitable split of expenses and helps create a more relaxed atmosphere around bill-paying (hopefully).

Would this approach work for your situation?