Fairly splitting shared expenses
February 5, 2019 2:40 PM   Subscribe

My partner and I are discussing the idea of me moving in to the home he owns (yay!), and we've started talking about finances. Can you help us figure out options for splitting costs fairly, given big differences in our means and how we will use the space? Any tips for managing shared expenses in our situation?

We are deciding how to split the mortgage, utilities (electric, sewage, garbage, and internet), and homeowner's insurance. Let's call it $1500 in mortgage and $500 in utilities a month.

He currently makes about 8x my salary, although his salary varies wildly from year to year, and he is supporting several family members. My salary is livable, but low enough that I need to maintain a tight budget with my current expenses. My salary will double in 18 months. Moving in with him is not driven by financial necessity but it has overall financial benefits for me, because even if we split costs 50-50 and I factor in additional costs related to a longer commute, I would have about 25% more a month to work with.

He is very generous with his greater means. He currently buys all of our shared food and all optional joint expenses, and would pay for furniture, home decor, home repairs, and homeowners tax.

However, neither of us feel comfortable with me not paying for some costs. Splitting them proportionately to our income would result in me paying an amount that feels too low ($222/month). It especially feels too low because he is out of town about 2/3 of the time, so I will be using the space and utilities much more.

We both see this as a long-term relationship but are realistic, so we're also thinking about the fact that I would be in a more tenuous financial situation if we were to break up- he will recoup some of his mortgage costs when he sells the house, whereas I would not regain any of that money and would be missing out on (potentially) years of building my own equity.

We agreed that we would prefer to not merge our finances at any point, but we have discussed making a joint account for shared expenses at some point.

Any suggestions?
posted by deus ex machina to Work & Money (25 answers total) 6 users marked this as a favorite
The "too low" payment strikes me as fair given that he is building equity and you are effectively renting. He may be out of town a lot, but the property will appreciate regardless! His paying for property tax and repairs is not a concession, it's his legal responsibility. Does he think it's too low, or is it just you?
posted by praemunire at 2:45 PM on February 5, 2019 [38 favorites]

I was once in a similar situation, though in my case I was living with relatives with a much higher income and I wished to contribute, but couldn't afford to do so at anywhere near the market rate. Eventually, we came to an amount that worked for both of us, but left me in a stable situation.

Perhaps you and your partner could "feel around" for what feels fair to the both of your? For example, if $222/month is too low, maybe $1000/month would feel too high, but $500 "just right". As you note, you will want to be putting some money away in savings, while your partner is building equity in the property. But really this is more of an emotional decision than a financial one: what amount feels right for both of you and will lead to the least amount of bad feeling on either part?
posted by jb at 2:51 PM on February 5, 2019 [1 favorite]

Well, I think it's fair to do something now and then see how it goes and have it all be up for discussion in 18 months if not sooner.

Generally, though, I would say why not just come up with a set amount you will contribute each month? Unless you somehow use an exorbitant amount of utilities, it seems to me that his expenses are probably not going to change all that much with you there. $300/month? $350? What are you paying now? What's the cost of housing in your area? It would be good if you built up an emergency fund for yourself, so that you aren't ever in a situation where you feel like you can't move out because you can't afford it.

One tiny point: for some reason I'd take home owner's insurance out of the list of monthly bills.
posted by bluedaisy at 2:52 PM on February 5, 2019

When my then-fiance moved in together, I was living off a grad student stipend and he had a full-time grown-up job. We looked at what our total expenses were going to be and decided that the best possible and most fair thing to do was to have a joint account, and we would put the same percentage of our paychecks into the account to make the total. So we both put half in, but his half a paycheck and my half a paycheck were significantly different. Rent, utilities, food all came out of the joint account. If we ate out together, unless it was a special occasion, we pulled from the joint. If we ate out apart, you paid for yourself.

We still use the same system today as a married couple. The shared pool of money has gotten bigger as we've gotten better jobs, but the percentage has stayed the same.

As the person who makes less, you get to have a few benefits that you wouldn't be able to afford and as the person who makes more, he is slightly limited on the shared things, but you both still have your personal account to do with as you need. If I wanted something back then that I couldn't afford, I had to save up so I could get it. But I could.
posted by teleri025 at 2:53 PM on February 5, 2019 [13 favorites]

I just want to chime in and recommend an app called Splitwise that has made splitting $ a lot easier between my partner and I. Whatever you decide to split, you can add it to the app and it keeps the balance for you. So much easier than dealing w receipts and things.
posted by monologish at 2:53 PM on February 5, 2019 [3 favorites]

If $222 feels too low do as chemicalsyntheticist suggests and start with half what your current rent and expenses are as if he were moving in with you. Making the move sounds like you are moving into "more home" that he has already selected on his own. I'm guessing that will come in around $400 based on info? But also set a time period to re-evaluate in a year maybe, and some criteria you might want to consider at that time: how has income changed, have you been able to build your own savings enough, are other contributions to the household being split well? Like, if he is away that often are you doing all the maintenance?
posted by Gotanda at 3:07 PM on February 5, 2019

My current monthly rent plus utilities is also about $2000, which is about the market rate. I can afford up to that amount and I already have an emergency fund in case I needed to move out.

He's way more frugal with water/electricity and obviously doesn't use either when he's gone, so I expect that those bills would go up substantially when I move in.

His paying for tax and repairs/upkeep is not a concession on his part, just wanted to be clear that that's not factoring into expenses here, because he pays a massive amount for both.
posted by deus ex machina at 3:08 PM on February 5, 2019

What about something like this:

You budget for the $2K per month, which would be "half" for you. You may him $500 per month towards housing and expenses, and bank the rest in a high-interest account. That will quickly build up a fund for any of these things:

* a super healthy downpayment on a new car
* throwing a lump sum at the mortgage, should you two decide to marry, in which case the house would - presumably - become half your property (pitching $30K at my mortgage principle took 9 years off its total term...which totally did not suck)
* a downpayment on a second home, either for vacationing, or rental income (or for inexpensive rent for family members/friends who are going through a rougher patch)
* an amazing birthday gift for him
* larger household repair expenses (new roof, new fence, new furnace, new appliances, what-have-you)
* a large downpayment on a house of your own (should things go awry and you need to get your own place, knock on wood)
posted by Tailkinker to-Ennien at 3:13 PM on February 5, 2019 [5 favorites]

Splitting utilities is straight-forward and sensible, but rather than splitting the mortgage (a detail of his home ownership), just pay rent to him. Start the market rent for your share would be and then lower it for whatever level of "sweetheart" deal he feels is fair.
posted by qxntpqbbbqxl at 3:16 PM on February 5, 2019 [6 favorites]

You’re both saving money by you moving in. Paying half of the mortgage and utilities seems to both 1. Be an amount you can afford given that it’s less than what you currently pay and 2. Saves you money that you can loosen your budget/save/etc.

He might make a bunch more money but right now that doesn’t even seem like it needs to be relevant. I would also make sure you treat t like a rental a lot of ways- he covers headache and costs of repairs/tax assessments/etc

You may also figure that other things need to be included on how you will split things (groceries etc)
posted by raccoon409 at 3:18 PM on February 5, 2019 [1 favorite]

Consider using the difference between what you consider "too low" and "fair" as deposits into emergency savings account, or perhaps two. One for just in case things don't work out, and one for emergency spending.
posted by stormyteal at 3:27 PM on February 5, 2019 [1 favorite]

I also really like the idea of both contributing to a joint account in some proportional way and then using that to cover joint expenses so you don't have to negotiate every bill and the person who pays bills doesn't have the task of tracking and collecting. What if you add in joint food and other household expenses (some of which he is already paying 100% for so you taking even 1/8 would put him a little ahead.
Also, if it seems fair to both of you, consider taking the average his income over several years, especially if it is unlikely to stay at this high level
posted by metahawk at 3:43 PM on February 5, 2019

Given he is supporting other family members, is that $ substantial and would you both feel better if you subtracted that amount from his total income to calculate your respective % contributions?
posted by sestaaak at 3:48 PM on February 5, 2019 [2 favorites]

I want to reiterate the point you make about how, were you to break up, you would walk away with nothing while he would have the equity he built up -- and you helped him with.

Yes, I think it's good that you will be paying something: I think it's good that he wants you to and also would be OK with your paying that smaller amount you mention. You can always revisit specifics when you get the raise or even every month if you'd like!

Also, it doesn't matter how much time he's spending or not spending there: on paper, it is his house even if it's both of your home. I think it's fine for you to want to spend more but wouldn't be OK if he expected you to pay for because of it. It sounds like he's being good about all this but I wanted to bring that up.

I'd consider buying some of the furniture yourself: I've lived in a beautiful home I didn't own with furniture that didn't belong to me, along with a few pieces that did. Having the latter really made me feel more ownership, and I recommend you do the same. He can buy the couch for $XXXXX but you can find a cute coffee table at an antique shop for $XX, etc.

Something to consider: I understand the benefits of moving into his place versus getting a new place together BUT that can be so hard. I've done both and it's difficult to be either person. I hope it's an easy transition but, should things prove difficult although the relationship good overall, consider moving to a new space together that is yours (plural) versus his (singular) from the start.

As I said before, I feel your paying $222 is totally fair. However, you could offer to pay the $500 for utilities in lieu of rent: you get "cheaper" housing and he is solely responsible for the equity of his house. Should you get married, earn more, etc. you can revisit the specifics. Regardless of what choose, it sounds like you two are on the same page and both trying to be generous and thoughtful, which is the most important thing and a positive sign!
posted by smorgasbord at 4:16 PM on February 5, 2019 [4 favorites]

You mentioned "He's way more frugal with water/electricity and obviously doesn't use either when he's gone, so I expect that those bills would go up substantially when I move in." I'd propose that you take over payment of all utilities and either pay a nominal "rent" or forego that altogether. If you take over those completely, you'll avoid the potential for freakouts when these bills go up.

It's a simple solution and it has worked for me and my significant other for more than ten years. He's also terrible about opening/paying bills on time, so if he just has to pay mortgage/property tax/homeowner's insurance and I handle the rest, it's way less stressful for both of us.
posted by queensissy at 5:36 PM on February 5, 2019 [9 favorites]

If you currently pay $2000 and his expenses as you listed them (although I realize they are probably theoretical) are also two thousand, why wouldn't you just pay half $1000? Then you are paying literally half of what you used to be paying, while paying him a good proportion. If you weren't planning on buying on your own at this time, you would still be renting anyway, so the equity argument doesn't hold up.
posted by bquarters at 7:06 PM on February 5, 2019 [5 favorites]

So your living expenses would be halved and you said your pay is about to be doubled, that sounds amazing. (His 8x more (if variable) would have to be averaged over years, subtracted by relatives he is supporting, and subtracting the significant costs of the upkeep or other expenses you mentioned....also once your salary doubles it is no longer 8x more.) So I would just pay the $1000 and consider yourself to be getting a good deal. Caveat...I'm not cohabiting so there may be way more dynamics/factors to deal with of course.)
posted by bquarters at 7:13 PM on February 5, 2019 [1 favorite]

Pay 100% utilities and nothing on the house.

Your partner will either keep 100% of the house if you break up quickly or 50% of the house if you break up slowly (after marriage, time elapse, or both depending where you live). It makes no sense for you to invest in a house that yields you nothing and you simply accept the risk of homelessness if the relationship ends through break up or death. Once you pass the point where the house becomes community property and there is a provision for you to get the house in the event of death, you can renegotiate.
posted by crazycanuck at 8:22 PM on February 5, 2019 [1 favorite]

they way we have split up our expenses based on our disparate incomes is by "pay equal percentages of their total daily, weekly, or monthly expenses - not equal dollar amounts.". We got the idea from Suze Orman and it works just fine for us - and let's us enjoy our vacations and free time activities together rather than one person always minding their wallet. So "proporational sharing" is our solution.

posted by alchemist at 11:54 PM on February 5, 2019 [1 favorite]

I would think about it by comparing to what you would do otherwise.

E.g., if your alternative would be to rent for 2000$/mo, then it doesn't matter whether he's building equity or not. You wouldn't be building equity in anything anyway, so just enjoy the 50% discount on your rent.

On the other hand, if you were otherwise planning to buy a house of your own, then maybe you need to talk about splitting the mortgage payment in exchange for some (formally executed!) agreement that he'd buy you out of "your" share if the two of you broke up.
posted by meaty shoe puppet at 12:13 AM on February 6, 2019 [4 favorites]

A few more ideas in case they resonate for you:

- "split the windfall" -- look at how much the two of you were paying in total before, subtract how much the two of you will pay in total now, and that's how much total money is being saved. Pay enough so you keep half the savings and he keeps half. (In general, finding any random thing to split equally is good for giving everyone a sense of fairness!)

- Think about what you would do if you were dating someone with a similar income to you and saving up for your own house. (Split a cheaper rented space?) Pay as much as you would pay in that situation.

- Subtract equity from the mortgage payment. His statement will break down exactly how much of the payment is going to interest (which is like rent on the borrowed money) and how much is going to equity (which is like his investment account), so you could look just at the interest part. (And in general, this is a nice way to think about houses -- a predictable rental fee plus unpredictable maintenance cost bundled with a volatile investment account. It's more realistic than "building equity.")

- Pay what you can afford, taking into account an aggressive savings goal. This is grounded in "I would be in a more tenuous financial situation if we were to break up." To make it less tenuous, suppose you take 20% of your paycheck off the top and put it in your own long term investment account, and another 20% for retirement savings -- or whatever amount will really put you in an equally secure position to him. At that point fairness in allocating the remainder might not be a big deal, because you're both working with "money to spend now" instead of money to feel secure for the future.
posted by john hadron collider at 5:02 AM on February 6, 2019

My wife and I were 35 when we married, so we were used to having our own money. Like you, there's a big income disparity -- though not quite as big as yours; I generally make 2-3x her salary.

Our split has been more or less:

Me: Mortgage, insurance, taxes, capital expenditures, dining out (say, 85%), entertainment (say, 60%).

Her: Utilities, groceries & household items, car payment if we have one.

In this way, traditionally, we've never had to pass money back and forth or have a shared account.

This is less true now, because things evolve. The biggest push here was when I stopped traveling for work, which meant no more frequent flier miles or hotel points. We then started using my Amex for nearly everything, especially groceries, restaurants, and gas, because of points multipliers, which resulted in me carrying more expenses. This has been mostly fine, too. It shifts the surplus money from me to her, which is good because she's a much better saver than I am.

This is all a long way of saying a split by category to establish weighted fairness might be a good approach, and has the benefit of not requiring a spreadsheet or individual split expenses.
posted by uberchet at 6:12 AM on February 6, 2019 [1 favorite]

Meaty shoe puppet has the answer, in my opinion. The fact that your partner is your landlord might be an odd thought, but you're just paying rent on a space, and (presumably) less than you would be paying if you weren't banging the landlord. If he didn't own the place, you'd both be paying rent to someone else. No difference.

Split utilities 50/50, pay some rent, save a ton of money.
posted by booooooze at 6:34 AM on February 6, 2019

These are all great ideas; he and I are going to sit down and hash this out.

Just to clarify why I wouldn't end up saving half ($1000) if we split 50-50, the new commute will add about $250-500/month for me in tolls/parking/gas/bus fare and having to hire a dog walker because I'll be gone much longer.
posted by deus ex machina at 9:20 AM on February 6, 2019

Just came in to say that you being there while he is gone isn't totally a negative for him, even there are utilities being used, etc. I get paid to house sit, so there is an amount you can figure in having someone stay at your home while you are gone. I stay in a house, use utilities, eat food purchased partially by the owner, AND get paid. Look into the average cost of a house sitter in your area and make sure you value yourself accordingly for that unpaid labor.
posted by BlueHorse at 10:59 AM on February 6, 2019 [1 favorite]

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