Joint household budgeting conundrum - any takers?

bpk101

Zanderman said:

[Tbh if our combined household income was 300k before deductions I wouldn't be worrying about such subtleties at all. Mrs Zanderman and I have a combined annual income of less than a tenth of that!]

But these are just illustrative numbers remember, i could have easily used £1,000 and £2,000, £10,000 and £20,000 etc. 

eskbanker

bpk101 said:

Zanderman said:

[Tbh if our combined household income was 300k before deductions I wouldn't be worrying about such subtleties at all. Mrs Zanderman and I have a combined annual income of less than a tenth of that!]

But these are just illustrative numbers remember, i could have easily used £1,000 and £2,000, £10,000 and £20,000 etc. 

Only if you've been using "illustrative numbers" throughout your series of financial planning threads over the years, which would obviously be a complete waste of everyone's time!

https://forums.moneysavingexpert.com/discussion/6326016/financial-planning-advice-sought/p1

Our joint income is around £330k including bonuses with my OH's income accounting for about 70% of that.

bpk101

Zanderman said:

I share the view that such splitting seems odd. I cannot see the logic of one person paying a higher proportion of bills just because they earn more.  Do they eat more too?  Have more showers?  Use more loo roll?  If the house is shared it is shared, surely? 

The only way i can explain or rationalise this approach is to give an example…

Person A – who might earn 2 or 3 times that of Person B – would rightly so like to enjoy the rewards of their comfortable hard-earned income and splash out the new super premium Netflix platinum subscription costing £100 a month (it doesn’t exist but you get the general idea).

Person B however is struggling to meet the cost of it based on an equal 50/50 split even though they'll inevitably use it. But at the same time doesn’t feel it’s fair to simply say no and limit Person A’s enjoyment just because Person B earns less. 

Therefore Persons A and B put their incomes together, pay for the premium service from the combined joint income, thus contributing equal amounts in proportion to what they both earn. I.e. the same system i'm describing.

Exodi

I think if you really want to do this fairly, you should compare net income - and net contributions to their pension pot.

E.g. Person A gets around £9.2k a month directly in their bank PLUS £1k in their pension = net benefit £10.2k

       Person B gets £8.3k a month, with £1k put into their pension which they receive £500 tax relief (assuming they claim the additional 20% higher tax relief as you state) = net benefit £8.8k

Total household monthly benefit = £19k, with person A making up 53.7% and person B making up 46.3%. Bills could be split in this way.

Also, with this logic - someone dramatically increasing their pension contributions, wouldn't lead to the other person being required to 'contribute more' where the increased pension contributions would obviously benefit the person increasing them.

Ebe_Scrooge

bpk101 said:

Ebe_Scrooge said:

If we're making the assumption that you're talking about a married couple, then many people find it somewhat unusual to split finances this way.  The majority of folk just treat the household income as joint - income and outgoings belong to the "family" and everything just goes into one big pot.

But isn't this exactly the same as the system i'm describing? Only instead of each persons entire salary going into one big pot, it's just the amount required to cover household bills.

I.e. if Person A put's their full £200,000 into the pot and Person B put's there full £100,000 into the pot, and from that one family pot come out all of the family bills, then Person A's income has contributed to 66% of the bills and Person B's income has contributed 33% of the bills.

My system is doing exactly the same thing no?

No, I think you're missing my point - it's not about just paying the bills, it's about living together and sharing everything.  If both people, in your example, put £100K into the pot to cover bills, what does the person with the larger salary do with the £100K they've got spare?  Go on a world cruise themselves but leave the other one at home because they've got no money left?

What most people do is both salaries get paid into a joint account, out of that comes all the expenses - food, mortgage, bills, holidays, treats, takeaways, whatever.  If Mrs Scrooge wants to buy herself a new dress, she does.  If I want to go for a pint with the lads, I do.  We don't ask permission, we don't divvy it up - although, we're both old enough and wise enough to know what we earn, what our expenses are, roughly what we have spare every month, what our saving goals are, etc., and would never go out and splurge a big chunk of cash just on a whim.

You could take it even further - for a large part of our life I've been the breadwinner, the wife stayed at home and brought up the kids.  Now that the kids are pretty much all grown up, she's got a part-time job.  Now, when she was "being a mum", she wasn't contributing anything financially.  But maybe I should have been paying her the going rate for being a child-minder/nanny, on a 24/7 basis?????  When we come to retire, it's my pension that'll keep us going - do I kick her out as she only has a tiny pension and won't be able to pay her fair share of the bills?

As I say, this idea of splitting things down to the nth degree seems strange to a lot of people.  Whatever you each bring home goes into the household pot and you share everything, end of.

Exodi

Also to the others in this thread (and to the OP) - my partner and I run a similar system (though we're not as meticulous as including pension contributions in the mix... but that said, we also don't have a household income over 300k!.

Every couple is different, and I feel people are unfair when they make broad-brush statements like "surely a couple should split their income 50/50". I think even the biggest romantics among us could appreciate that it isn't reasonable (or in line with being a MoneySavingExpert) to give a new-ish partner 50% of your income, especially where there may be a dramatic disparity, or they may be a spendthrift.

Obviously if you've been married for donkey's years then the point is more valid - but we need to make sure we're comparing apples to apples (which very rarely happens on these forums unfortunately).

bpk101

Exodi said:

Every couple is different, and I feel people are unfair when they make broad-brush statements like "surely a couple should split their income 50/50".

Yes, this.

bpk101

FYI, this article covers most of what's been discussed and was a bit of a catalyst for me to try and work out a better / fairer system. 

"A 50/50 split might not work when one partner earns significantly more. It may leave the person who earns less feeling financially strained if they can’t save or allocate enough to pay down debt."

"A popular method is to set a proportional amount of your incomes (for example, 35% of your net paycheck) for joint expenses. With a proportional split, the larger earner pays more, but the amount is relative to their ability to pay."

https://www.refinery29.com/en-gb/2021/06/10499898/splitting-money-partner-salary

EssexExile

At times in our life I've earned a lot more than my other half. At other times my other half has earned a lot more than me. Now we're pensioners and her pension is much bigger than mine. It doesn't matter, it all goes in the same account and we each spend what we want, anything big gets discussed. The definition of "big" has changed over time.

None of that matters of course, I know all the passwords and she doesn't.

bpk101

Ebe_Scrooge said:

this idea of splitting things down to the nth degree seems strange to a lot of people. 

Bear in mind the reasons behind me wanting to arrive at these monthly net figures is to ultimately arrive at a monthly personal disposable income figure – once joint household expenses (bills, nursery fees, contributions into a holiday kitty etc. etc.) are paid – from which i can start to budget with.

The only way of doing this accurately is to account properly for what these expenses are, what the agreed split is to cover them (50/50... proportionate to income...) and therefore, what is left over as personal spending money for the few things i wouldn't expect a partner to cover from a jointly combined pot... saving towards a gift for them, for example.

It might all seem overly granular but isn't that just the very nature of budgeting? If i'm basing my personal budget on an incorrectly calculated monthly amount then the budget won't work.