Joint household budgeting conundrum - any takers?

Emmia

We have a joint mortgage, a current account for groceries and savings account, but our salaries and the bulk of our savings are in individual accounts.

I having experienced a past relationship where I was almost bled dry financially, (and as much as I love and trust my OH) I would never in a million years go all in with a single joint account with anyone. I cherish and guard my financial independence - OH has also never suggested an "all in" arrangement, so it is something that works for us.

ZeroSum

There's no right or wrong answer, but when I first got together with my OH, it was more like the OP. She gave me 50% of the bills each month then we had our own spends.

Now that we're getting married with kid on the way, it's a more pooled set up.

We still have our own accounts but each transfer a set amount each month into a joint account with the higher earner making a larger contribution. Then all the joint spending & saving is managed from there. And since I'm good with money & she can't be bothered with all that, I manage all the household spends.

A big problem with what the OP does is that what if she wants a nicer house & he can't afford the 50% mortgage payment? If you don't have kids then going all in isn't really needed, but I suppose there's nothing wrong if say you both have your own cars, and she wants something a bit nicer & can utilise her higher income for that.

enthusiasticsaver

bpk101 said:

Hi,

I'm trying to work out a joint household budgeting system where the two individuals contributing are proportionally splitting the total cost of bills on a true and fair representation of their respective monthly take-home salaries.

However, as described below (using illustrative figures), the way each persons pension contributions work means the monthly take-home figures may not be based on a comparative set of factors.

Person A is a full-time employee, after deductions their taxable income is £200,000
However, they also contribute £1000 a month to a work pension via ‘salary sacrifice’ bringing their total taxable income down to £188,000.
Tax and NI is deducted and a monthly take-home figure arrived at. 

Person B is self-employed, after deductions their taxable income is £100,000
They too contribute £1000 a month to a (self-invested) pension, but it’s not classed as a tax deductible expense and their taxable income therefore remains at £100,000.
Tax and NI is deducted – with any 20% higher rate pension relief accounted for – and a monthly take-home figure arrived at.

Person A and B plan their monthly household budget and calculate their individual contribution so that it’s in proportion to their respective monthly take-home figure. All household bills are then paid.

However, Person B still has their monthly pension contribution to make from whatever they have left after bills. 

So... would this be deemed a fair system or would it be fairer if Person B deducted their pension contribution (adjusting for any higher rate tax relief that might come back to them) before the split of household bills is worked out?

I think if you are going to split bills this way then net income after pension, tax and NI  is what you need to work on.  So the self employed persons income needs to be £88,000 assuming £12k pension contributions (ignoring tax relief).