Disparate incomes question

[ccquest]

I had a long talk the other day with my girlfriend (late 20s) about this and we've got different thoughts on it which has me concerned about looking at it selfishly. Let's say I make $80k and she'll make $160k (pretax).  I've always thought combined finances and priorities would be the best way to handle it, but she likes to say 50-50 split on core things and if it's something she really wants (say a bigger house), she'd cover the difference to make that a reality.

Originally at the start of the discussion, she wanted to max out available retirement accounts which I wouldn't be able to do for myself with my income alone anyway. As we worked through what a full zero-based budget might look like, it became clear that we could spend the full total but that doesn't account for saving for a tax bomb on her huge (say $500k) student loans or for her other goals (rental properties/passive income and private practice). These other goals would be on top of her putting money away into retirement accounts and also possibly somewhat substitute part of it. 

As much as I'd want to support her other goals, I don't think it'd be fair for "common" expenses to be split 50-50 because obviously as a percent of income, that is much more in her favor and keeps me back more. But she does have a point that it'd just me being able to do more because of her income. In the end, if her way works out I'm just "mooching" (my word here) off of it but in retirement instead of along the way.

Guess I'm just curious on thoughts from other member's that have gone through this and have more experience/advice to share.

[iced]

Are you married (or otherwise in a life-long relationship with some commitments)? The answer will determine your course here.

When we were not married but cohabitating, bills were basically split 50/50 except the mortgage, which I took on 100% because the mortgage was still substantially cheaper than any rental I could live in, so I saw it as a bargain even at 100% (I even made extra principal payments it was so, so much cheaper). We otherwise split 50/50 because there was no long-term guarantee the other was in for the long-haul, and incomes don't matter at that stage. You're both equal partners, and you should be able to support yourself (outside of housing, where you may have taken on a roommate). If you can save more, you should do so as it does help you in the long-term.

Marriage changes the game because now you ARE in it together for the long-haul and helping one another maximize savings translates into both benefitting in retirement. Once married, I took on more of the expenses so my SO could contribute more specifically to max out the retirement account. When a child came along, I took on most of the expenses so my SO could also max out DCFSA (leaving her with only a few hundred dollars take-home per paycheck, not nearly enough to split expenses).

[Shooting-For-800]

You need to look at what is best for you until you are married.

I would look at your expenses if she was not involved.

If you are willing to spend $1k on a house or apt, that is would be my max for my side of the arrangement.

If you want to max out your retirement, do it.

Dont treat your finances like you are married if you are not.

If you end up married it all works out anyway, if not, it still works out.

JMO.  GL!

[Anonymous]

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@ccquest wrote:

I had a long talk the other day with my girlfriend (late 20s) about this and we've got different thoughts on it which has me concerned about looking at it selfishly. Let's say I make $80k and she'll make $160k (pretax).  I've always thought combined finances and priorities would be the best way to handle it, but she likes to say 50-50 split on core things and if it's something she really wants (say a bigger house), she'd cover the difference to make that a reality.

Originally at the start of the discussion, she wanted to max out available retirement accounts which I wouldn't be able to do for myself with my income alone anyway. As we worked through what a full zero-based budget might look like, it became clear that we could spend the full total but that doesn't account for saving for a tax bomb on her huge (say $500k) student loans or for her other goals (rental properties/passive income and private practice). These other goals would be on top of her putting money away into retirement accounts and also possibly somewhat substitute part of it. 

As much as I'd want to support her other goals, I don't think it'd be fair for "common" expenses to be split 50-50 because obviously as a percent of income, that is much more in her favor and keeps me back more. But she does have a point that it'd just me being able to do more because of her income. In the end, if her way works out I'm just "mooching" (my word here) off of it but in retirement instead of along the way.

Guess I'm just curious on thoughts from other member's that have gone through this and have more experience/advice to share.

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When it comes to splitting finances, there is no right or wrong.  it is a relationship, every person and every relationship is different.  finding the balance that works for you 2 is the right choice, whatever that is... that said...

1) a 50-50 split to me should not factor in how much you make.  unless you are going to cap yourself at using 25% of the internet or 25% of the apartment i think paying 50% is a reasomable ask.  Typically these are things you would pay 100% of if you were single regardless of salary.

2)  beyond the common expenses, everything else i think comes down to how committed you are.  if you are talking about retirement and owning property, what the split is to me depends on the commitment.  is this marriage or some other binding long term relationship?  if so they id feel less worried overextending myself in your case leveraging her income to make up the gaps.

3)  Your goals matter too.  you making less money doesnt mean your goals matter less.  she isnt providing 100% of your living costs, so she shouldnt get some greater stake in shared goals, other then her already willingness to chip in more if she wants more of somethng (house, etc..)

[JL276]

I think her request is actually very fair, you all aren't married and she wants to split 50/50. I would also say don't go into debt if you can't afford to split the bills as that will make matters worse. The simplest solution would be not to move in together, you both get to spend how you see fit. In any case talk it out with her BEFORE you make any moves to live together. 

[disdreamin]

I'm with others who say the 50:50 split is reasonable for cohabitation before marriage. If you are married, it's a bit different as oftentimes any investments made during the marriage are viewed as belonging to both partners. The offer to take on more financial responsibility if the decision to spend more on something is hers makes complete sense. One partner with greater income should supplement the cost of things they choose to do beyond the basics.

A couple other points - since the incomes are quite different, taxes may also be skewed. Are you looking at splitting based on net income (after 401k contributions, insurance, etc) or were you viewing the gross incomes as the basis for splitting expenses? Those might be two quite different things.

Frankly, if one partner makes far less than the other those details are something to work out sooner than later as there is sometimes resentment from both sides that occurs down the road. I've got a friend in this situation, they make twice what their partner does and they resent it. The partner chooses to be underemployed and have far more free time but contributes nothing as far as housework/cooking despite all their extra free time. They basically do mooch. Lots of free time and hobbies, and they rely on their partners income to finance it all. From the outside, it looks like a recipe for disaster and I don't think it will end well. As on all things, your mileage may vary.

[ccquest]

@iced said:
Are you married (or otherwise in a life-long relationship with some commitments)? The answer will determine your course here.

Not married, long term relationship and talking about plans for when we would be married.

I don't disagree with splitting things 50-50 now, we're both just individuals in for the ride together until marriage is what happens. But my questions/thoughts were more for her viewpoints on finances when married.

@Shooting-For-800 said:
Dont treat your finances like you are married if you are not. If you end up married it all works out anyway, if not, it still works out.

They're fully separate now and would likely stay that way for awhile, forever if it goes her way. I guess that second sentence is especially true in the end, everything shakes itself out at some point! Just may be some pains along the way.

@Anonymous  said:
1) a 50-50 split to me should not factor in how much you make. unless you are going to cap yourself at using 25% of the internet or 25% of the apartment i think paying 50% is a reasomable ask. Typically these are things you would pay 100% of if you were single regardless of salary.

Her view on things like that before marriage goes back and forth a bit. Like she'd be fine picking up all the household bills while I pay whatever my current rent is if we were to move in together at my place.

@Anonymous  said:
is this marriage or some other binding long term relationship? if so they id feel less worried overextending myself in your case leveraging her income to make up the gaps.

Scenario originally posted is marriage yes.

I think her request is actually very fair, you all aren't married and she wants to split 50/50. I would also say don't go into debt if you can't afford to split the bills as that will make matters worse. The simplest solution would be not to move in together, you both get to spend how you see fit. In any case talk it out with her BEFORE you make any moves to live together.

These are based on being married, not just being together.

@JL276 said:
A couple other points - since the incomes are quite different, taxes may also be skewed. Are you looking at splitting based on net income (after 401k contributions, insurance, etc) or were you viewing the gross incomes as the basis for splitting expenses? Those might be two quite different things.

It was based on after tax estimation for both, not 401k or insurance. Another wrinkle in that respect is gov vs private sector employment so I don't have 401k or matching, but better insurance coverage/pricing.

@disdreamin said:
The partner chooses to be underemployed and have far more free time but contributes nothing as far as housework/cooking despite all their extra free time.

That came up in the opposite way as well with her considering some "break" time in between before getting to work fulltime so it'd be more even on income those years at the start possibly with her just working halftime.

[Anonymous]

She may be contributing twice the income, but it's possible that she has more than twice the debt with student loans factored in. When you say there's a "tax bomb" associated with those, is that because she's expecting forgiveness at some point?

My husband and I didn't cohabitate until we were sure of marriage within the next 1 - 1.5 years. He worked in high tech as a manager and I was a new public school teacher, so you can imagine the income disparity. However, we simply set common goals together and put all the money in one pot. We personally found that much easier than deciding who "owed" what each month. However, we did give each other an allowance each month (what my mother called "mad money") and we could spend that however we chose. That money is transferred directly from our joint checking account into our individual checking accounts each month. 

I think it worked for us because we had similar long-term goals related to outright home ownership, early retirement and passive income generation. We were both also very willing to live waaaay under our means, which for us meant smaller houses and older cars. It probably would have been very different if one of us was had a more short-term view of spending money for immediate gratification.

I'll also say that it's possible that the income disparity could shift. My husband hated his job and eventually moved into a MUCH lower-paying but satisfying career, and I got into swing/day trading and now make 90% of the family income. Having to recalculate that split every time our incomes changed would have been a pain in the arse. 

[SoCalGardener]

My thoughts are most in line with what @Anonymous said.

Personally, I think partners--whether legally married or not--in a committed relationship should pool their incomes. I just don't see, or like, a "mine and yours" mindset for a committed couple. You're in it together, so who cares who makes more? I say pool both incomes, then use the resulting pot to pay the bills.

That method works great whether you're both working or one is taking time off--like both my husband and I did during the course of our marriage. I took time off to be home with our daughter when she was very young, then later I took time off due to illness. During those periods, when he was the only one bringing home money, there was never a question of 'mine and yours,' or making me feel guilty about not working (for pay). Likewise, when he decided he was no longer happy in his career and--after 25 solid years of working--wanted to stay home and 'do nothing,' I felt the same way. I made more than enough to compensate for lack of his income, so why not?

For both of us, when we weren't bringing home a paycheck, we saw taking care of the house (and shopping, and children (human and otherwise), and laundry, and cooking, and vet visits, and running errands, etc.) as the way we contributed to the family. I never made him feel guilty for staying home either.

What if you have children? Will one of you stay home, at least for a while, when they're babies? What if one of you gets sick? Or loses their job?  When your relationship is built around a 50/50 "you owe this much and I owe that much" mentality, what happens when one doesn't have an income? Is their worth diminished because they're not bringing home a paycheck?

I've been on both sides of the higher-vs-lower-income dynamic, and think it's important for both partners to feel equal, regardless of whose paycheck is bigger. If you're resentful because 50% of the bills takes a bigger bite out of your income than it does hers, that can only lead to problems. Anything that causes resentment can lead to problems...

[Anonymous]

My daughter and her husband have this problem.  She makes well over $250,000 he makes $30,000.   He spends his $30,000 on toys for him and she pays all the bills.  What he has not figured is she resents him not paying any thing even based on income.   She got stuck buying a used car while he bough a telsla that  uses his whole pay check.  More than once she talked about kicking him to the curb since he uses her money to live on.   He treats her like his personal ATM.  She is busing looking for a higher paying job so she can get a better house.   My kitchen is about the size of their condo.   (yes my kitchen is large but still)