Tell me about your expenses, I’ll tell you what kind of couple you are. Whether it is because new generations are more inclined to manage their finances individually or because of the proliferation of reconstituted families, couples who have a traditional sharing of expenses are fewer and fewer in number. Result: financial planners of the 21ste century must frequently cut to the chase.
This is the question that Ana posed to us, writing us this: “I have recently moved in with my new partner, who already has a child from a previous union who lives with us every other week. I’m wondering about the best way to divide expenses. Is there a preferred model? I feel that my partner is fearful when it comes time to talk about this subject. For the moment, we manage sharing on a piecemeal basis, which makes me uncomfortable. »
No universal model
The first element to make clear is that there is no model that applies to all couples. The one that best suits your reality and your common values will be the best. I would add that the important thing is that both team members are comfortable with it. Among the most common models, there is the traditional 50-50 sharing or pro rata of income, pro rata of the children coming from each spouse for certain essential expenses for the children.
If it is more complex to go through the process of establishing this budget than to manage your expenses individually, the fact of not having a clear budget is dangerous for the couple – note here that this is not my area of responsibility. expertise! — and can lead to great inequalities in the long term. For example, it could happen that our reader Ana contributes to the expenses of the child who is not hers, without sharing the income from family allowances or alimony.
Before proceeding with a joint budget, each member will have to highlight their own expenses over a period of ideally 12 months. Each expense item should then be discussed as a team. First to determine which expenses will be individual or which will be common. For common expenses, the contribution of each member of the household should be decided at the end of this exercise only, even for couples who wish to merge their finances and put everything in common, in order to avoid unpleasant surprises regarding habits. consumption of the new spouse.
A risk and benefit analysis
The main advantage of pooling all resources is to encourage savings for the spouse with less income and to recognize the time devoted to family life. On the other hand, it considerably reduces the financial independence of members and presents many risks for common-law couples.
The 50-50 split applies more to couples whose income is roughly the same, while sharing in proportion to earned income allows for more equity between spouses. In both cases, financial independence is preserved, but the accounting is also more complex, especially if expenses are paid in addition, in proportion to the expenses devoted to the children.
In the case where the income gap is significant, the “half-and-half” formula is more risky for the spouse who has lower income and who will consequently have to reduce their long-term savings.
In the case of reconstituted families, as is the case of Ana, the discussion must also make it possible to establish the sharing of expenses relating to the children. If the reconstitution is recent, the parent may want to assume the expenses related to their children and keep their family allowances or pensions. When the “step-parent” contributes their income to the child’s expenses, the income and expenses may be configured differently. Once again, each family is unique and will have to make its choices. The logic to follow boils down to pooling the income received for the children if these expenses have been shared between the spouses.
The essential key is communication
Without a universal model to rely on, the key to success lies more in communication than in using a calculator. In the case of Ana and her partner, the conversation should be open, frank and respectful. Before blaming her partner for not wanting to have a clear budget, our reader will benefit from understanding the source of her discomfort. For example, he might be afraid to share his family allowances if he has already had a negative experience in the past with another partner. Everyone comes into a relationship with past experiences, sometimes positive, sometimes negative. Ideally, this conversation should have happened before our readers moved.
What a lack of romance! you might think as you read this. Over the years, I have noticed that a couple’s ability to talk about money says a lot about their chances of long-term survival. Couples who achieve their financial goals have the same characteristic trait: they manage their finances as a team, without taboos. Their relationship with money is more detached, less emotional. We must equip ourselves with the necessary means to make financial discussions lighter.
One thing is certain, for Ana, it is imperative to clarify all these elements with her partner. Putting off this important conversation will only add to the challenge and even fuel frustrations. Regardless of the model chosen, the final step – but often neglected – will be to subsequently adopt a common living agreement. But that’s another story…
Financial planner, Sandy Lachapelle is president of the independent firm Lachapelle Intelligent Finances.