I’m Rich, But He’s Not—How Do We Split Rent?

Dear Kristin,

My boyfriend and I are looking to get our own place together after years of living with family and roommates and have been discussing combining our finances or how to balance our expenses. He earns almost $10 more per hour than I do, but also has debts and child support to pay. I have some small debts, but I also have quite a bit of money in savings, and bonds and stocks thanks to yearly gifts from my parents and grandparents. 

He believes that because of the gifts I receive I technically earn more than he does, and that I should contribute at least half to our expenses. I think he may be right about me earning more if I include my savings, but I’m trying to figure out how we could fairly split rent and expenses when 50% of rent in our area is 50% of my monthly earnings, never mind groceries and utilities! I don’t dare ask my family’s advice as they’ll say I don’t owe him anything from my savings (both my parents are divorced, enough said).

Sincerely, 

Poor Little Rich Girl

Dear Rich Girl,

This is such a popular question, and it’s not hard to see why. How do you combine finances, split expenses, and continue to handle your money in a way where no one feels they are taken advantage of? This conversation will require you to take stock not only of your finances, but also, of your feelings and emotions.

I believe that the best way to split expenses is proportional to income. So if your boyfriend earned $2,000 a month and you earned $1,000, he earns roughly 67% of your combined earnings—and should pay that same percentage of your expenses. I crunched the numbers, and at $10 more an hour, he earns over $20,000 more a year (before taxes), assuming he works full time. That’s not an insignificant amount, but you mention that you receive monetary gifts from your family, which does complicate things.

Your savings or assets shouldn’t be counted as income you’ll be spending on rent or expenses. Why? Because if you need to rely on a finite amount of money in your savings account to pay your bills, then it’s an indicator that you might be living beyond your means (and you don’t want to drain your emergency fund if you don’t have to). 

And while any stocks or bonds you’ve been gifted contribute to your total wealth, they don’t put any money in your hands you sell them, unless you earn dividends and choose not to reinvest them. And you shouldn’t have to sell your assets to pay rent unless it’s an emergency. So your boyfriend shouldn’t count them as a part of your income.

One thing to consider is if you get sizable cash gifts regularly from your family. If so, that should be counted toward your income, similar to a bonus you’d receive from your job. For example, if your family gives you cash gifts that equal a combined amount of $20,000 a year, then it sounds like it might actually be fair for you two to split rent 50/50. But considering that these are gifts, it wouldn’t be wise to rely on it. Your family’s generosity or financial picture could change, which means that the gifts could stop at any time.

Let’s now broach the second issue in regards to your boyfriend’s budget. Child support isn’t discretionary spending. Meaning, he has to send that money to his ex-partner for his children no matter what. His debts can be thought of the same way. So while his income might be greater than yours, his budget might not be. And while that may not seem ideal—or even fair—it is a reality of his financial circumstance. He just might not be able to contribute as much of his income as he’d like to rent, utilities, groceries, and more. 

But that doesn’t mean you have to pick up the slack because of his current financial situation. So what do you both do know? Have an honest conversation about your incomes (the total income, including any gifts) and put a budget together that doesn’t force one person to pay more than they can afford. 

Look at how much each of you can reasonably contribute to rent and other expenses and use that as a guide to where you’ll live. It might turn out that the areas you like are out of your budget. Is there a different neighborhood that is more affordable? You won’t be able to answer those questions until you both have this conversation. 

If you and your boyfriend plan on staying together for the long haul, you’ll have to get comfortable navigating tricky financial situations like these and others. Remember that ultimately, the relationship should give you both an opportunity to improve your financial situations by combining forces. So don’t be so rigid in the pursuit of “fair” that it forces one person to live beyond their means. If you do, you could both lose—financially, and in the relationship.

-Kristin

If you have questions about money, Kristin is here to help. Submit an anonymous question and she may answer it in a future column.