Forget 50:50 splits – this is the fairest way to divvy up the household bills

I’ve worked with a number of women recently who are in their twenties, at the start of their careers, and are beginning to move in with their partners. Some are renting, some are buying, but all have wanted to discuss how best to manage their shared finances now that they’re setting up a home together.

I’m a money coach, and I love to hear that people are being intentional with their finances, making a plan and setting themselves up for success.

But then, without fail, these young women have gone on to say: “Of course, I want to pay my way. We’re going to split everything 50/50.”

That immediately sets alarm bells ringing for me. These are young women, in relationships with partners who are already earning more than them, yet they insist on splitting the household bill down the middle.

A few more questions and it becomes clear to me that my clients and their partners are simply unaware that there’s any other way to divvy up the household finances. But there is. One that, at first glance, may not seem equal, but is actually very fair: contributing in proportion to what you earn.

To calculate this, divide the monthly take-home pay for each of you by the monthly household income. The resulting percentage is your contribution to household bills.

For example, if one of you earns £2,000 a month and the other £1,000 a month, your monthly household income is £3,000.

£2,000/£3,000 = 66 per cent.  £1,000/£3,000 = 33 per cent.

For example, if the monthly household bills were £1,000 each month, the higher earner would contribute 66 per cent (£660) towards them, and the lower earner 33 per cent (£330). And yes, for ease of explanation, I’m leaving that extra 1 per cent on the table.

Contributing to household finances in proportion to what you earn accounts for income disparity. It acknowledges and accounts for the fact that gender financial inequality exists.

No woman plans to be poor in her old age. But the gender pensions gap stands at 35 per cent, according to government figures. For every £100 of men’s private pension wealth, women have £65.

Research by the University of Manchester found that in about half of couples, one partner has 90 per cent of the pension wealth. Less than 15 per cent of couples have equal pension wealth.

One of the main drivers of the gender pensions gap is that across our working lives, women earn less than men. Reasons for this include women’s employment in lower-paid sectors, in less senior roles, and taking time out of work and working reduced hours in order to care for others, whether children or older relatives. And for women of colour, the ethnicity pay gap can also exacerbate our financial position.

Lower earnings by women across our working lives means less money paid into our pension pots, and results in less money for us to retire on.

It’s important to shine a light on the hidden forces at work on women’s finances so we can raise awareness and make informed financial decisions on a personal and collective level.

Policy changes being called for during this general election period include affordable childcare, and a lower earnings trigger for auto-enrolment into workplace pensions, which would see more women qualify.

In this context, how to split household bills increases in importance – and not just for women in their twenties. I told a fortysomething friend of mine, who has been married 10 years and counting, that I was writing this piece. She said, and I quote: “Oh wow. Proportionate splitting. Never even occurred to me. I am going to lap up your piece!”

Money worries are the biggest strain on couples across the UK, according to relationship counsellors Relate. So how can you talk money with your partner without falling out? Try talking to each other about your own relationship with money. Pose questions such as: what does money mean to you? How do you feel when you think or talk about money? What did you learn about money growing up?

Decide on your financial goals as a couple so you’re clear about the fact that you’re both working towards the same thing – whether that’s buying a home, travelling the world or starting a family.

And even if managing the household finances naturally falls to one of you, it’s a shared responsibility. Schedule regular money dates to review your financial position together.

Finally, it’s important to come up with a way of managing your finances as a couple – whether that’s one big pot with everything pooled together, or three separate pots representing yours, mine and ours.

A joint account can also pay dividends, because you and your partner get to decide what counts as a joint expense. Rent/mortgage, utility bills, and groceries seem obvious. But what about smaller, one-off things, like home furnishings? If this comes from the joint account, then no more feeling disgruntled – or being out of pocket – because only one of you has paid for the couch cushions!

No matter which method you end up going with, it important to talk about these things – after all, financial resentment is not conducive to a happy, healthy relationship.

Talia Loderick is a money coach, who helps people to understand and take control of their finances. Her website can be found here