Over the past week I’ve given a lot of thought to this question:
What’s the fairest way to split household expenses?
And the answer. Wait for it... Really depends.
Before writing this post, I naively assumed most people were like me, and split rent and house expenses equally. But after speaking to a bunch of people in different situations (couples and singles) it turns out the reality is far more complex. ¯\_(ツ)_/¯
This post will cover the various ways you can split household expenses fairly. And to start making things smoother in your household – I created a nifty spreadsheet template with a little bit of coding magic. It’s setup for you to start using, no matter how you prefer to split expenses.
Get the spreadsheet:
How the spreadsheet works:
- Click on this link, Sign in to your Google account (100% free unlike Excel), and copy the Google sheet. You’re now free to customize the sheet with the names of your housemates.
- When someone in the house pays for something – lodge it in the spreadsheet.
- If they want to split the expense equally between housemates, they can pick Equally from the How to split dropdown and tick the checkboxes for everyone who is going to contribute.
- If they want to split it by percentage, they can pick Variably from the How to split dropdown and add a percentage under each person’s name. Be sure to include the % symbol.
- As every expense is added, the spreadsheet will automatically calculate the amount each individual owes to each other.
- Sending money to every person in your house to settle up can be a bit time consuming, so the spreadsheet also includes an option to simply the calculation. After the “Simplify” box is ticked, the spreadsheet will do some magic calculations to find the least amount of transfers needed to settle up.
Voila! That’s it. But if you’re still wondering how you should split your expenses, here are some options.
7 Ways to Split House Expenses
1. Go 50/50.
People in your house buy a bunch of stuff. You all use that stuff. You split it fairly. If that sounds good to you – this can be one of the simplest ways to split rent.
This is how my girlfriend and I split our expenses and rent. We’ve have fairly similar lifestyle habits and use the utilities in our house pretty equally, so we’re happy with this method.
2. Split by percentage.
Splitting by percentage means all your household expenses are lodged, but the amount that everyone pays is weighted. Some reasons for choosing this option:
- Some people don’t use that particular expense as much as others, so it doesn't make sense to split evenly. For example, maybe one housemate works from home and uses the Internet, while someone else rarely does. It might make sense for housemate A to pay 80% of the Internet bill.
- If you want to split based on income. This is an extremely common method of splitting expenses – even outside of couples.
- If one person in the household has put their hand up to foot the majority of the expenses. This is more common in relationships.
This method is great to optimise fairness when people in your house have very different incomes, routines or consumption of utilities in your house.
The downside of this approach is that is can be difficult to get down to an exact science how the split should land, so it’s important to discuss this and get everyone to agree on your split ratios before lodging expenses.
3. Split based on income.
Splitting based on income is most popular for people in relationships, where one person earns significantly more than the other and is happy to foot a higher percentage of expenses. The idea is that the amount each person pays is proportional to their income.
You’re willingness to do this probably depends on how serious your relationship is; whether you want to operate as “a team” where you share everything and are working towards common goals, or whether you want to maintain a sense of independence and ownership of your finance and prefer to split evenly.
4. Different people take on individual expenses.
Another way is to split expenses by category. For example, one person covers electricity and water while another covers Internet.
On the plus side, it’s a great option to reduce the amount of bank transfers you need to send when you split things. On the downside, the fairness of this approach is a bit arbitrary. Groceries and gas are probably always likely to be cheaper than rent and electricity, so overall it gets more points for convenience than fairness.
5. Split by usage.
Splitting expenses strictly based on how much someone used a certain thing can be a good option if different members of the house have very different consumption habits.
For example, one housemate may never use the Internet or always showers at the gym, so in this system they would pay less from those specific expenses. As mentioned above, this approach gets points for fairness but involves a bit of effort in terms of calculating the right percentage for the split.
It also has the potential to cause arguments if people in the house diverge from their usual rhythms. For example, if the girl/guy that usually showers are the gym decides to skip exercise for a couple of week, do you need to go back to the drawing board and reasses the water bill?
6. Set up a joint bank account with debit cards.
Setting up a joint bank account means there are no calculations needed to split expenses. All contributing members simply add a set amount to the pool each month, and expenses are charged directly to the account.
This approach can be great for couples or housemates, and means you only need to think about expenses if you exceed your budget. The downside is that you need to set aside money in advance, so it might not be so ideal for homies on a tight budget. You also need to trust your housemates as there’s also the temptation to spend the money because it’s there. If you prefer to lodge expenses only when necessary this might not be your first pick.
The YOLO approach is driven by good faith. With this approach, members of the house purchase goods or pay for things when they come up, and everyone assumes it will all roughly even itself out.
Houses have come to bitter ends over far less. Unless you’re crazy loaded and money isn’t an issue, this option should probably be avoided. :)
However you choose to split expenses in your house it’s handy to have a tool support your system.
Check out the sheet linked above and let me know if it makes your life a little easier. Or if you have any questions, just shout out in the comments below.