Finance expert: Why couples SHOULDN’T split rent equally – and how much you should be paying instead
- An Aussie finance expert says couples living together shouldn’t pay equal rent
- Victoria Devine said rent and bills should be split based on percentage of income
- This makes it truly ‘equitable’ if one person earns more than the other
A leading finance expert has revealed why couples who live together should not split rent equally.
While talking about money with your partner might be awkward at first, Victoria Devine, from Melbourne, said it’s necessary and believes couples should split the rent based on the percentage of individual salaries.
The host of the She’s On The Money podcast shared a video with her 36,000 Instagram followers explaining how it isn’t ‘equitable’ to split rent equally if one person makes twice as much as the other.
While talking about money with your partner might be awkward at first, Victoria Devine, from Melbourne, (pictured) said it’s necessary and believes couples should split the rent based on their individual salaries
The host of the She’s On The Money podcast said she ‘doesn’t believe’ it’s fair to split rent and living expenses equally with your partner if one person earns significantly more than the other
‘Hear me out, if you earn $60,000 a year, and your partner earns $150,000 a year – I don’t think it’s fair for you to pay equal rent/bill/fixed expenses. Why? Because while it might be equal it’s not equitable,’ Victoria wrote.
She continued by saying shared expenses in relationships should not put pressure on one person and should be split based on percentage of income instead 50/50.
This way the lower income earner can still save money, making the split truly equal.
After 17 hours the video was viewed more than 57,000 times, and hundreds agreed with the strategy.
‘Percentage based is way better! Don’t get me started on domestic labour and “traditional” household roles!’ one woman wrote.
‘110 per cent agreed – that’s what we have been doing, and it’s such a relief,’ another added.
To calculate the percentage of an income, Victoria said to first work out your annual after-tax income and divide by 12 to get a monthly figure.
Then, add your individual after-tax incomes together to calculate the joint income.
Next, divide each individual’s income by the joint income figure and multiply this by 100 to get the percentage.
‘Hear me out, if you earn $60,000 a year, and your partner earns $150,000 a year – I don’t think it’s fair for you to pay equal rent/bill/fixed expenses. Why? Because while it might be equal it’s not equitable,’ Victoria wrote
How to calculate your income by percentage:
1. First, work out your annual after-tax income and divide by 12 to get a monthly figure
2. Next add your individual after-tax incomes (net income) together to calculate a joint income
3. Now divide each individual’s income by this joint income figure and multiply by 100 to get a percentage
Last year Gerry Incollingo, Managing Director of financial planning business LCI Partners, told FEMAIL the average Australian should spend a maximum of 30 per cent of their monthly gross income on rent.
Pushing further than this recommended amount can place strain on the person and their financial situation.
‘Of course, circumstances differ across the board and sometimes it may seem necessary to compromise on other expenses to increase your ability to afford rent, however, it is commonly considered that pushing for higher than 30 per cent often generates housing stress,’ Mr Incollingo said.
‘Prospective renters should make it their primary focus to accurately determine how much they make and calculate how much they are able to afford within a safe sweet spot.’
Evidently the ’30 per cent rule’ might be too much for those earning a high annual wage, such as $100,000 or more.
Failing to understand and manage your financial position can result in ‘rental stress’ and the possibility of being unable to pay for additional bills.