Sharing Living Expenses
Before tying the knot, more and more couples are choosing to live together. While living together can be a great opportunity to see if you and your significant other are compatible, being in financial harmony and agreeing on how you will share living expenses with each other can take some work. Read more to see if you’re ready to live with your other half.
According to recent surveys, one of the leading causes of divorce among couples in America is financial problems. If you are not on the same page with your finances, budgeting, and spending, tensions can run high and conflicts can occur. Before taking the next step of living together or getting married, take the time to let your financial skeletons out of the closet. Once you are honest with your partner about your debt, your monthly spending, and your monthly income, you can move forward and set financial goals together.
Become Budget Buddies
Budgeting doesn’t have to be a drag. Find time to discuss your budget together and keep each other accountable. Set goals and work hard to stay motivated to meet those goals. For example, if you both need to pay off a credit card, see who can pay off their card first. Have more date nights in and get creative. Get a second job together in order to bring in extra income. Create a side business together. Encourage each other to apply for upcoming promotions at work. The possibilities through teamwork are endless.
Contribute Based on Your Income
Be careful not to put too much financial pressure on yourself or your partner. Before looking for a place or before buying a house together, figure out not only what both of you can afford but how much of your monthly income you should be contributing to the joint bills. For example, if your monthly income is $3000 and your partner’s income is $4000, your joint monthly income is $7000. In general, your rent should be 30% of your monthly income. So your rent should be no higher than $2100 a month. If both of you contribute 30% of your monthly income, your contribution to the rent should be $900 per month and your partner’s should be $1200 per month. Sharing living expenses doesn’t have to mean splitting everything equally if that would put unnecessary strain on your personal finances and by doing so, you will find it difficult to budget properly.
Both Separate and Joint Accounts
Even after marriage, more and more couples nowadays are opting to keep separate accounts instead of combining all of their income into a joint account. There are benefits to having both types of accounts.
With separate accounts, there is less conflict over money issues as long as each partner is paying their portion of the monthly expenses, but there is less accountability for savings when they are separate. Also, separate accounts can make sharing money with each other in times of need a little tedious.
Many couples often decide to keep their separate accounts for their own expenses and personal financial goals. They also have a joint checking account for their shared expenses and a joint savings for any future purchases of joint assets such as their first home, cars, etc.
Your, Mine, Ours
Although you may have some shared expenses, living together should never come with the expectation that you or your partner should be shouldering the financial burden alone. Your personal expenses and debt should be taken care of through managing your own expenses. By focusing on your own money and making financial contributions to shared expenses that are relative to your monthly income, you will find yourself in less conflict with your partner. The expectations between the two of you will be transparent, and you will not be relying on your partner to contribute more than they can afford and vice versa.
Have a Break Up Plan
Everyone knows that divorces can be very expensive, but people rarely talk about how costly a break-up can be if the two of you are living together. Make sure that you have your own emergency fund in your own savings account that you can rely on in case you and your partner call it quits out of the blue. Also, though it’s not the happiest subject to talk about, discuss how you and your partner will divide your assets if you break-up and are not married. It will be up to the two of you to decide what each person walks away from teh relationship with because you are two separate individuals in the eyes of the law.
Even though living together doesn’t always lead to wedding bells, a happy relationship can only be enhanced through financial transparency. Whether you are getting married or living together, having open and honest conversations about money and setting financial goals will have a positive impact on your relationship for years to come. And if living together does lead to marriage, having a budget that works for the two of you will put you ahead of the game and be one less thing to worry about when you do walk down the aisle.