One of the biggest strains on many relationships is money. Moving in with a partner comes with a lot of changes and one of those is how to handle your financial situation. I’ve been reading quite a bit about the subject over the past few weeks, and here are some suggestions I’ve learned for couples moving in together who aren’t married.
Sharing a Rented Home
If you are sharing a rented house or apartment (meaning that no one is earning equity in the home), the best way to handle the situation is to split the costs in a fashion that both of you are comfortable with. I have many friends who decide that one partner is going to take certain bills while the other picks up the rest.
My favorite method requires a bit more math, but I think it’s the one that helps everyone feel like they’re on equal footing. Take a look at total household income and figure out what percent of the total each person brings in. If one person makes 60% and one person makes 40%, then the bills should be split along those lines.
Now, the actual method of handling this can vary. Some people open a joint checking account and deposit money in on their preferred ratio and then use that account to pay all of their bills. Others sit down every month and figure out the best way to balance the bills. It’s a bit more work, but it’s fair.
When One Person Owns a Home
What happens if one person owns a home and their partner is moving in? This situation is a little bit different, because one person is earning equity in the home while the other is not. One suggestion I’ve heard is that the non-owner can just pay the owner a “reasonable” amount of rent. But that somewhat changes the emotional feeling to the home that you are sharing. It makes it very clear that one person is the owner and one person is the renter. That’s not always what you want in your shared home.
Taking a look at your shared finances is an important start. I think that one of the best methods I have seen involves the non-owner taking over some of the household bills and also contributing money into a “household” fund. This isn’t a shared fund, but rather, money set aside in case the house suddenly does need some repairs and then both partners can kick in some money (after all, both parties benefit if the AC breaks and then needs to be replaced). The benefit to this is that should the relationship end, that partner will hopefully have first and last month’s rent available, making the move-out process slightly easier. And if the relationship continues to work, that money can be used on shared adventures, be it vacations or buying a different home together.
The Most Important Part
Communicate. Make the method work for you. Make sure that you’re both comfortable with the way you have decided to split the bills. And if down the road, you find you’re not content with the agreement, speak up.
And remember, each of these methods to be tailored to your specific situation. If one person is also dealing with heavy student loan debt while the other is debt free, maybe these balancing methods don’t quite feel right, for example.
It can be hard to talk about money, and it can be especially hard to talk about money with loved ones. But these conversations are so important to make sure that everyone is comfortable and confident in their financial situation.
Megan is a 40-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:
In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.
While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.
Except that’s not what an emergency fund is for.
So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.
I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.