Just as openness, honesty, and a commitment to figuring things out together are keys to a solid relationship, they’re also important when tackling money issues together. If you and your partner have decided to share your lives and a home, or are figuring out if moving in together is the right choice, make sure your finances figure into the situation.
Have the Money Talk and Lay the Ground Rules:
First thing’s first: Have an open and honest discussion with your significant other about how you’d like to approach your finances together and any financial goals that you might like to work toward as a couple. Being in sync on your money early on will guide you when you need to make important financial decisions and will also help you avoid allowing money to negatively impact your relationship down the road.
Before you move in together, lay the ground rules for what’s “yours,” “mine,” and “ours” to avoid arguments in the future. This includes questions like:
1. What expenses do you consider joint expenses?
2. Who’s responsible for making sure payments are made on time?
3. Will you create and maintain a joint budget to help you keep track of joint expenses?
Figure out the answers to these questions before moving in together so you know how to approach these things before they become problems.
Open a Joint Checking Account for Joint Expenses:
Once you’ve laid the ground rules for what’s “yours,” “mine,” and “ours,” you’ll need to figure out the best way to pay for “ours.” For many couples, that means opening a joint checking account that both you and your partner have access to, will contribute to and from which you’ll pay your joint expenses.
How much will each of you contribute? You have two choices: Split expenses 50/50 or contribute an unequal amount based on your salaries. For couples who make about the same amount of income, a 50/50 split may be the best option and one that won’t leave either partner feeling like they’re contributing more or less than what’s fair.
However, for couples who make very different salaries, splitting expenses based on your income may be a better scenario that’s not overly taxing on a single person.
Think of it this way: If your combined expenses total $2,000/month, you bring home $2,000/month while your significant other pulls in $3,000/month, a 50/50 split would mean that you’re shelling out 50 percent of your income on expenses, while your partner is contributing one-third — or 33 percent — of his income. Is that really fair?
In the case of unequal salaries, consider splitting the costs based on how much each of you take home every month. Here’s how to do the math:
1. First, you’ll need to figure out three things: Your monthly take-home income, your total joint expenses, and your combined monthly take-home income.
2. Next, multiply your individual monthly income by your total joint expenses. Using the numbers above, that would be $2,000 x $2,000, which equals $4,000,000.
3. Finally, divide the amount from #2 by your total combined income. In our scenario, that’s $4,000,000/$5,000, which equals $800. That’s your monthly contribution to joint expenses.
To figure out how much your partner will contribute, simply subtract your contribution ($800) from your total joint expenses ($2,000). In our example, your significant other will contribute $1,200 ($2,000 – $800 = $1,200).
Next, deposit this amount into your joint checking account to cover your shared expenses. Many employers allow you to direct deposit a certain amount of your paycheck into a special account, while the remainder can be deposited into your individual checking account. You’ll still have to sit down and do your bills together, but with many banks, you can set up bill pay for free to make sure all your joint expenses are paid on time every month.
Keep Some Things Separate:
Your decision to move in with your partner may have been prompted by your desire to share your lives, but there are some things that should stay separate — for your own good and the good of the relationship.
First, hang on to your own checking and savings accounts. Different people have different ideas about how to properly manage their finances. In case your money personalites don’t mix, having your own bank accounts help you take care of yourself without burdening your partner in case you lose your job, have an unexpected expense like a car repair or even if you’d like to buy your significant other a special gift without him knowing.
It’s also important to keep at least one of your own credit cards — and that includes not allowing your significant other to become an authorized user on your account. Having your own card will allow you to build and maintain a solid credit history as an individual so in case your relationship doesn’t work out, you’ll be able to move on with your life….at least financially.
Finally, while you and your partner should talk openly and honestly about money and do your bills together (at least your joint expenses), it’s up to you to make sure you know what’s going on with your money. You never know when a little rain is going to fall in your life — and that includes relationship problems and breakups –so it’s important to learn how to manage your money as an individual first, and as a couple second.
Ann-Marie Murphy is the Community Builder for Quizzle.com, an online service that provides free and easy ways to manage your home, money, and credit — all in one spot. She pairs her experiences in financial services with her writing skills to help consumers better manage their personal finances.