From an Economist's Perspective: How to Handle Finances in a Live-in Relationship

Many couples are turning to live-in relationships, as divorce rates rise and couples waiting to longer to get married. Live-in relationships are when a couple shares a house or an apartment, similar to a married couple, but does not have the legality of a marriage. However, managing the finances of a live-in relationship can get very complicated. With joint purchases, sharing vehicles, sharing rent or a mortgage and daily expenses it can get complicated to manage joint finances.

Large joint purchases

You and Mr. Perfect just decided to purchase a new car, share rent/mortgage, or buy a big screen TV. In the moment, you feel that you both will stay together forever or at least the life of whatever you purchased. While it is natural to remain optimistic about your relationship, it is important to protect your investment. Get in writing what you purchased and how much each partner is paying. In the contract, outline how you will split up the purchase if you two break up. A common problem with live-in relationships is that when two people make join purchases they do not outline how to split them in the event of a breakup. When the breakup occurs, a fight over who keeps what items is bound to pursue.

Should you co-sign a loan or cell phone for your partner?

Having a good credit score is vital for receiving the best interest rates and terms for credit cards, mortgages and even cell phones. A common problem I have witnessed in a relationship is that one partner is better with their credit than the other is. When this happens, the partner with better credit often feels obligated to co-sign a loan for their better half. However, unless you're married, this way of thinking could cost you. If your partner fails to make payments, or makes late payments, it could lower your credit score. The worst-case scenario is that if you two break up, you are responsible for the payments. The bottom line is that you should only co-sign a loan for your partner if you are comfortable with paying for the item out of your own pocket. Do not let love cloud your judgment when it comes to your own finances.

Handling everyday expenses

Everyday expenses such as groceries, gas and small appliances for the apartment or house you two are sharing can get expensive. When one partner makes more money than the other does, it can be easy to put the burden on the financially secure partner. However, it can create relationship stress. Decide upfront and put weekly allowances for everyday expenses in writing. Make sure both partners pitch in order to reduce stress. I live to split expenses with my girlfriend in a way that we are both putting a fair percentage of our pay for everyday purchases. This way if one partner is making more than the other, the percentage of sacrifice for everyday purchases remains relative to both people. For example, if I make $2,000/week and my partner makes $1,000 I would put aside 10%, or $200, while she would put aside $100.

How to bring up finances

Let's face it, nothing is less sexy than writing contracts for how to split expenses. However, as you get past your initial shyness of the "money talk", both partners should realize how important it is. Don't put blame on one partners financial habits and encourage each other to make finances something both partners want to work on. Bring up live-in finances during a time where both partners have free time, but not after a stressful day. If finances are not your thing, try hiring a personal financial planner. Certified financial planners are not expensive and can help you balance your finances without having the stress of learning all the complicated terms.

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