Relationships and Finance – What a Hot Combo
Posted on August 4, 2008 12 Comments
During this hottest week of summer, an anonymous reader asks a steamy question about relationships:
“How do you and your boyfriend handle finances? I am in a relationship and I am pretty frugal and I enjoy working on finances. This can be pretty tricky in a relationship and I was interested to know how you balance that.”
OK, I lied. Her question was not steamy in the traditional risque sense … but have you ever gotten into a fight about finances? (Read that one, it’s worth it.) Finance fights are the hottest it will ever get in your relationship (outside of the bedroom). Tempers flare, spending habits collide and the strongest of couples can feel like they’re living life in a pressure cooker of expectations.
So while I usually try not to pull B too much into my writing at his request (hee-hee, at least I tell him that), I’m willing to take this question for the frugal Ms. Anon. You should know that what works for me most certainly won’t work for everyone else, but since a lot of us are living in the crazy co-habitating space and our parents didn’t, I suppose it’s important for me to share.
Before I get into the nitty gritty of our finances, I want to share my perspective on living together. I know too many people for whom it has not worked, and trust me, it’s messy when it doesn’t. Unless you are truly comfortable with yourself, and have shown that you can live on your own with and without roommates, you should probably think twice before moving in without a committment. If your relationship is new, think twice. If you’re moving in because you have no where else to live, or it’s more convenient or just because it’s cheaper, think twice. These might be signs that you’re not ready to move in together, or that you’re taking things too fast. And in your 20′s, who wants to go fast? Life right now should be about developing a mature, healthy and happy you. So enjoy it while you can be your most fab.
But for certain situations, living together might be right. And when you live together without being married, the question comes up, how do you manage your finances together, separately?
For us, we think of each other as two equal individuals. We pretty much split everything home-related 50-50, like roommates (think heating, electric, renter’s insurance, car insurance). There are a few big line items that we scaled based on income (rent). Since B pays for the car and gas, I cover the groceries (they are about equal). When it comes to miscellaneous trips to the store for random stuff, we take turns paying. The same goes for dining out (though I think B usually ends up paying more often when we eat out).
We do not have a joint checking account or a joint credit account. We do have a joint cell phone plan that we split, but we itemize the charges. We also have a joint gym membership, but that’s pretty easy to split charges, too.
We typically go about our business paying the bills we each “own” and then typically two or three times per year, we put everything on a spreadsheet and figure out who owes who money. We should probably do this once per month, but we get too busy and we’re usually close to even when we tally up the totals anyway.
Our arrangement works well for a few reasons. First, though we split living expenses, we in no way tie or disposable incomes or savings accounts together. Therefore, if I go off on a spending binge (like I did this weekend), I have no one to answer to but myself. I am responsible for reconciling my own actions for my financial health. It might sound cliche, but it’s very empowering to only have to depend on yourself for financial support.
Another benefit to keeping separate finances is that should this relationship not work, I have a solid understanding of where my money comes from and where it goes. There would be no learning curve, no mystery accounts, no questions and no financial mess should we break up. Without a legal commitment, I’m protected from a potentially damaging situation. And while some people might find this unromantic, it’s really just pragmatic. Our relationship is based on love, trust and understanding, rather than financial support. Should that change, we could easily consider other options. (Blech. I don’t even like writing that.)
Another reason why our arrangement works is because we ‘re working towards mutual financial goals. Though our current lives aren’t legally tied together, we believe at some point they will be. Therefore, we work individually for the best shared future. For instance, my savings are going to a downpayment on a house or condo. B’s savings are primarily being used for law school. Both the house and the legal degree will help our shared future. And neither of us feels like we’ve had to stifle our dreams to achieve the other’s.
Finally, B and I have similar backgrounds and similar attitudes about money. I’m not sure whether this makes a difference or not, but I’ve never felt that buying material stuff was detrimental to my happiness. While B probably is a little more sensitive to being able to provide a future family with a secure and happy life, he’s the least material person I know.
All that said … It just occurred to me that Anon never mentioned that she wanted to move in together. If you’re not planning to move in together, I wouldn’t recommend combining finances. I would keep all your finances separate, and come to agreements about what you want to spend when you’re hanging out together. For instance, if you prefer to be frugal and he’s very spendy, that’s OK – he’ll either have to be spendy without you, or to spend a little more on you. He can’t ask you to spend your hard-earned money if you don’t want to.
For instance, if he wanted to go to Lollapalooza this weekend but you thought the ticket price was outrageous, he has three options: go with his friends while you listen to CDs at home, pay for your ticket or stay home with you. If I were you, I’d tell him to go enjoy the show with his friends, and I’d plan a cheap-o girls night with friends. (Having separate lives is just as important as separate finances!) This way, if he wants to pick you up a ticket, he can. But you’re secure enough with your relationship either way.
You should know that this approach flies in the face of a lot of couples, I think. My friend from India always thought I was “very odd” for wanting to be so financially independent. And many of the American women I know would probably freak if their bf told them he was going to Lolla alone. But my feeling is, if you don’t care enough to buy the ticket, you don’t really want to go. Why get upset about it?
As long as you both set expectations in advance, communicate about your needs and understand that one of you is a cheap-o and the other is a spendaholic, you’ll be able to lay some ground rules in advance to prepare for every situation. I think you should talk about this stuff every step of the way. Who knows… maybe you’ll find a happy middle ground somewhere.
… There was another part to the question saying that it might be tricky because Anoyn likes to do finances. Why is that? You will have to explain. I think most guys I know would be happy to have a significant other to discuss finance with. I was at a party two weeks ago and talked at length with friends about stagflation, investing, my finance questions and brokerage accounts. A lively, engaging discussion was enjoyed by all. So stick with your interests! You may becomes the life of the party.
And there you have it. My finance and relationships mini-manifesto. Or, what my friends call “one of Mladic’s lectures again” (they secretly love them). I’d love to know your thoughts. All discussion is welcome here!
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12 Responses to “Relationships and Finance – What a Hot Combo”
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August 4th, 2008 @ 1:43 pm
I think it’s really, really important to have similar attitudes towards money. I know that in every relationship there’s supposedly a “spender” and a “saver” but in my experience (as the saver) I absolutely CANNOT be in a relationship with someone who is irresponsible with money.
One of my exes was so bad with money I used to have panic attacks–and we were not living together. But as I watched him blow his paycheck on another video game system when I knew he would not have money for rent, I realized our relationship could never work because I would never be able to rely on him if I ever needed to.
Another ex was pretty good with money but didn’t care too much about investing/saving/etc. He figured as long as he wasn’t in debt, things were ok. We were planning to move in together, but ultimately did not, and money was a factor. He made more than twice what I did, but was not willing to contribute more than splitting expenses 50/50, and I couldn’t have afforded to live with him. I realized that despite his affinity for remaining in the black, he was selfish and also wouldn’t be a good financial partner.
A longterm relationship or a marriage is not just an emotional partnership, it’s a financial one. You need to be able to talk freely, to express your fears and your goals, and to make compromises. I won’t settle for anything less anymore.
August 4th, 2008 @ 2:24 pm
Nicole, you make a great point about living together for the right reasons – not simply because it’s cheaper or because you have no other options.
My boyfriend and I moved in together eight months ago, which involved me quitting my job, putting my house on the market and moving from Colorado to D.C. I think the main reason we weathered all those changes was due to great communication about our future and goals, including some very important conversations about money. We’d both lived on our own for a long time, managed our own money and were entirely self-sufficient, so the move to cohabitation and shared budgeting was very new and different.
First we each paid a certain percentage of the bills based on our incomes (I paid more since I’m working, while he’s in medical school and lives on very little). Recently, after deciding that we’d be engaged within the year, we combined all our finances and made our first major purchase together – a vehicle. I think we’ve been successful because we communicated about the process, made budgets together, and listed our priorities and goals. We also started reading “Smart Couples Finish Rich” and have monthly talks to be sure we’re on the same page with regard to finances. Because of our talks and shared goals, we never argue about money, and I find it really wonderful to be working toward goals with the person I love. I think Little Miss Moneybags is right – having similar attitudes about money is essential.
August 4th, 2008 @ 4:01 pm
Great topic. I think it’s really important to have similar attitudes towards money, especially when you live together, and also for you both to be able to talk about money openly and honestly, so that it doesn’t become a pent-up source of conflict if your partner’s spending/saving habits aren’t the same as your own. I really enjoy your blog, by the way, and I’ve added you to my ‘roll.
August 4th, 2008 @ 4:19 pm
its all about money money money
ha ha …
nice blog
August 4th, 2008 @ 8:37 pm
We have his, mine, and “our” accounts.
Our account: pays for rent, utilities, groceries, cell phone (shared family plan), internet, cable, renter’s insurance, pet vet bills, “fun money” for us as a couple, and we have a vacation account together, too. To each of these things we contribute equally. I out-earn him now, but we’ve been in the same apartment for three years and have split things down the middle from the start.
His account: handles his car loan, his student loans, his fun money (so I’m not paying for golf or nights out with the guys), his medical, his gas, his car insurance (his is more expensive because he carries a CDL, so we opted not to be on the same policy), and so on.
My account: handles my car loan, my student loans, my fun money (he can’t bitch if I buy a new purse!), my healthcare costs (I have asthma), my gas, etc.
Each month we write a check from our individual account to our shared account to fund the shared expenses. All bills and groceries are paid for through the joint account. If we go to a concert, we buy the tickets from the joint account. If we go out to eat together, we pay for it through the joint account. If I meet my girlfriend for lunch, I pay for my lunch with my fun money from my own account.
We both contribute 15% to our 401ks. We also have a joint high-yield savings account; neither of us touches it without asking the other first; to this day we haven’t made a withdrawal.
That’s how we do it, and it works for us. We’ve been dating for 6 years, no rush to get married, and never fight over money.
August 5th, 2008 @ 4:28 pm
This was a great subject to post about. I have been thinking a lot about this subject lately. My boyfriend, T, and I are buying a house together. We've lived together in an apartment for the past 3 years and split everything 50/50.
Because our incomes are quite different we have decided that we will contribute approximately 30% of each of our incomes into a joint account which will be used for the mortgage, gas & electric, cable, water, sewer, trash, and any other joint bills. The rest of what we make will be for our own personal spending.
I'm hoping this will work out. He's the spender, I'm the saver, but we've always been able to communicate well about money. It seems like its worked for others so thats great to read.
Thanks for the blog!!!
August 5th, 2008 @ 10:09 pm
I write a financial blog about peer to peer lending. I’d like to suggest a link exchange, I noticed you blog, would this be of interest? It would help both of our search rankings.
My blog address is http://p2plendingwithprosper.blogspot.com/
Thanks
August 6th, 2008 @ 8:01 pm
Wow, rightly said!!
The comments are right on the money. Money is a big factor in relationships, whether it be love or platonic.
I have been understanding the importance of living within my means for about 7 years now. I only spend on the things that are good quality or necessity.
I have also been trying my look at the virtual stock exchange platform with Wall Street Survivor.
Check it out when you have the time Wall Street Survivor
All the best
August 7th, 2008 @ 3:06 pm
The problem is that there will always be certain expenses that one person will be completely blind to, and unwilling to compromise on. This is where the need to gain perspective comes in, and there might be even need for outside help. Free Advice by Expert advisors for the forex industry can be found at forexface.
August 10th, 2008 @ 7:00 am
What a great blog! Great info. I learned a lot of new things here…
Snoring Causes
August 29th, 2008 @ 8:22 am
Money fights are the worst. In our decade-plus of marriage we have had a few, but since we started working together to get out of consumer debt we have been able to agree on things much more. No stresses about which bank we want, or which insurance company is the right choice, or who paid what for this or that. We communicate in advance now, and it makes a difference. We are unified and it leads to much better life in general.
Jerry
http://www.leads4insurance.com
January 11th, 2010 @ 8:17 pm
it's true, unless both views regarding finance are on the same plane, a relationship for the future is not feasible.
as the "saver" (why r men always the spenders).. i've had many heart to hearts with the bf.. and thankfully, our views are converging!
http://alwaysrandomandfun.blogspot.com/