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Blending Finances
Question: Hi Chris, My girlfriend and I will be graduating from Cal's City and Regional Planning Master's program next month. We will also be moving in together.
Neither of us has lived with a partner before. We're thinking about buying a car. And we're wondering if you have suggestions for any books or resources that will help us have a harmonious financial relationship together. At this point, we're not sure whether we will be getting married but still want to thoughtfully and logically think through our communal finances. Justin, Oakland, CA
Answer: Congratulations on you and your partners thoughtful approach to money. To me, how money is handled defines one of the big differences between living together and being married. Even when married couples strive to keep their finances separate, money mingles over time. And for most newly married couples the decision to set up merged accounts is deliberate. But when you're living together it makes sense to keep money separate most of the time.
Keep the lines of money communication open. Don't let any problems or issues fester. Establish a regular money meeting for paying bills and talking over finances. And whatever system you and your friend decide on for splitting and paying the bills-- keep it simple. Now, on your specific question of a car, it's easy enough to divide insurance, maintenance, and gas bills. But what about ownership? For instance, who gets the car if you split up? And if you buy together you should have a contract that spells out obligations.
Ownership is a legal issue. A good resource for looking into the options for a car contract between unmarried couples is the Nolo.com guide Living Together: A Legal Guide for Unmarried Couples. As you can gather from the title, Nolo's book is written from a legal perspective. For insight on handling the basics of household money as a couple, I like Ruth Hayden's For Richer, Not Poorer: The Money Book for Couples. It's geared toward married couples, but there is practical advice for any couple.
About the author
Christopher Farrell is economics editor of Marketplace Money, a nationally syndicated one-hour weekly personal finance show produced by American Public Media.
When my husband and I moved in together - before we were married we were concerned about money and equality. We earned different amounts so when we looked at the budget we did this:
We had a joint account and 2 individual accounts. Each month we would each deposit 2 weeks worth of salary, for us this was a paycheck. From this account we paid for rent, utilities, groceries and some entertainment. Household expenses like a new TV also came out of this. The other paycheck was for our personal use - car payments, car insurance, clothing - whatever we wanted to spend or save.
It worked out well - both of us had equal skin in the game, albeit different dollar amounts. There was never any arguments about money.
