Living Together: Budgeting Beyond the Basics
When I wrote about the challenges of being underemployed, I was thrown by all of the super-confident responses to “just do it this way!” and “here’s the obvious solution!” Is budgeting as a couple ever that simple? Let’s move beyond splitting the utility bills to more complicated matters:
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Let’s say you have your monthly bills all worked out: either you each pay proportional to your income, or you each get the same discretionary income and the rest goes to bills, or whatever works for you. We’ll assume the rent, water, electricity, gas, and groceries are all handled in a way that makes sense to both of you. Congratulations! But what I want to know today is, how do you handle the following?
Paying For Each Other’s Past: Does your partner pay alimony to a former spouse? What about child support? Did your partner make an investment years before you got together (house, car, business, luxury item) that you wouldn’t have chosen to make? Do you now consider those your bills as well? If you make 60% of the household income and pay 60% of the household bills, does that mean you’re also paying 60% of that alimony? Or 60% of the mortgage for a house that’s not in your name?
Deep In Debt: This is perhaps a subset of the previous question, but at what point do you take on each other’s debt? I know many married couples choose to see each other’s debt as their own (and legally, it often is), but does that start right when you move in together? At what point, if ever, does that debt feel like “ours?” Again, does a huge monthly credit card or student loan bill ever simply become part of your monthly household bills?
Disparate Savings: If one of you has $5,000 in savings/retirement, and the other has $50,000, or $500,000, how do you handle that? Do you add each other to your savings accounts right away, or wait a year or years to see how it goes? In the meantime, how do you deal with the fact that you have completely different futures? The partner with the lower savings probably needs to be squirreling away every available cent, while the partner with the higher savings can relax more. How does this affect your monthly spending, your discretionary spending, and your attitudes? Are savings taken into account when you set up your joint budget, and are more allocated each month to the partner with the smaller nest egg?
Granting Indulgences: If one of you really wants cable and the other would watch it from time to time but wouldn’t choose to get it, what happens? Is it a utility bill and divvied up as such, or does it come out of the more enthusiastic partner’s discretionary funds? What if one of you drinks and the other doesn’t, or one of you eats twice as much food? I need wifi to be able to work from home, but we’re both going to use it every day. Should I pay for most, or all, of the internet bill?
Married and civil-unioned couples, I’d love to hear from you, but your financial situation is generally determined by state laws and/or pre-nups. I’m more curious about all the cohabitating couples out there, the ones who have combined lives, but perhaps haven’t combined everything, at least not yet…