Your Partnership is Equal, But Should Your Finances Be?

                It’s February and to quote one of my favorite movies, “If you look for it, I’ve got a sneaky feeling you’ll find that love actually is all around”.[1] It’s true- February is known to be the month of love, thanks to the commercially famous Valentine’s Day. Naturally, the month lends itself to many different conversations around love and relationships. Over the years, the definition of love and relationships has evolved and one type of partnership that has become more common is the number of unmarried couples that lives together.[2] Some couples use this arrangement to test their compatibility without the legal implications if the relationship ends. Other couples do not intend on marrying and are content with their relationship and living situation in its current state. Whatever the reason, many of these couples would state that they prefer to have an equal partnership– where both members contribute equally to household tasks, childcare and even the financial responsibilities but should they be?

                Finances can be especially difficult to navigate as a cohabitating couple and shouldn’t necessarily be equal. It is important to remember that each couple is different, and your situation may or not be applicable. Hopefully this conversation was had prior to living together, but if not, now is a good time to discuss how you intend for the everyday finances to be shared. Is one person going to pay for certain bills and the other person pays the remainder? Will you both use a joint checking account to pay for bills in which all income is deposited? Or will you each maintain separate checking accounts and only pay for shared expenses from a joint account?

                This can be an especially important conversation to have for couples with a large income disparity. In situations where one member is a high-income earner, it may not be reasonable to expect the other person to pay an equal amount in expenses. It may be reasonable to expect that each person pays a percentage of the bills and expenses that is proportionate to their income. For example, if one person earns $120,000 annually; and their partner earns $40,000 annually; instead of sharing the mortgage payment where each partner pays 50%; it may make more sense for the high-income earner to pay 67% of the mortgage and the lower income earner to pay 33% of the mortgage.

                Another consideration is the decision on sharing a rental lease on an apartment or purchasing a home together. If the relationship ends, how do you continue to pay the lease or mortgage? Oftentimes, one person will vacate the premises- and if the rent or mortgage was being paid equally, that person may no longer feel the need to pay for a home they don’t live in. As a result, each person should be prepared to pay the full amount individually in that circumstance. Alternatively, there may be costly fees and penalties to ending a lease and moving; or in the case of home ownership- selling the property may be required if one party cannot afford it on their own.

                While it can be a difficult or uncomfortable topic to discuss with your loved one, debt (held both jointly and individually) needs to be discussed: how much do you each have that is separate from your partner? Do you have a debt reduction plan? Are you expecting your partner to help pay down this debt? Legally, your partner is not required to help make any payments toward this debt; but would it be beneficial for long-term goals to eliminate debt jointly? If you do not have a financial plan in place, it may be prudent to contact a Certified Financial Planner® to review your overall financial situation and create a plan that works for both parties.

                A difficulty that can arise without a legal marriage is often during the stressful and upsetting times of an untimely death. Unmarried partners are not granted the same legal rights as a legal spouse. This can make an already difficult time for your partner harder, as they will not receive social security benefits, may have difficulty accessing your individually held finances, and may not be able to act on your estate’s behalf. Talking to an estate planning attorney to create a will and other necessary legal documents is important to ensuring that your assets are passed to your loved one in the way that you want. It’ll help to relieve legal burdens that your grieving partner is likely to face.

Having a proper financial plan and estate plan in place will ensure that your relationship and finances are protected. By keeping open conversations and transparency in the relationship, couples are more likely to achieve shared goals and reduce the number of arguments in their relationship. Above all, remember that what works for one couple may not work for your situation. It is prudent to have this conversation with your partner and it is proactive to connect with a financial planner to address your inquiries, answer your questions and advise on next steps. If you’re interested in how Bickling Financial Services can help with your plan, please visit www.bickling.com or call 781-862-9792 to schedule a free consultation. 

[1] Curtis, R. (Director). (2003). Love Actually [Motion Picture].

[2] Gurrentz, B. (2019, September 23). Cohabiting Partners Older, More Racially Diverse, More Educated, Higher Earners. United States  Census Bureau. https://www.census.gov/library/stories/2019/09/unmarried-partners-more-diverse-than-20-years-ago.html#:~:text=The%20number%20of%20unmarried%20partners,total%20adult%20population%20(xls).