Cohabitation

September 25, 2006 4:03 PM

Me and mine are moving in together. How do 2 single wage earners merge their $$ incomes and outflows in a way that keeps it simple for bookkeeping and tax returns? [More]

So my partner and I are going to move in together. I earn more, 3/5 of our combined salaries.
Is it feasible to use one checking account and one savings account, from which all bill will be paid so that whats left over at nthe end of the month can go into savings, which if we should ever split up can be divided by 3/5(mine) and 2/5(my partner's)? Is this equitable? Is it practical in terms of capital gains taxes etc? We won't be owning a home for the time being. I have alot saved up especially compared to my partner, who has a small financial cushion but not much else in the way of accumulated wealth. I have no kids, but they have 2 full growns (potential probate issues?).

Is there a more practical, equitable scheme for two income streams living under one roof, other than seperate finances or marriage?

posted by Fupped Duck to Work & Money (21 answers total)

That doesn't seem like a fair arrangement for her if she's making 2/5 what you are but paying 1/2 of your joint bills.
posted by MegoSteve at 4:16 PM on September 25, 2006

Why merge everything? Keep seperate checking accounts, split the bills by what seems fair and if you want, keep a joint savings account. What you want to do seems more complicated than it's worth.

Why worry about taxes. You're not married.
posted by DieHipsterDie at 4:24 PM on September 25, 2006

You could try maintaining mostly separate finances, but both contribute to a joint checking account that pays for shared fixed expenses like rent etc. Your interest-bearing accounts would be separate, your stocks would be separate, and you would each retain your own checking accounts and credit cards. Paychecks etc first go to your separate accounts. From your separate accounts, you set up regular deposits into the joint account. Then you've got separate records of all the capital gains stuff, (and you retain your separate credit histories etc in case anythign goes wrong), but you also have a fully-funded joint account. You can then decide how much each person should contribute to the joint account, and adjust as circumstances warrant.

In Canada, romantic partners (opposite-sex or same-sex) who live together are treated under the law as married for most (all?) purposes.

I take it you are in the US, though? If you and your partner are opposite-sex, you can look into whether your state has common-law marriage. Most don't, but it's worth checking. For probate issues you should talk to a lawyer, and write explicit wills directing what will happen to your assets, and anything else you care about. Might be a good idea to draw up documents like a living will etc to say who gets to make medical decisions for you if you're incapacitated.

Also, previously.
posted by LobsterMitten at 4:29 PM on September 25, 2006

Domestic partnership agreements are fairly common now, most family lawyers can do it for you fairly simply when it comes to the asset and income side. Providing for one partner's pre-relationship children is a quite common aspect of these agreements, since these agreements are frequently used to form quasi-marriages when a widow(er) wishes to preserve survivor benefits which are forfeit upon remarriage.

Investment income and gains can be allocated addressed through the formation of an investment partnership, also not terribly complicated to form (although careful recordkeeping and annual tax preparation is a must).

Putting the asset division and tax allocation aspects together won't be grossly complex, but you will need to make a careful selection of accountant and lawyers. (Note the plural: as with prenups, though, the party proposed to get the shorter end of the stick must have her own lawyer in the drafting if you hope to be able to enforce the agreement in the event of a nasty break-up.)

In order to save needless future lawyering, it might be prudent for the agreement to provide for what happens if you buy a house, have a child of your own, you adopt her children, or you get married. In the absence of those provisions, the agreement will be something close to a dead letter should those events transpire.
posted by MattD at 4:32 PM on September 25, 2006

Billmonk may interest you.
posted by dmd at 4:58 PM on September 25, 2006 [1 favorite]

I lived with my girlfriend for five years without sharing an account...when we got married this summer we got a joint account for the wedding cheques in both our names, but that's where we draw the line. I think putting both your incomes into one account is just asking for trouble.
posted by furtive at 5:53 PM on September 25, 2006

This is a somewhat frivolous point, but having separate checking accounts (at least for us) helps to keep some sort of surprise in birthday gifts and the like. I take care of our finances and there have been a few instances of slightly ruined surprises because I'm checking out unfamiliar charges.
posted by stefnet at 5:55 PM on September 25, 2006

If all your earnings go into one pot, then Megosteve is wrong about you paying half. You are paying 3/5ths if you split the extra in the same ratio as contributed.
posted by JohnnyGunn at 5:56 PM on September 25, 2006

i live with my boyfriend, and we don't put all of our earnings in the joint account. we each put in a set amount of money (which pays for our rent, utility bills, cable/internet/tivo/netflix, cell phone, etc) each month and we make sure we have 150-200 dollars left over for groceries.

this way, we both have money left over in our personal accounts for our individual expenses (credit cards, student loans, amazon purchases).

good luck to you with whatever you decide!
posted by kerning at 6:26 PM on September 25, 2006

I can't say for the Windows side of things, but Money-Tracking software such as gnuCash can allow for separate-yet-together tracking of money. I assume that programs like MS Money^tm and Quicken^tm can do the same thing. This allows for multiple incomes paying into the same set of expenses. You can run reports to see how each of you is spending your own money, or how balanced you are for income/share of sharable expenses.


It takes a bit of effort to get started, but if your bank offers downloadable data files, you simply download the files and start categorizing them.


(I'll also recommend Billmonk, but it might not be heavy-duty enough for you... then again, it's ability to enter in data via. text messages might be a "killer feature" for those who have a hard time dedicating time to organizing money... I was one of those until lately, and it still takes a LOT of effort to not fall back)
posted by hatsix at 7:18 PM on September 25, 2006

If you're really committed then get one checking account, put both your salaries into it, call it "our money", make a budget you both agree to, and live on the budget.
posted by JamesMessick at 7:27 PM on September 25, 2006

Another possibility is the one my SO and I have worked out: we have completely seperate finances. We totalled our fixed monthly expenses, added averages for variables like power and gas, and split that according to the ratio of my pay to hers. Since I make more, every month, I pay all the bills, and she gives me the amount we agreed was a proportional distribution. Keeps you from having to worry about any joint account at all.
posted by jammer at 7:54 PM on September 25, 2006

What worked for us: Keep all our money separate, but pay joint expenses on an income-proportionate basis. We had a 40-60 split until I got a raise, then 45-65 split. I pay for lunch and cheap eats, he pays for dinner and more spendy fun stuff. We're married now, so if we split we'd have to leave it to the legal system. But before the wedding, we each fully owned our own money and had no entanglements.

An alternative approach that's worked for some friends: figure out what share of your combined income is needed to cover mutual expenses -- stuff like utilities, rent, groceries, dinner out, vacations together, etc. It'll really depend on how much you make and how much you spend. Each of you put that portion of your income into a shared account, and use that account to pay for all mutual expenses. Discuss in advance -- maybe even get in writing -- whether you'll split the money from this account 50-50 or on an income proportionate basis if you decide to close the account for any reason.

I don't think you should put all your money into one account and call it "ours" unless:
1. You're married, and thus there are existing systems for mediating any future disputes.
2. You have a contract that spells out who owns the money and how it works.

I strongly recommend the cohabitation book "Unmarried to Each Other" for advice.
posted by croutonsupafreak at 7:58 PM on September 25, 2006

Personally, we have totally merged finances (luckily, this has worked for us). That said, what I've heard work successfully for others is this - have three accounts - yours, mine, and ours. The division of bills should be on the basis of a percentage that takes into account the differences in income. So, if Partner A earns 70% of the income in a relationship, why should my Partner B pay 50% of the bills? That leaves B with much less of a % of income for extras than A. It also means that when discussing major purchases, B will always be looking at a greater proportional sacrifice than A. When couples with very different income levels try to keep things "fair" by splitting bills 50-50, they disempower the lower earner.
posted by spinturtle at 8:14 PM on September 25, 2006

Strictly my 2 cents, and please disregard if you disagree:

1. Get married or a domestic partnership agreement.
2. Merge your finances and forget about it.

If you aren't willing to do the above (in good time), then this discussion of apportioning finances is all a prelude to the relationship ending. Because why else would it all matter, other than to see who owns what when it all comes to an end?

I respectfully disagree with the notion above, that "When couples with very different income levels try to keep things 'fair' by splitting bills 50-50, they disempower the lower earner." If you have a strong relationship (in all senses), then it all comes out even, long-term. Have you monetized the housework? Conversation-keeping-upping? Social planning? What about meal-cooking, back-rubbing, and sympathetic-ear-lending? And, on a less touchy-feely level, has your accountant drawn up a plan for when the higher-earning partner (God forbid) gets teh cancer and can't work at all?

And to answer the obvious question -- if the guy who earns $20K a year surprises his $80K wife by buying a solid-gold bass boat with the joint account, then there are larger problems to be dealt with.
posted by turducken at 11:09 PM on September 25, 2006 [1 favorite]

Before my fiance and I got engaged, we lived together for 3 years, and we did not share an account. Instead, we split up our planned expenses according to the % of money we earned, and each of us had bills we were responsible for paying. For example, he pays the rent check, I pay the cable, electric, phone, and groceries.

Now that we're getting married, we're going to just combine our accounts & finances, but this worked very well for the time we did it.
posted by tastybrains at 4:41 AM on September 26, 2006

I think we're missing some key information here. Is this relationship looking forwards toward marriage, or is this a relationship looking for non-marriage options? Are you a couple of 20-something lovebirds, or adults with assets, children, and other issues?

If you are just trying things out before marriage, I recommend that the easiest thing you can do is to open a joint checking account. Keep all your other finances, savings, etc. separate, but make monthly contributions to the joint account. They can be 50-50, or 60-40 if you like, but just keep enough in there to cover the bills. I don't think there's any shame in keeping your finances separate, and it doesn't reflect at all upon your love or respect for each other, as some people above are implying. I even know a married couple that keeps separate finances, because they once split up over money issues. Money is often cited as the most frequent arguing point for couples - why not minimize that frustration?

However, if you have significant assets, and your partner has children, you might want to think about talking to a lawyer. Especially if this is a same-sex relationship, or you aren't ever planning on marrying. As mentioned above, you can still enter into an agreement about your finances, and you can also design an estate plan that takes care of things. You can also execute some documents that relate to healthcare in order to give you the kinds of rights that spouses have. This is becoming a major issue for committed, non-married couples (gay and straight). Also, you can tell your lawyer the details that you are choosing to omit here which might seriously influence your options.

Ultimately, I think you both need to reflect on what arrangements you want. Do you just want to provide for living expenses, or do you consider all of your respective incomes to be shared equally? Do you want your partner to inherit your wealth when you die? Do you want your partner's kids to inherit your wealth when you both are gone, or do you want that money to go to someone else? A lawyer can help suggest some options that will meet your needs better than AskMe can.
posted by MrZero at 6:40 AM on September 26, 2006

My now husband and I lived together for almost 7 years prior to getting married. All utilities and bills like phone/cable were split down the middle since we equally used those. Depending on the different incomes we had throughout the time period we paid different portions of our rent. We bought our own groceries, but split the cost of things like milk, butter and other household goods. We just got married on September 16th, and the only change we will make is that we are going to open a joint savings account to save for a house. Good luck!
posted by Elaisa at 10:20 AM on September 26, 2006

Here's another option for how to keep separate accounts but keep things fair:

We have completely separate accounts, nothing shared. Any shared expenses are paid by either one of us and recorded in a spreadsheet with one column per person. So when I pay the rent or buy groceries, I add it to my column (with a simple description and date), likewise for her into her column.

The sum of each column is calculated at the top of the spreadsheet. If one of us is ahead, the other will pay for more things until it's more balanced. Or if it gets really out of whack, one will write a check or otherwise transfer money. That transfer goes into the spreadsheet, too (as a positive contribution from one and a matching negative contribution from the other, to keep the net effect at $0).

We split things 50/50, but you can easily setup a cell to calculate how much one owes the other for any other split. Just calculate the expected contribution of one person (sum of all expenses * their ratio) and compare to what they've actually paid.

So we can always see how well we're keeping things fair, and we have a simple record of our shared expenses. We can decide which expenses to put into the spreadsheet and which to leave out as an individual expense. It's simple, flexible, and has been working well for us since we moved in together.
posted by whatnotever at 3:25 PM on September 26, 2006

The division of bills should be on the basis of a percentage that takes into account the differences in income. So, if Partner A earns 70% of the income in a relationship, why should my Partner B pay 50% of the bills? That leaves B with much less of a % of income for extras than A.

How the heck does this work? Your partner should pay 50% of the bills because they are using 50% of the resources. When you are rooming with somebody, you don't say "Ok, I make $30k a year, you make $15k, so why don't I pay twice as much as you do?". You make the assumption (sometimes flawed, I know) that each person will make an equal contribution to the bill (unless, ie, one person makes lots of international calls or something).

You can make a concession for your partner because they are your partner but that's about love and giving, not about equity. Equity is 50/50!

To the original poster, it basically seems to come down to:

1. Lump it all together and work with 'our money' OR
2. Keep it seperate, each contribute money to a joint account and pay from there (using whatever split/scheme seems appropriate)

From your post, it seems you'd prefer the former, in which case I'd advise keeping it 50/50!
posted by ranglin at 11:06 PM on September 26, 2006

How the heck does this work? Your partner should pay 50% of the bills because they are using 50% of the resources. When you are rooming with somebody, you don't say "Ok, I make $30k a year, you make $15k, so why don't I pay twice as much as you do?". You make the assumption (sometimes flawed, I know) that each person will make an equal contribution to the bill (unless, ie, one person makes lots of international calls or something).

Well, when I moved in with my boyfriend (now my husband), he was making a fair amount more money than me, and was used to a higher standard of living as a result. He had high-speed internet, cable TV -- including premium channels. He would turn on the heat when it got cold, instead of wearing a sweater. He'd shop at fancy high-end grocery stores, and I'd been shopping at discount stores and Asian markets.

He didn't want to sacrifice his quality of life. I couldn't afford his quality of life. Having each of us pay an income-proportionate share of our mutual expenses allowed us both to get what we wanted.
posted by croutonsupafreak at 8:13 AM on September 27, 2006