If you’re not hitched and sharing a house and your finances, learn how to approach the situation so you both come out ahead.
When you live with your loved one, you get to share more than furniture. You’re also blending your finances, which can work to your advantage – as well as against it.
A 2023 Bread Financial survey found that 44% of coupled respondents wish they had more similar financial mindsets as their partners.
As an unmarried couple, whether you have been living together for a while or are just now considering the merge, find out how to approach the arrangement so you come out ahead financially, both as individuals and as a duo.
1. Set Financial Boundaries
Even if you haven’t tied the knot, living together is serious business. One of the first things you need to do is determine how independent each of you want to remain in the relationship, says Kendall Meade, a certified financial planner and financial therapist at SoFi in Charleston, South Carolina.
“Have a conversation with your partner to determine what will work best for you,” Meade says. “The most important thing is to make sure that you still discuss financial matters and make the decision together. This can help alleviate future concerns or conflicts.”
According to Meade, you have three basic options:
- Separate: You may want to keep your income and spending totally separate. Each of you would have your personal account for deposits and withdrawals, as well as your credit card accounts for charging and loans for borrowing.
- Combine: Both of you would manage all income and spending from a joint account. You may also be on the same credit cards and loans.
- Hybrid: You would have a joint account for shared income, expenses and savings, but each of you would still maintain a personal account for your own spending.
Which method you choose is up to you and your partner, but discuss it so you are on the same page.
“Remember there is no right or wrong,” Meade says. “Each relationship is different and so the way that you manage money may also be different.”
2. Assign the Best Bill Manager
Knowing who will be handling the payments for shared household bills is important. Rent or mortgage, utilities, cellphones, internet and anything else that you’ll be using together doesn’t automatically get paid.
The statements will come in, so choose who will pay them – on time. It doesn’t have to be the primary account holder. It could be the person who has the most time and is more responsible.
Review your financial situation separately and as a whole, then discuss who will be the designated bill manager. One of you may assume the entire task, or you may want to divide the bills.
3. Deal With Debt, Individually and as a Couple
“First and foremost, transparency is key in any relationship regardless of marital status,” says Lisa Fischer, chief operating officer at Mission Lane, a financial services company in Richmond, Virginia.
“While there is no need to bring this up on a first date, if you are sharing your life with your partner, live together and have or plan to have shared assets, you need to know where each other stands,” she says.
That means dealing with past and future debt, openly and honestly. After all, the amount you owe will impact the other person, and vice versa.
“One’s debt-to-income ratio impacts their credit score,” Fischer says. “If you are trying to do things such as rent an apartment, apply for a mortgage or lease a car under both of your names, both of your credit scores will be considered, and you don’t want any unpleasant surprises.”
Discuss your personal plans for debt deletion. Will one partner help the other out with balances they accrued as an individual? Although it’s not legally necessary, you may want to tackle the repayment process together so you can move forward with your goals.
“If you are unmarried, you are not responsible for any debt owed by your partner, unless your name is also on it or you have agreed to pay it,” Fisher says. “On the other hand, if the debt is in both your names, you both have an obligation to pay it off, regardless of who spent the money to begin with.”
4. Communicate About Money, Early and Often
Money is a common cause for strife in a relationship. The Bread Financial survey found that 58% of millennials and 57% of Gen Zers report arguments with their partner over finances at least occasionally. Resentment can build if you think the other person is accumulating too much debt, or your partner doesn’t think you’re making the “correct” spending decisions.
“Even if you keep your finances separate, it is important to discuss it with your partner,” Meade says.
“The best way to begin a conversation with your spouse about finances, whether you are combining assets for the first time or simply revisiting budgeting is to start by discussing your goals, values and where you are currently. This allows you to get on the same page as your partner and begin thinking as a team about how you can achieve these goals,” she adds.
Trust is essential in a relationship, and that starts with feeling comfortable with sharing financial and credit information. Ask each other questions, and give and expect candid answers.
5. Save for Children While Reducing Your Taxes
“If you’re thinking of a longer term relationship and one that may involve children, you might also assess how you and your partner feel about covering the cost of education for a future child,” says Patricia Roberts, chief operating officer at Gift of College Inc. in New York, which helps employers offer financial wellness benefits, including contributions to 529 college savings plans.
You and your partner may want to set your children up with a 529, and start to fund it early.
“What’s so great about 529 savings plans is that you do not need to be married to your partner or even be related for the beneficiary to set up the account,” Roberts says. “It can even be for a future child, where you name yourself as beneficiary, then switch it to the child when they arrive.”
What do you and your partner get? Tax-deferred growth on your contributions, tax-free withdrawals when you spend the money on qualified educational expenses, and very often a state tax deduction.
6. Plan for Your Estate
Unfortunately, there are some problems associated with not being legally married.
“One con is that Social Security benefits don’t pass to an unmarried partner like they do to a spouse when you die,” says Lea Ann Knight, a certified financial planner, co-owner and managing partner of financial planning at Better Money Decisions. “This can mean a noticeable drop in shared income for the remaining partner.”
Handling finances in the event of a death is hard enough, but even more challenging for the living, unmarried partner when dealing with housing, pensions, or access to bank accounts. “Simply put, unmarried people often have fewer rights after the death of their partners than married widows and widowers do,” Knight says.
“Since unmarried couples do not have the same rights as married couples when it comes to inheritance, estate planning is essential,” says Judith Leahy, vice president wealth management and senior wealth advisor at Citi Personal Wealth Management.
“Creating a will allows couples to designate beneficiaries and specify how their assets should be distributed when they pass away. Establishing a trust can provide an added level of protection,” she says.
Leahy also suggests creating a life estate for the surviving partner. Once set up, that person has the right to remain in the home if the primary residence is in the other person’s name.
When you open your individual bank accounts, make sure you have a transfer on death (TOD) designation, too. It will ensure that your assets are transferred to the person of your choice upon your death. It’s especially important if children who depend on you for care are involved.
Just Keep Talking
With the right approach, you can enjoy your relationship while keeping your finances in order. These aren’t matters you discuss once and then set aside. Couples, whether married or not, should integrate money conversations into their lives. When you work together, you’ll avoid most arguments and can achieve mutual goals.