Family finance: money management for cohabiting couples
Moving in together is a big step, so being clear on who pays for what at the start should help you avoid tricky conversations later on
If you’re planning to move in with a partner, being clear about who pays for what at the start should help to avoid difficult conversations later on.
Things to think about include:
Who will pay the rent/mortgage payments? Will you split it 50/50? Is that fair?
Who will pay the bills? Whose name will be on the bills? How will you split them?
Do you need a joint account? Is a joint account the best way to pay the bills?
Who will pay for the shopping? Will it be you one week and your partner the next?
Sharing means saving
Living with your partner can make life a lot cheaper, especially if you have been living on your own.
Sharing rent or mortgage costs, bills and even the weekly shop should help reduce your outgoings.
Moving in with your partner may also enable you to get a bigger place, or move to an area that was previously out of your reach.
Rent or buy?
Moving in together is a big step. That’s one reason many couples choose to rent first before buying a home together.
By renting together you can see how compatible you are, while saving towards a deposit.
But whether you rent or buy a place, you will need to decide what percentage of the rent or mortgage payments each person will pay.
The most obvious split is 50/50. But this is not always fair if one person earns a lot more – especially if she or he wants to live in a more expensive home as a result. So make sure you discuss what works best for you both.
Splitting the bills
In legal terms, the person whose name is on the bill is the person responsible for paying.
You may therefore want to put both your names on all the bills, or split them between you.
Say the electricity bill is in your name and the water and broadband are in your partner’s, you can then add up the total cost and split it according to whatever agreement you have in place.
Taking out a joint account
Many couples choose to pool their earnings – or at least a percentage of them – in a joint account they use to cover bills and other outgoings.
But keep in mind that while joint accounts can be convenient, there are disadvantages.
The main one is that the account provider can ask either one of you to pay off any overdraft in its entirety, as you are both responsible for the account.
So if the relationship breaks down and your partner moves out and the account is overdrawn, it could fall to you to make up the payments.
Getting properly insured
If you live in a rental property, you will need contents insurance to protect your belongings in case of burglary, or an event such as a fire or a flood.
If you buy a home, you will need both buildings and contents insurance.
Mortgage lenders require you to have buildings cover in place to protect their investment, as well as yours.
Even if you don’t have a mortgage, buildings insurance is well worth having to ensure your home is protected – though it usually falls to the landlord to arrange this.
If you have a mortgage, it’s also sensible to take out a life insurance policy that will pay out a lump sum if you pass away, ensuring your partner would be able to keep up with the mortgage repayments.
Taking out a mortgage
If you are in a position to buy a home together, you will probably need to take out a mortgage to do so.
Most couples increase their borrowing potential by taking out a joint mortgage, for which you’ll both need to provide paperwork showing how much you earn, and how much income you have left after paying your bills.
Just keep in mind that you are each responsible for paying off the whole balance.
Borrowing together will also link your credit files.
Making a will
If you co-own a property, or have children, it’s important to write a will to explain who should get your share of the property, and any other assets, if you passed away.
This is particularly true if you are not married or in a civil partnership, as your partner will have no claim to your estate otherwise.
Lawyers charge from about £500 to write a straightforward will.
You can write your own will for less online, but taking professional advice will help ensure there are no mistakes. You can find out more in our article.