Living together, is it less expensive?
Yes and… no. On the one side, sharing costs (rent, food, car, etc.) enables you to make significant savings. Moreover, if the couple registers a civil partnership to their local commune, taxation is more advantageous than separate taxation, even without children. On the other side, living together is not necessarily Scrooge’s paradise. Unexpected expenses can occur like, for instance, the fact that one partner doesn’t want to impose limits to the lifestyle of the other or hides debt for fear of compromising the relationship.
So, what are the financial risks of living together and how to avoid them?
1. Create a personal then common financial statement
Before creating a common financial statement, everyone would make a personal list of assets and debts. It allows identifying the assets that everyone wants to keep for themselves and to better understand the consumption and savings habits of the partner. It will avoid you judging the other too quickly as a miser or a spendthrift.
2. Your place, my place or ours?
Moving together means making choices. Which furniture or appliances will you keep? Which ones will you sell, give or throw away? Or do you prefer to buy new furniture? Do you opt for cohabitation or co-ownership? If you choose co-ownership, it is better to consult a lawyer or notary first in order to set fair rules, especially if you don’t bring the same down payment or if you expect that the mortgage contribution will be different from one partner to another.
3. Draw up a common budget
A common budget is not so easy to draw up. It is still the best way to know the income and expenses of each partner and to agree on an equitable sharing of common expenses according to the income of each other. What part of your income will be allocated to the common expenses? How much will you spend on personal expenses? How will you split common expenses with your partner?
There are 3 ways to create a common budget:
– the common pot: this model where couples merge all their finances can be a source of conflict if one partner is too wasteful or if they are too big differences in income. Another disadvantage is that the joint bank account can be frozen if one of the partners dies.
– half and half: sharing equally the common expenses is adequate for partners earning the same salary, but doesn’t allow redressing inequalities. The richest partner is getting richer and the poorest partner is getting poorer.
– pro rata basis: common expenses are split proportionally to the income of each other. This model can help the partner earning the least to save money and to reduce his/her financial insecurity. But the partner earning the most could dislike it, even if it is the most equitable model.
4. Don’t let one become richer than the other
Even if it can be more convenient when you earn less than your partner, don’t fall into the trap of paying the daily expenses and letting your partner buying in his/her own name durable goods such as house and furniture. These goods have a resale value and, in case of relationship breakdown, you will be left without anything.
5. Sign a cohabitation or a financial agreement
You are living a true love story; it is wonderful! When things are going well, take the opportunity to set rules that will apply in case of separation: the way the assets will be shared, the inventory and share of common goods, the occupation of the house, etc. Lay down these rules in a cohabitation agreement if you are actual cohabitants or in a financial agreement if you have registered a civil partnership to your local commune. Don’t hesitate to use the services of a lawyer or a notary for the drawing up of these documents.
In a nutshell, love and money can go together if each partner communicates their needs, expectations and limits openly.
The queen of cards. There are many different types and they offer many possibilities other than cashless payment, from differed repayment to additional guarantees on purchases.
3D Secure is an internationally recognised security standard for online payments. The service is limited in Luxembourg to credit cards.
If it’s true that when we shop in a store and handover physical cash, the pain of paying finds the act prompts more awareness about spending, and parting with cash may even hurt a bit more than swiping a bank card.