Introduction:
You and your friend are considering moving in together this year. Your friend makes a lot more money compared to you (three times more). Should you try to find an apartment you can both afford half of, but that isn’t as nice? Or should you look for a better apartment and see if he’s willing to pay based on his income level? As individuals, we each pay about the same amount in rent, but my monthly rent has already exceeded my budget because I wanted to live in a more comfortable and safe neighborhood as a woman. He wants to combine finances a few months before we move in together, but I feel like I have almost nothing to contribute. What should I do?
Answer:
First, congratulations on moving in with your partner! This is a new and more serious stage in your relationship, and while discussing finances with a loved one can be stressful, it’s also an exciting new chapter for you both; try to enjoy it as much as possible.
You’ve raised two questions here, so I’ll first address the issue of combining finances. You didn’t mention anything about what you envision regarding “combining finances,” and this means different things for different couples. If you mean combining everything from bank accounts to credit cards, I advise against that until you’re married. This is because your money could be accessible to your friend if the relationship deteriorates – you wouldn’t have any legal protection if he closed the joint bank account without informing you.
You can cover shared living expenses even if you decide to keep your finances separate. Create a household budget that includes rent, utilities, groceries, etc. How you pay these bills is up to you. Some couples choose to split the utilities and bear them separately. For example, you might decide to pay for the internet while your friend pays the electricity bill. Who pays for what depends on both of you and how much you expect to spend each month on these expenses. Alternatively, you could calculate the total expenses and contribute half the amount or a proportional amount based on your incomes.
Now, should you split rent 50/50? Honestly, that depends on your expectations for the relationship in the future and your individual and shared financial goals. Personally, I believe that if one partner makes a significantly larger amount of money than the other, they should contribute a relatively higher amount when it comes to rent and other expenses. If you prefer to contribute half and feel financially comfortable doing so, that is definitely an option as well.
You didn’t mention how much higher (or lower) your current rent is compared to the rents of the places you plan to move into, but it seems you’ve exceeded your financial budget, while your friend seems to have a financial break. Therefore, while that 50/50 agreement may be “equal,” it doesn’t necessarily make it “fair.” The recommended amount to spend monthly on rent is 30% of your income, which varies significantly between you and your friend. For example, if you earn $2000 a month, 30% equals $600; if your friend earns $6000 a month, 30% equals $1800. You may want to consider finding an apartment that fits this type of budget for both of you.
If you’ve been in this relationship for a long time, you’ll want to ensure that your finances are as stable as possible. This means neither of you should stretch your budget limits so that you don’t feel financial stress when you move in together.
The step
The first thing here is to have an open, honest, and compassionate conversation with your friend. Ask them about their financial expectations of you, their financial goals for the future, and if they have any constraints like debts that might prevent them from contributing as much as they’d like. Don’t hide from yourself either – be upfront about your financial insecurities and what you hope to achieve financially in the future. If you approach these conversations in a loving manner, I think you might be surprised at how easy it is to align and create financial agreements that work for both of you.
Good luck!
– Kristen
If you have questions about money, Kristen is here to help. Submit an anonymous question and she may answer it in a future article.
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Sources:
– Consumer Financial Protection Bureau. “I have a joint checking account. Can the other person close the account without telling me?”
– DocPlayer. “Who can afford to live in the home?: A look at data from the 2006 American Community Survey by Mary Schwartz and Elaine Wilson at the U.S. Census Bureau.”
Source: https://www.thebalancemoney.com/should-you-split-rent-based-on-income-5270427
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