The evolution of managing shared spending in a dating relationship

I started working on this post after my husband and I had been dating for about a year. I’m publishing it now as a snapshot of how our financial management evolved during our dating relationship. I’ll have plenty more to say about how we will manage money going forward in our marriage, don’t worry!

Friends and Early Dating

My husband and I have been friends since college. We occasionally went out for food together prior to beginning to date and we just split the bill by what food we ordered. That’s what most friends do, right? When we were first casually dating, we continued to do the same. I remember one occasion when we were trying to figure out how to split the bill, he put his card down, and poof the server took off with it! I turned out to have some cash and gave him some for my share. Since that instance, we’ve always made sure to figure out what we’re doing before either of us put our cards down on the bill. I still remember the first time we went out for dinner after we had The Relationship Talk and we looked at the bill and went “What do we do?”, realizing that maybe there was a new process to this paying for eating out madness. He also asked me how much I was going to tip, which I found quite amusing at the time. (He later explained that he didn’t want to tip vastly different amounts on similar bills.) Until we moved in together, we had several approaches:

  1. If the amounts were way off, sometimes the person who ordered more $ of food pays the whole bill
  2. Sometimes one person randomly pays for both of us
  3. If we split all the food or ordered within $1 of the same amount of food, we split the bill 50/50
  4. If the amounts we each ordered are off by less than the amount we would tip, then we adjust the amount with the tip

For any costs in cash, usually whoever has the most convenient denomination of cash pays.

For expenses that we couldn’t split at the source, we set up our checking accounts so we could transfer money to each other without seeing the other’s balances after we’d been dating for about six months, which made random things so easy to split. It did drive me a bit nuts with the number of transfers going back and forth, but it was a great system. (Square Cash made this pretty easy when I moved my money to a different bank.)

Travel

In 2014, we took a few trips and they were relatively easy to share the costs:

  1. In March, we went on a trip to an all-inclusive resort. Pretty much everything was paid for upfront, so one of us paid with a credit card and the other transferred half the cost. Super easy. If you’re ever traveling with friends, these are great trips to take! One of us took out some $ from an ATM to have some spending cash and the other transferred them half of that. We ended up spending none of it though so we both had enough cash to last us several months of normal cash spending.
  2. In June, we went on a trip to another city, a short-ish flight away. One person booked the flights on a credit card, the other booked and paid upfront for the hotel, and the person who paid less for those two transferred the other the difference. We did one activity that one person paid for in advance and the other transferred them half. Once we were there, we followed our normal pattern for splitting costs.
  3. In July, we went on a driving weekend away. One person booked the hotel and activities and the other paid them back once we had the final amounts. My husband filled up the gas tank. We followed our normal restaurant pattern.

As of early 2015, our trip to New Zealand was our biggest shared cost so far, the first one being our shared checking account for groceries. At home, we split every expense except groceries at the source. This sounds tedious to everyone else, but it works for us. When we go out to eat, we either pay for what we ordered or we split the bill evenly if our separate amounts are within a dollar of each other’s. We agreed as we were booking this trip on about how much it would cost, how long we wanted to go for, where we wanted to go, and the type of trip that we wanted to have: hotels not hostels, renting a car instead of tour buses, not a big group experience. We also decided to put most of the expenses on one credit card (and agreed to use a recent card that my husband got) and then deal with things when we got back. We both had separate credit cards that we used for non-shared expenses. This system worked out pretty well!

Living Together

It took us a few months of living together before we found a good routine with our financial management systems. The system I described in that post isn’t exactly what we ended up doing over the last two years. We did, however, stick to our plan of splitting the outgoing shared expenses other than the mortgage payment 50/50. Our incomes when he moved in were pretty similar and so that seemed like a fair system. Our incomes eventually diverged quite a bit, but we’ve still kept to the 50/50 system as we don’t want to create a financial dependence on the other person’s income.

We determined who would pay what with the question “If we were renting, would the landlord or the renter pay for X?” In order to keep my condo equity safe and clearly separate, I paid for everything related to the condo. I paid the mortgage payments, monthly HOA dues and special assessments, property taxes, and any maintenance or improvements. He paid for most everything else: groceries, travel, restaurants, utilities, new towels, etc.

To keep things simple, all of the shared expenses that he paid for were put on one credit card and I have an Authorized User card on the account. We also set up a financial aggregator account with it so that I could see the data without him sharing the online banking password. Every few months, I would enter my part of the data and his part of the data into a spreadsheet and make sure that things were relatively even since we weren’t splitting at the source.

When we did a living room furniture remodel this year, we agreed to split every item purchased at the source so that we fully owned all of the items together. I ended up getting a couple of credit cards (including the Chase Sapphire Reserve!) for credit card bonus points with the large purchases and then he paid me back for his half of the furniture pieces.

After we got married, we moved to a slightly different system (which I will talk more about next year), though I continued to pay for everything related to the condo until the postnuptial agreement was signed. I am so excited to retire the haphazardly updated spreadsheet of shared spending!! I’m really glad I kept that spreadsheet though as it made creating our 2017 joint budget much, much easier.

Happy holidays, everyone! This is my last post for 2016.

A Millionaire’s Elopement

We’re both on the introverted side and neither of us saw marriage as a shiny penny, but as something we were already living day and in and day out at the time that we chose to marry. Eloping thus turned out to be the perfect solution – it meant that we weren’t focusing on a big party, but on choosing to marry each other.

We had been talking about marriage for a while now off and on, so it didn’t surprise anyone that we decided pretty quickly to get married. A note to anyone else planning a wedding: all you really need is about 48 hours or whatever your local jurisdiction’s waiting period is. People were surprisingly shocked though that we didn’t have an official proposal or an engagement ring, though the latter was mostly my decision as I’m still on the fence as to whether I want to wear one. My now-husband (!) has said we could buy me one if I really wanted it, though I’d kind of rather have a tablet I think.

We made the decision to get married so quickly that we didn’t have time to draw up a pre-nuptial agreement, so we’ll be drawing up a post-nuptial agreement soon and I’ll be talking about that when we figure out what it looks like. At this time it appears that it will likely cost about what we spent flying the key people in to the wedding location. We’re both really excited to combine as much as makes sense. After all, we do already have the same Investment Policy Statement and we both hate even low-interest mortgage debt. This event has created plenty of inspiration for future blog posts!

Why do I say it was a millionaire’s elopement? Now that we’re married, we sort of have a combined net worth even if some of it will stay separate and combined, our net worth was over a million dollars as of our wedding date.

What did our wedding spending look like?

Total cost: $3,500

$2,300 Flying some key people here (2/3 of the cost of the wedding)

$800 two wedding bands

$140 Attire – I bought a dress off the rack and my husband wore a suit he already owned

$100 buying up some domain names

$84 Ubers around

Marriage license fee (I google’d “our county marriage license” to research this – I know it varies from county to county whether there is a waiting period so be careful of that!)

Fee for two certified copies of the marriage license

$6 buying some birthday cards and stamps for a few birthdays we missed because we eloped

$0 Photographer – our witnesses and officiant are hobbyist photographers

$0 Officiant – a friend officiated and was included in the post-wedding food

$0 Venue – we got married at a park

$0 Food – Dinners and lunches were paid for by either our grocery budget or our parents as a gift (I’m guessing this was about $600-800)

$0 Flowers – no time for such things

$0 Music – we were in a park! Natural noise from that

$0 Decor/rentals/lighting

Pre-nups and marriage: the future of shared finances

This is a super controversial topic, I know. But I plan to marry only with a solid pre-nup in place. I always knew I would marry with a pre-nup, since I was in my early twenties and my parents told me how much money they had then. My mom tried to tell me again recently and I told her I don’t need to know as it’s their money for them to spend in their lifetimes – I don’t need it. I definitely knew I would marry with a pre-nup when I was a 23 year old buying a condo with a 20% down payment and cash reserves leftover while still maxing out her 401(k). Hot stuff that sure intimated guys! My boyfriend, on the other hand, seems to find it attractive that I am wildly independent and know my way around Vanguard. I still remember his calm response when I first told him how much money I had saved, which was back when my net worth was in the high $300k range.

My boyfriend and I have started discussing what our pre-nup will look like, slowly, what our finances will look like in the future, how we will handle this appreciating like wild fire (too soon?) condo that I own right now as my separate property. A hot anniversary dinner topic, I know.

He was flabbergasted when I told him of how many people on the financial internet are so strongly in the one pot finances camp that they belittle people for ever separating their money or having a pre-nup. With the slow pace we are taking to the altar, by the time we get married, we could very well have a solid $2M net worth minimum combined. That’s a pretty huge difference from people who meet in college, with no money, have $50k/year jobs and get married in their mid-to-late-twenties. We are two financially stable, high income adults, a far cry from the people we were in college when we met.

Pre-nups aren’t just for people from old money. They’re for people who think strategically about how they will grow their wealth as a couple, while financially protecting both parties. For example, I picture using a pre-nup to re-title assets so that we could own this condo together without a mortgage or selling off any assets. Or we could use a pre-nup to re-title our separately lopsided, but balanced combined investment portfolios where one of us has 80% of their portfolio in taxable accounts and the other has 80% of their portfolio in tax-advantaged accounts, though both are completely indexed with maxed out 401(k)s, Backdoor Roth IRAs, and happy Vanguard accounts.

Right now, we track some shared spending in a spreadsheet. By we, I mean, I enter the data in the spreadsheet and update him every few months, usually to confirm that our system is working as expected and we’re splitting expenses just fine with our lackadaisical he pays for some items, I pay for others, and we split some 50/50 approach.

I tried to suggest to him that we make a game in 2015 of which one of us could save more money. When he remembers, he kicks himself for not agreeing to this game because it turned out that I took two months off unpaid and he had a record income year, so he totally would have won.

No, we’re not engaged. But we envision a future together, building wealth together. A mortgage-free life with index funds and maxed out 401(k)s. Financial security is sexy and don’t let anyone tell you otherwise.

Here is to many more years of a life of delicious food cooked at home and adventures together! Swoon.

Officially living together!

My boyfriend has moved in! I started writing this post back in August, at which point we had mostly decided this was happening, but kept waiting to publish it since I didn’t want to jinx it! He moved his furniture in this past week and we’ve been working on rearranging things. We have a ton of duplicates (even some triples and quadruples…): some of which we’ll keep, some we’ll donate, and some we’ll sell. It is super exciting and scary all at the same time. He’s been unofficially living at my place for months now, so we’re just making it official now and saving some money (mostly him, but me too). My fixed expenses are going from $2,000/month down to $1,600/month (only $600/month once the mortgage is paid off!).

We’ve been splitting groceries all year, so we’ve got that down pat. We have our checking accounts linked so we can transfer money to each other super easily (free and instantly from the website or app for our credit union!), without seeing the other’s balances, and we’ve also opened a joint checking account that we’re slowly figuring out what we’re going to use it for (currently: groceries and travel). We’re on the same page with savings and investment strategies and what we do with bonuses and other extra money and we know how much money the other has and makes and such.

The big question though is what to do about housing expenses. If we were renting apartments, it would be easy. We would look for a new apartment, probably a two bedroom + den, move into it together, and split everything 50/50. But we’re not renting apartments. Also, ew are those types of apartments expensive at $3,200/month! I own my condo (well 2/3 of my condo) and it is a good size for the two of us, while my boyfriend was renting an apartment.

What I’ve seen some people do is just split everything down the middle when they move in together, even though one person owns the place. I don’t want to do that because of the amount of equity I have. I also don’t want my boyfriend to pay me rent or for him to see me as a landlord. Everyone assumes he will pay me rent and are super confused when I say that he’s not. This is a serious, long-term relationship. Plus, my HOA rules don’t allow for only renting out part of my unit.

So what we’ve agreed to do is to split all of the outgoing expenses other than the mortgage 50/50. Logistically, this means taking a look at all of the expenses, adding them up, and then arranging the puzzle pieces so that we each pay for unique line items that add up to the same amount. This means me paying the property taxes, him paying the HOA dues, and then us splitting the utilities (electricity and internet) evenly. I look at it that the mortgage payment is mostly principal at this point, so it is part of my savings strategy, just like my boyfriend’s rent savings will go to his savings strategy.

It’s been pretty fun him slowly moving in over the last few months and decorating the condo together :) It’s shifting from my place to our place as we move more and more of his stuff in and rearrange the furniture and as we buy artwork and new furniture together. I look forward to years of this!

If you have any questions about how we decided to split expenses or how we’re doing it, go for it! We’re still figuring this out as we’re going and nothing is really set in stone yet.

P.S. I finally told him about my blog a couple of months ago and he seemed to think it was kind of cool! I’m trying to convince him now that he should write a post sometime ;)

Reflections on Home Ownership: 6 Months In

I’ve now been a homeowner for about six months and it has been a little over a year since I started the home searching process. Am I happy with the condo I have now? Absolutely. Do I think that I should have started the home searching process last fall and actually purchased a place? No.

Why do I think I wasn’t ready last fall? I didn’t have enough in savings. Here are what the numbers looked like:

  1. Down payment savings: $24,709.14
  2. Next vehicle: $3,213.54
  3. Vacation savings: $2,458.49
  4. Emergency reserves: $18,037.51
  5. Taxable investments that are currently at a loss: $2,901.60
  6. Miscellaneous savings that would take some significant effort to retrieve: $7,005.37
  7. Taxable investments that are currently at a long-term gain: $2,587.44 (selling would cost $168 in long-term capital gains taxes in April plus $9 in commissions) – post-selling value would be $2,578.44
  8. Auto loan payments: $858.94 (not available – will use to make the last payment on the auto loan this month)

That adds up to:

  • Emergency reserves: $18,037.51 (~6 months)
  • Money available to buy a place: $33,411.72 (down payment savings, vacation savings, taxable investments currently at a loss, taxable investments at a long-term gain)

So when I first started looking at buying a place, I had only $33k in cash available to me. But a realistic budget was $250-400k for a condo. $33k would only make a 20% down payment on a place worth $165k and that is ignoring closing and moving costs. The first places I looked at were clearly not places I wanted to live (though they were quite nice) and the process was quite frustrating. My parents gave me a sum of money that made the decision actually a viable one, but I really shouldn’t have gone ahead with the process last fall. Instead, I should have re-signed my lease and kept on saving for another year. I would have had about a $73k down payment fund right now and I would have had plenty of time to look for a place. I would have saved myself a lot of stress, about $4k in moving costs, and many months of lost social life. (All those dates I went on in the first half of 2012? I think I would have had better luck had I not been so stressed out with the condo hunt. That said, I am thankful for my now-boyfriend and wouldn’t change that part at all.) Sure, my rent would have been almost as much as I’m now paying for my condo per month, but I would have had more time to find what I was interested in and I would have known better questions to ask so I didn’t end up with a super pushy real estate agent who just wanted a quick sale.

Things worked out in the end, but I don’t think that I was ready financially when I started the process. If I’d lost my job, things would have been disastrous. Surprisingly, that’s about how things went when I bought my car as well…

I always, like Krystal, thought that I would buy a place with someone. I also thought I would be at least in my late twenties before I even considered buying a place. After university, the pieces fell into place quite nicely: I finished university somewhat young with an amazing salary, a job that I love and is quite stable, and made the smart decision of moving to a city where I would consider staying long-term. The piece of a significant other isn’t there, but that’s okay. I can most definitely afford this on my own with my income. – Buying a place: Property Search and Life Decisions (November 5, 2011)

Now that I’m in a serious relationship, I’ve questioned my decision to buy a condo on my own. It’s definitely weird trying to build this place into my home at the same time as my boyfriend and I are building our relationship. If he owns his own place, we would be in a weird situation of owning two places and if he doesn’t own his own place, we would be in a weird situation of me building equity and him not. (I’m looking at it from all directions so as to not discuss his financial situation whatsoever.) Also, I picked this place, but it’s possible that he never would have picked it in a million years. There are a few ways this could go/could have gone:

1) We eventually get married and move in together. We could buy into each other’s place(s) or declare them separate property in a pre-nup if the other party doesn’t have the funds to buy in.

2) We eventually break up and date other people. I keep my condo, he keeps his if he has one and nothing is really lost or changed. The situation would repeat with my next potential partner.

3) If I hadn’t bought a place and he didn’t have one, we might have moved in together in a rental some day, saw how that went, and then if we wanted to get married, bought a place. This probably would have meant several years out of the real estate market since I wouldn’t buy a place by myself while serious with someone, but I wouldn’t buy a place with someone without being married. Estimated down payment fund (just me): $73k (2012), $114k (2013), $165k (2014), $216k (2015). This wouldn’t have really been the end of the world. I/We probably would have skipped the “starter” condo/house phase and gone straight for a long-term house.

Back to my place, I definitely love this place! There are a few things I would change or would have done differently myself, but they’re not broken, so I won’t do anything about them. I’m definitely keeping notes on what appliances I will buy when the ones I have die a tragic death. I like the settling down feeling, I like the nesting feelings of wanting to make lots of little changes here and there. I also love the cost so far! My monthly costs are lower and more stable, so ignoring the cost of selling the place, it was immediately cheaper to own. I’m also really enjoying the location – I think it was a perfect choice for me.

Get a pre-nup for a second marriage

Before getting married, it’s really important to look at your financial situation, together. You should pull credit history reports with your significant other, as well as looking at the last few months of bank statements, pay stubs, and W-2s. (just like applying for a mortgage!) You should also talk about spending and saving amounts. If you have spreadsheets, you should share them with each other. You should go through this full disclosure process before getting married, even if you don’t sign a pre-nup. If your assets or income are really disparate, you should consider signing a pre-nup.

If you’re young, have never married before, and have no kids, a pre-nup is a nice to have. You could end up getting divorced, but you could not. If you have been married before and perhaps your previous spouse died, you should strongly consider either signing a pre-nup or living together without legally getting married. This time around, it’s less a worry of ending up in divorce court and more a concern of your children and how they will have to deal with your new spouse’s financial situation after you have passed away.

The death of a parent is difficult enough to deal with without having to sort through an extra set of children wanting their “fair” share of the family money or a new spouse spending away yours and your previous spouse’s hard-earned savings.

With a pre-nup, you could live happily with your new spouse until you pass away, but since the accounts and the money are all separate, everything would tie up nice and cleanly after your passing, leaving your new spouse with their savings and making your passing less complicated for your children to work through the estate.

 

For me? For a first marriage? I think that I would be sure to go through the full disclosure process of a pre-nup before deciding to sign one or not. I agree that finances should be a single pot when you’re married, but I don’t necessarily believe that family inheritances should be single pot. Family inheritances should be between you and your sibling, not between you, your spouse, your sibling, and your sibling’s spouse. It’s possible with the level of assets that I’ve developed for my age, that a future spouse’s assets could be quite different from mine.

We’ll see, but I definitely know that if I want to get married a second time, I will either get a pre-nup or just live common-law with the person. A relative in my grandparents’ generation lived with a significant other after their first spouse passing away for many years – my sibling and I even called them both ‘Aunt’ and ‘Uncle’ and didn’t realize or care that they weren’t married until we were in our twenties!

Readers, how do you feel about pre-nups for a first marriage? What about a second marriage?