Your Guide to Budgeting For Unmarried Couples

More and more modern couples are opting to move in together before getting married. In fact, the number of unmarried couples has almost tripled from 6 million to 17 million over the last two decades, according to a 2019 report from the US Census. With this cohabitation comes shared household expenses and potentially even a shared bank account, yet fewer legal protections compared to married couples. So what is the best way for unmarried couples to manage a budget?  

While there is no one “right” way to budget, there are some helpful steps to take with your partner to ensure the best financial success for you both (and protect each of you in the event of a split).

Disclaimer: This post is for educational purposes only and should not be construed as financial advice.

Talk About Money

Money is important. It pays the bills and makes the world go round. Yet so many of us don’t have real conversations about money with partners – whether married or unmarried.

In fact, a 2019 survey from SunTrust found that while 88 percent of folks believed it was important to talk money before marriage, only 51 percent actually had the finance chat before tying the knot. 

Whether or not you are planning to marry your partner in the future or have reasons for not getting married – if you’re planning a life with your significant other, it’s essential to talk about expectations and goals for finances. This might include questions like…

• What are your long term financial goals?
• What are your current finances like? Are you in debt?
• What do you value in your budget?
• What are your favorite things to spend money on?
• What are your favorite things to save money on?
• Are you a spender or a saver by nature?
• Do you have any savings goals you’re working on right now? If so, for what?
• What are non-negotiables when it comes to finances?
• What would you consider a serious financial mistake?

If you’re in a serious relationship, having this discussion should help both of you formulate a good plan for moving forward together. If your partner refuses to talk about these things, it may be because they weren’t brought up being open about money – but could also be a red flag for hiding financial concerns. It’s something you’d want to dig into deeper into (whether just the two of you or with counseling).

And while many of the upcoming tips apply to unmarried couples that are living together, this particular tip can apply to any couple in a committed relationship that’s simply planning for the future.

Create a Budget

Budgeting as an unmarried couple can get messy. Most couples face this challenge when they first move in together. Suddenly they are faced with bills like groceries, rent, and cable and may not be sure who pays for what or how to draw up a mutually beneficial budget.

Work together to create a budget that feels fair and equitable for both of you. Pull together a list of both incomes and all your expenses. It’s helpful to look at both shared and personal.

For example, shared expenses might include:

• Rent
• Utilities (water, gas, electric, etc)
• Food
• Entertainment

Personal expenses might include:

• Debt repayment (car, student loans, credit cards)
• Transportation (car, train, etc)
• Personal care items
• Cell phone bill
• Medical expenses
• Insurance

From here, it’s important to figure out an approach that works for both of you. Some couples will want to maintain a sense of personal responsibility for individual expenses, like past student loans or gas costs. Other couples may view everything together as one set of expenses in the relationship.

While your past splits with a roommate were likely an even 50/50, living with a significant other may be different. If you’re both working towards shared goals and a life together, it may be more appropriate for couples to breakdown shared expenses based on a percentage of income.

For example, if Partner 1 in the relationship makes $80,000 a year, and Partner 2 makes $40,000 a year, it might be fair for the first person to pay two-thirds of the shared expenses and the second person to pay the other one-third.

It’s not always this clear cut, of course. What if Partner 1, who is making $80,000, also has a $1000/month student loan bill and a $500/month car loan? That may impact their ability to contribute at the income percentage mentioned above.

Ultimately, it would be up to each couple to find a solution that works. In the example above, that might mean that Partner 1 gets a side hustle, it might mean that Parter 1 trades in their car to reduce their personal expenses, it might mean that Partner 2 takes on a greater percentage of shared expenses, or it might mean that the couple works to cut shared expenses in a way that allows the two-thirds/one-third split.

Consider Worst-Case Scenarios When Budgeting

Just keep in mind that you never know what can happen in a relationship – married or unmarried. In unmarried relationships in particular, though, there are no legal protections for the partners (in most cases – there are rare exceptions in certain states).

Let’s say we go back to Partner 1 making $80K and Partner 2 making $40K, and assume neither has debt. Parter 1 only do a 50/50 split of shared expenses, and wants to live in a relatively pricey apartment. Partner 2 agrees, because they love Partner 1.

This scenario might leave Parter 1 with adequate extra cash to flow towards savings and retirement, but leaves Parter 2 pinching pennies each month without the ability to put money into retirement.

Now imagine it’s 10 years down the road, and Partner 1 and 2 split up. Partner 1 has cash reserves to fall on and is on their way to a good retirement savings, while Partner 2 has nothing to fall back on.

It’s important to hope for the best, but also realize relationships may end, and may do so suddenly. Have some type of plan in place that leaves both parties in a good financial position should this occur.

Saving Money as an Unmarried Couple 

You may have already started saving money on your own, but what about your goals as a couple? Once you have assessed your income and expenses and created a budget, it’s time to consider adding savings goals.

For example, you may want to save up for a big vacation (hello, cruise!), or perhaps to purchase a house down the road. You may also need savings for joint emergencies – like if your fridge dies and you need to replace all the food that was in there.

Each partner should discuss how much they can comfortably save each month. From there, you can decide whether to have a joint savings account for these goals, or two individual savings accounts where each person contributes as planned.

Before opening a joint savings account together, you should also consider the pros and cons of this type of account. Joint savings accounts may offer transparency and accountability, and help to create a stronger bond and sharing mindset as a couple.

However, joint accounts can be tough for unmarried couples. One person can mismanage the money in the joint account, and it can lead to conflict. It can also lead to disagreements over how the money should be spent if there are competing goals or those goals have not been discussed in advance.

Whether you decide on two individual savings accounts or a joint account to work towards the financial goals in your relationship, there are two important notes here:

1. Do not open a savings account only one partner’s name and place all the couple’s savings in it. Unmarried partners typically don’t have legal rights to a spouse’s savings account. If a relationship doesn’t work out, you don’t want all the money you saved being legally owned by the other person.
2. Ensure you are also saving money individually (whether that means for retirement, emergencies, etc.).

Additional Tips

There are many advantages to following these tips as unmarried couple – you’ll set yourself up for financial transparency, work together towards financial goals, and put your relationship on the right path from the start. And although a joint budget may come with a few hiccups, there are a few additional tips that can help:

• Be honest with each other about debt and big purchases. Remember, 86% of couples who got married in the last five years started out in debt according to a recent survey – it’s not as uncommon as you may think. Own it and figure out a plan to move forward.

• If it’s helpful, consider using a budgeting tool or spreadsheet to help track your finances. That said, remember that people have different financial styles. While you may love tracking every last cent, it may drive someone else crazy to write down every single purchase. Automated apps that categorize purchases may be more helpful in those instances, or sometimes, simple spending caps without breaking it down into every single category.

• Determine who’s paying each bill, and if money needs to be transferred to the person paying that particular bill (or set of bills).

• Meet regularly to check-in. “How are our finances going? Were there any unexpected twists and turns? Are we on track to meet our goals?”

The Bottom Line

Transparency and trust are important factors to consider when unmarried couples start to budget together. Whether you’re just starting to budget as a couple or looking to improve your budgeting skills, creating a budget that you’re both happy with is key to a successful financial relationship.