Credit Card Brains

During this hottest week of summer, an anonymous reader asks a steamy question about relationships:

“How do you and your boyfriend handle finances? I am in a relationship and I am pretty frugal and I enjoy working on finances. This can be pretty tricky in a relationship and I was interested to know how you balance that.”

OK, I lied. Her question was not steamy in the traditional risque sense … but have you ever gotten into a fight about finances? (Read that one, it’s worth it.) Finance fights are the hottest it will ever get in your relationship (outside of the bedroom). Tempers flare, spending habits collide and the strongest of couples can feel like they’re living life in a pressure cooker of expectations.
So while I usually try not to pull B too much into my writing at his request (hee-hee, at least I tell him that), I’m willing to take this question for the frugal Ms. Anon. You should know that what works for me most certainly won’t work for everyone else, but since a lot of us are living in the crazy co-habitating space and our parents didn’t, I suppose it’s important for me to share.

Before I get into the nitty gritty of our finances, I want to share my perspective on living together. I know too many people for whom it has not worked, and trust me, it’s messy when it doesn’t. Unless you are truly comfortable with yourself, and have shown that you can live on your own with and without roommates, you should probably think twice before moving in without a committment. If your relationship is new, think twice. If you’re moving in because you have no where else to live, or it’s more convenient or just because it’s cheaper, think twice. These might be signs that you’re not ready to move in together, or that you’re taking things too fast. And in your 20’s, who wants to go fast? Life right now should be about developing a mature, healthy and happy you. So enjoy it while you can be your most fab.

But for certain situations, living together might be right. And when you live together without being married, the question comes up, how do you manage your finances together, separately?

For us, we think of each other as two equal individuals. We pretty much split everything home-related 50-50, like roommates (think heating, electric, renter’s insurance, car insurance). There are a few big line items that we scaled based on income (rent). Since B pays for the car and gas, I cover the groceries (they are about equal). When it comes to miscellaneous trips to the store for random stuff, we take turns paying. The same goes for dining out (though I think B usually ends up paying more often when we eat out).

We do not have a joint checking account or a joint credit account. We do have a joint cell phone plan that we split, but we itemize the charges. We also have a joint gym membership, but that’s pretty easy to split charges, too.

We typically go about our business paying the bills we each “own” and then typically two or three times per year, we put everything on a spreadsheet and figure out who owes who money. We should probably do this once per month, but we get too busy and we’re usually close to even when we tally up the totals anyway.

Our arrangement works well for a few reasons. First, though we split living expenses, we in no way tie or disposable incomes or savings accounts together. Therefore, if I go off on a spending binge (like I did this weekend), I have no one to answer to but myself. I am responsible for reconciling my own actions for my financial health. It might sound cliche, but it’s very empowering to only have to depend on yourself for financial support.

Another benefit to keeping separate finances is that should this relationship not work, I have a solid understanding of where my money comes from and where it goes. There would be no learning curve, no mystery accounts, no questions and no financial mess should we break up. Without a legal commitment, I’m protected from a potentially damaging situation. And while some people might find this unromantic, it’s really just pragmatic. Our relationship is based on love, trust and understanding, rather than financial support. Should that change, we could easily consider other options. (Blech. I don’t even like writing that.)

Another reason why our arrangement works is because we ‘re working towards mutual financial goals. Though our current lives aren’t legally tied together, we believe at some point they will be. Therefore, we work individually for the best shared future. For instance, my savings are going to a downpayment on a house or condo. B’s savings are primarily being used for law school. Both the house and the legal degree will help our shared future. And neither of us feels like we’ve had to stifle our dreams to achieve the other’s.

Finally, B and I have similar backgrounds and similar attitudes about money. I’m not sure whether this makes a difference or not, but I’ve never felt that buying material stuff was detrimental to my happiness. While B probably is a little more sensitive to being able to provide a future family with a secure and happy life, he’s the least material person I know.

All that said … It just occurred to me that Anon never mentioned that she wanted to move in together. If you’re not planning to move in together, I wouldn’t recommend combining finances. I would keep all your finances separate, and come to agreements about what you want to spend when you’re hanging out together. For instance, if you prefer to be frugal and he’s very spendy, that’s OK - he’ll either have to be spendy without you, or to spend a little more on you. He can’t ask you to spend your hard-earned money if you don’t want to.

For instance, if he wanted to go to Lollapalooza this weekend but you thought the ticket price was outrageous, he has three options: go with his friends while you listen to CDs at home, pay for your ticket or stay home with you. If I were you, I’d tell him to go enjoy the show with his friends, and I’d plan a cheap-o girls night with friends. (Having separate lives is just as important as separate finances!) This way, if he wants to pick you up a ticket, he can. But you’re secure enough with your relationship either way.

You should know that this approach flies in the face of a lot of couples, I think. My friend from India always thought I was “very odd” for wanting to be so financially independent. And many of the American women I know would probably freak if their bf told them he was going to Lolla alone. But my feeling is, if you don’t care enough to buy the ticket, you don’t really want to go. Why get upset about it?

As long as you both set expectations in advance, communicate about your needs and understand that one of you is a cheap-o and the other is a spendaholic, you’ll be able to lay some ground rules in advance to prepare for every situation. I think you should talk about this stuff every step of the way. Who knows… maybe you’ll find a happy middle ground somewhere.

… There was another part to the question saying that it might be tricky because Anoyn likes to do finances. Why is that? You will have to explain. I think most guys I know would be happy to have a significant other to discuss finance with. I was at a party two weeks ago and talked at length with friends about stagflation, investing, my finance questions and brokerage accounts. A lively, engaging discussion was enjoyed by all. So stick with your interests! You may becomes the life of the party.

And there you have it. My finance and relationships mini-manifesto. Or, what my friends call “one of Mladic’s lectures again” (they secretly love them). I’d love to know your thoughts. All discussion is welcome here!