Dividing expenses and savings by two
Getting married? Or, perhaps moving in with a significant other? Regardless of your relationship, there are some financial aspects you should consider when sharing expenses. It is important to communicate, understand concerns and options, and decide how you are going to share financial responsibilities. This includes how deposit accounts, budgets, credit, and debt are going to be managed.
Having the conversation is critical, but it can be difficult. Managing money is a sensitive topic. Finances are a frequent source of stress in relationships. Having an open discussion and agreement up front can help with navigating this stress.
You should discuss your bank accounts and whether you will have individual, joint, or a combination of both joint and individual accounts. If one of you does not have a bank account, visit the FDIC #GetBanked pages for affordable bank account options. Determine which accounts will be used to pay for regular recurring expenses or hold savings you did not spend at the end of the month. Also, consider building a savings or rainy day fund for when unexpected expenses or costs come up. Having a separate savings account may be a good way to store funds for emergencies or to pay for unexpected expenses.
When two or more people establish a joint deposit account together in an FDIC insured bank, each co-owner has equal rights to make withdrawals and transactions from the joint account. Co-owners also have equal rights to close the account and withdraw 100% of the funds independently of another owner. A joint account is insured up to $250,000 per owner. If each owner also has an individual account at the same bank, their individual account is separately insured from their joint account for up to $250,000. You can call 1-877-ASK-FDIC if you have any questions about your FDIC deposit insurance coverage.
Discussing a shared budget can be very helpful. Start out by listing each of your income sources and expenses. It is important for each party to disclose their income, expenses, and ability to pay expenses. Once your budget items are listed out, you can come up with a plan on who pays for what, how much to save, and even create a solution to pay down any debts each of you owe.
Depending on the nature of your relationship, here are a few ways of going about paying for things to get you started:
- Combine all income and pay all debt and obligations together.
- Split the financial responsibility and agree on who pays for what expenses.
- Use an income-based or percentage approach. If one partner brings in sixty percent of the income and the other forty percent, then the debts and bills are also paid for in the same percentages.
Understand what is on each other’s credit report. This will help avoid surprises, if you decide to apply for a loan together in the future. You can work together to build your credit scores too. Information on a credit report will usually determine the cost (interest rate and fees) and terms of the loan, such as how long you will have to repay it. Learn more about Credit Report and Credit Scores.
Regardless of the plans you decide on, it is important that you continue to communicate about your finances, keep your money insured, and pay your bills on time to keep that credit score in good shape. In addition, when adding a user to your credit card account or cosigning for a loan, you are still responsible for balance and payments, even if the primary borrower or added user is unable to make the payments. If you know what your share of responsibilities are and the financial expectations you have of each other, you will have more time to enjoy being together!
FDIC, How Money Smart Are You?
Consumer Financial Protection Bureau (CFPB), Credit Reports and Scores
Michigan.gov, Getting married? Tips on combining finances
Internal Revenue Service (IRS), Tax Plans in Wedding Plans
For more consumer resources, visit FDIC.gov, or go to the FDIC Knowledge Center. You can also call the FDIC toll-free at 1-877-ASK-FDIC (1-877-275-3342). Please send your story ideas or comments to ConsumerNews@fdic.gov.