Personal Finance for Unmarried Couples

Unmarried couples who live together have special personal finance challenges, including:

• keeping records of assets you own jointly and as individuals
• keeping records of liabilities you owe jointly and as individuals
• obtaining life insurance to cover lost income for your partner in the event of your death
• obtaining domestic partner health insurance benefits (if available from your employer)
• obtaining disability insurance to cover lost income for your partner if you become disabled
• obtaining long-term care insurance to cover your care and expenses if you need nursing home or skilled in-home care
• adding yourselves to each others automobile policies
• understanding opportunities and pitfalls in tax, retirement and estate planning, and
• agreeing on parenting and co-parenting arrangements for children from previous relationships.

Money Without Matrimony: The Unmarried Couple’s Guide to Financial Security, by Sheryl Garrett and Debra A. Neiman, is an easy-to-read guide with practical advice on these and other planning considerations affecting unmarried couples. What I liked best about this book is that it helps you decide what to do about a specific issue, e.g., merging finances, by explaining and giving examples of the pros and cons of different scenarios.

For managing household finances, I recommend that unmarried couples track expenses in Quicken rather than Mint.com because the Quicken categories are more flexible. For example, you can group your expenses into three main categories: your own, your partner’s, and your shared expenses. To set this up, create a category with your name, then make all of your individual expense categories a subcategory of your name. Do the same for your partner, duplicating categories as needed. For example, if you both spend on clothing as individuals, you’ll need a clothing category for yourself and another for your partner. Categories you share, such as groceries, don’t need to be associated with a name.

Quicken default expense categories are general and unstructured. Income sources are fairly standard for most individuals, but expenses vary widely. The expense categories should reflect how you organize your financial life. This is your chance to be creative. I recommend starting with the default list, and modifying it as you categorize expenses and get a better picture of your financial life. As you learn more about what you’re spending, you’ll want to refine category groupings that make it easier to interpret cash flow reports.

A method I recommend for sharing expenses is to have one person, usually the one who handles the household finances, obtain a check each month for what the other owes for the common expenses. If you keep transactions on all of your accounts up-to-date in Quicken, it’s easy to generate a report showing the the total for shared expenses at the end of each month.

If you keep a shared Quicken file, it’s also easy to create and monitor a household budget. You might sit down together once a month to tally up shared expenses and keep tabs on year-to-date spending. This is a good time to bring up issues and concerns, to make sure you’re both on the same page with respect to managing your finances and making progress towards your financial goals as a couple. Even if you agree to keep certain expenses separate, it’s important to fully disclose your individual spending to your partner, so that he or she has the opportunity to discuss any concerns and vice versa.

Tagged as: Accounting, Book Reviews, bookkeeping, Budgeting, Couples, financial organizing, Personal Finance, planning, Quicken, Recording Transactions, unmarried couples