As more young people experiment with live-in relationships to see what the benefits and drawbacks of cohabitation are, they frequently ignore the financial side of living together. Ignoring it can lead to rifts and, in the event of a breakup, financial ruin for the partners. Because most institutions only recognise married couples and blood relations for legal transactions, it might turn into a financial nightmare for one or both parties. Here are some things to bear in mind if you decide to live-in after a breakup so that you don’t have to start over financially.
1. Don’t combine Resources
Even among married couples, combining funds for a period of time after the wedding is not a smart idea. Because of the open-ended nature of the connection, this is especially true for live-in couples. It is therefore preferable to have separate bank accounts rather than a combined account. Split family expenditures and distribute payment obligation in accordance with salaries. If the obligations are not established at the outset of the partnership, resentment may arise since one spouse may wind up paying more than the other.
2. Set Goals together
Traveling abroad, purchasing a home, or establishing a family are all possible aspirations. It’s critical that we set financial objectives and agree on how to attain them jointly.
If you both contribute to savings, after few years, you may both be eligible for a first-home grant. This may be a significant increase to your deposit – up to $20,000, depending on how much you’ve contributed. Working through the Goal Planner together might help you get on the same page.
3. Investments and Insurance
As partners in live-in relationships do not have the same rights and obligations as their married counterparts, the investment strategies of such couples cannot follow the formulas applicable to married partners. For couples in live-in relationships, the investment strategy should be individualistic in nature. They should keep the investments separate and goal oriented. It is recommended to work towards each goal separately even if the goal is common in nature such as buying a house. In such a case the asset could be held jointly with the appropriate split clearly mentioned. These individual investments should span across various instruments such as bonds, debt and equity mutual funds. One can nominate the partner for these investments if desired.
4. Split the bill 50/50
Every cost is divided in half. You each contribute the same amount to all bills, which will be used for any agreed-upon shared expenditure like as housing, utilities, vacation, date evenings, and so on. You have complete control over your finances while also being able to easily split spending with your partner.
Splitting expenses evenly may appear fair, but if one person earns much more or less than the other, one person may be put under more financial burden than the other. Splitting costs evenly will have an impact on large future expenditures (such as houses), since you will need to ensure that each individual can pay the cost.
5. Grow Wealth together
A partnership opens up a slew of possibilities for accumulating riches. Living together and sharing expenditures is less expensive than living alone, even only monetarily. As a result of becoming life’partners, you’ll have possibilities to save and invest that you wouldn’t otherwise have.
Setting objectives takes more effort in a relationship, but it’s necessary so that you and your partner both know what you’re aiming for as your net worth grows. You’ll also be better prepared for any changes in your spending habits that may occur.
6. Individually protect your risks
You may not be able to purchase a family plan, therefore seek appropriate health insurance individually. Each spouse should have health insurance of Rs 5-7 lakh, with the option to extend to Rs 10 lakh if you have the financial resources. Life insurance might be difficult to get since insurers only accept spouses and blood relatives as candidates; but, if you have a kid, he can be named as a beneficiary. If both couples make enough money, however, life insurance may not be essential. If you have debts, such as a mortgage, you should get loan-linked insurance.
7. One-income households are possible
It’s as if you were living on a single salary. All of your costs are covered by one partner’s income, while the other partner’s paycheck is saved in full.
Because you are only living off of one person’s income, this strategy assures that you are continually saving money and will continue to discover inventive and inexpensive methods to save money. This single income, which is most usually the higher-earning of the two couples, covers all costs and savings contributions. The reduced or irregular income is devoted entirely to short- and long-term investments.