Smart Money Podcast: Romance and Real Estate – Navigating Shared Rent and Housing Expenses
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Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions. In this episode:
How can couples split housing expenses without splitting up? Learn how to keep your finances — and relationship — healthy.
What part of your life can have an unexpected impact on your finances? Hosts Sean Pyles and Sara Rathner discuss how personal experiences with ADHD and side hustles have had financial implications for them beyond what you might expect. Learn how unexpected opportunities and even scrolling social media can impact your buying decisions and affect your bottom line.
Today’s Money Question: What’s the best method for splitting housing costs with your significant other? How can you figure out what’s “fair” when one partner is making a lot more money than the other? NerdWallet writer Kate Wood joins Sean and Sara to help answer a listener’s question about how to split living expenses like mortgage and utility bills when cohabitating with a loved one.
They explore various options for splitting rent or mortgage payments, including informal agreements, formal rental contracts, and tenancy in common. They also weigh the pros and cons of a classic 50/50 split versus splitting housing costs proportionally based on income, and explain why having an emergency fund is especially important when living with a romantic partner. You’ll walk away with a better understanding of how you can ensure fairness and transparency through practical tips that can keep both your relationship and your finances healthy.
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Have a money question? Text or call us at 901-730-6373. Or you can email us at [email protected]. To hear previous episodes, go to the podcast homepage.
Episode transcript
This transcript was generated from podcast audio by an AI tool.
Sean Pyles:
Hey, Sara, when you first moved in with your now-husband, did you guys split rent 50/50, or did you try to find some fairer way to share your housing costs?
Sara Rathner:
We started at a 50/50 split, but pretty quickly realized that that was actually financially unfair to my then-boyfriend, now-husband, because at the time, his salary was less than mine. So we switched to paying proportionally to our incomes, which we still do now with our mortgage.
Sean Pyles:
Well, I am a fan of that approach, but in this episode, we are going to help a listener who's grappling with how to share housing costs with their partner. Welcome to NerdWallet's Smart Money Podcast, where you send us your money questions and we answer them with the help of our genius Nerds. I'm Sean Pyles.
Sara Rathner:
And I'm Sara Rathner. Listener, it's 2024, the future. And I'm betting that you have some new money questions like maybe you want to get a new puppy, but you aren't sure how much it's going to cost. The answer is a lot.
Sean Pyles:
It's true.
Sara Rathner:
Or you want to find the best way to use points for your spring vacation, which will also cost a lot, but not as much if you use points. So whatever money questions you have, we Nerds have the answers.
Sean Pyles:
So true. You can text it to us or leave a voicemail on the Nerd hotline at 901-730-6373. That's 901-730-N-E-R-D. Or you can email your question to [email protected].
Sara Rathner:
This episode Sean and I answer a listener's question about how to split mortgage payments with a partner you're not married to.
Sean Pyles:
But first, Sara and I are going to talk about things in our lives that we didn't expect to have a big influence on our finances, but ended up having a really big influence on our finances.
Sara Rathner:
Yeah. Like you might not think that making plans with a friend is a financial decision, but then after a few hours you've bought some junk at a boutique and had a snack at a cafe, and the next thing you know you're out 50 bucks. So Sean and I wanted to share a couple of things from our lives that we didn't expect to have the financial implications that they ended up having. So Sean, what's yours?
Sean Pyles:
Mine is my own brain, specifically the way it is ruled by a storm of chaos and whimsy and distraction, AKA living with ADHD. For me, it manifests primarily as hyper focus on things, and this hyper focus, I would say, is both my superpower and my internal/eternal nemesis. It helps me run the show, for example. It helps me get really, really deep into topics that I'm researching, but sometimes it leads me to hyper fixating on things that I want to buy allegedly, but really don't need at all.
Sara Rathner:
Yeah, Sean, it's funny because working with you, you have so many systems in place where you are very organized. You are the first person to claim time on my calendar every week, which I appreciate because once the time is scheduled, I will work around it. And so you have dibs on my free time, but it is interesting to hear how it manifests itself for you financially, where impulse purchases can become a really big problem if you don't keep yourself in check.
Sean Pyles:
Yeah, I mean, this is part of why I try to stay away from social media, because those ads just hit me so hard. I was scrolling through the other week and I saw this pair of glasses that were extremely beautiful, handcrafted, limited edition. I saw them on my face immediately and thought, that's going to make me look so fly and so smart. And then I clicked into the website and they cost no less than $1,100.
Sara Rathner:
Oh, no.
Sean Pyles:
Yes.
Sara Rathner:
I haven't worn glasses in years, but that's really expensive.
Sean Pyles:
It's really expensive. And even if my insurance was to cover some of that, it would still be very, very, very expensive. So that helped me shake out my hyper focus a little bit, but then I began scheming for ways to make it more affordable. Like, okay, what is my insurance going to cover? How much do I have in my HSA? Is this worth it at all? And I decided to step away from my computer, put down my phone, get away from social media because I've been through this cycle before where I get hyper focused on something that I didn't know existed an hour before, but now I suddenly have to purchase.
So I think this is one tip that anyone can apply to impulse purchasing, whether they have ADHD or not, is build in that time buffer. If you see something that you think is great for you and you just want to buy it right then and there, step away, maybe give yourself a day or a week and just think about it. I saw those glasses last week and now at this point I'm thinking, eh, I actually have a pair of glasses that's a little bit similar to that, and I already own them outright. They are not going to cost me $1,100. So that's one way I stop myself in my tracks from getting hyper focused on something.
Another thing that I do is I try to ask myself what this purchase is going to change or improve. It's that kind of “so what” question. If I have this thing in my life now, so what? What's it going to do? How are things going to be better, if at all?
And another question that I recently came across in conversations about buying things is the “where is this going to be in three years” question? So when you want to buy something, if it's like a new suitcase or a water bottle or a very expensive pair of glasses, where's it going to be in three years? Is it going to be in a landfill? I mean, my glasses probably wouldn't be, but a water bottle, probably. Not to call out the girls who love their Stanley Cups, but I'm just saying a trend is a trend.
Sara Rathner:
Yeah. What's crazy, I can't believe there are trends in water bottles because I drink from a YETI, which apparently is very 2018 of me, and ...
Sean Pyles:
Those were trendy.
Sara Rathner:
And then high school, college were the Nalgene bottle years. And then, yeah, it's very strange that there are trends in water consumption.
Sean Pyles:
Whether you have ADHD or not, just putting systems in place to protect yourself and your wallet from yourself is how I try to operate this weird brain that I have.
Sara Rathner:
I would say one good thing about social media is the existence of what are called “buy nothing groups.” If you haven't joined them, I think they're mostly on Facebook, but they're by neighborhood. And so if there is an item that you think you might need or really want, you could first reach out on the “buy nothing group” and see if somebody has one that they're willing to give away. And I've gotten some pretty amazing things for free this way. I've also given away things for free that I was no longer using.
Sean Pyles:
Okay. Anyway, so Sara, what is something that you experienced in life that you didn't think would have the big impact on your finances that it did have?
Sara Rathner:
For me, it was embracing a side hustle, which I did, oh my gosh, over a decade ago at this point. It was something that I didn't think I would do because I had a full-time job and people would sometimes come to me with freelance opportunities. I was like, "Oh, I don't have time for that." But at this particular point, I think I had just gotten married and I had all this free time now that I wasn't planning a wedding anymore. And I was like, "I can do that." And it not only changed my finances to have that extra income coming in, which was really nice, but it also ended up changing the trajectory of my career. So here's what happened.
So years ago, my brother and sister-in-law before they got married, worked with a financial planner together, and they worked with a woman who was about the same age as I am, which is very rare in the financial planning world, less rare now than it was a decade ago. And they said, "You should look her up. I think you'd really like her." And so I subscribed to her email newsletter and she would send out interesting articles and tips and stuff about money. And one day she posted an opening for a virtual marketing assistant just to help with content management, publishing articles on her website, social media, things like that. And I have no idea what mysterious force prompted me to apply. I just was like, you know what? I want to do that. And it turns out I was the only person she ended up interviewing. And since I had writing experience previously, she expanded the role to include writing blog posts about personal finance for her.
Sean Pyles:
Okay.
Sara Rathner:
Yeah. And guess what? Right now I'm a full-time personal finance writer at NerdWallet, and I am happier in my career. The work I do is actually much closer to what I went to college for and what I have a degree in than ever before. So it took me about 15 years to circle back around to that, and I earn more than I ever did before.
Sean Pyles:
That's fantastic.
Sara Rathner:
Hashtag girl boss, which is why I pay more of the mortgage. So really sometimes a side hustle or some other opportunity might come your way, that's a way to make some extra cash or try something different, test out a possible career change. And if you have the time and the inclination, I would say go for it. Because worst case, you do one project for somebody and then it's not a good fit, and then you just kind of mutually quit each other and sometimes it ends up being life-changing.
Sean Pyles:
And your experience also speaks to the unexpected opportunities that come up when you expand your network, whether it's through a really intentional professional move like what you made or just serendipitous through the friends that you have. I think back a lot to the relationships and friendships that I made shortly after moving to the Bay Area when I was in my early 20s, and the people that I met in the first few weeks after I moved there ended up giving me opportunities that led me eventually to the job that I have now. And there's always that balance of meeting people just through happenstance and coincidence, and then taking that opportunity and putting in all of the work and getting to where you want to be. So there's a bit of a balance to that of how much of it is pure chance, how much of it is your own initiative and hard work, but you can't really have one without the other.
Sara Rathner:
Yeah, it's really hard to put yourself out there in that way and be vulnerable and be like, "Hey, I'm looking for new opportunities" or not, and being open to having those conversations with people that you meet. But you really never know what sorts of networks people are tapped into. And there are still people that I'm in touch with from previous roles or just people I know socially who happen to have amazing networks, and sometimes I am in touch with them to find sources for my articles because they're tapped into certain industries and can connect me with experts in different fields. It is good that when you have a good connection with other people professionally to nurture those connections over time because you really never know. And then that can also put you in a position to help another person who is looking to make moves as well. It's like a buy nothing group. What goes around, comes around, that karmic cycle of giving and receiving. It applies to so many other things in life.
Sean Pyles:
Perfect callback.
Sara Rathner:
Thank you.
Sean Pyles:
So even though we just shared two totally different experiences, they both highlight the way that things in our life, in my case, having a weird brain, in your case, subscribing to a newsletter, can influence your finances and create opportunities in ways that you wouldn't expect. And in general, I think it's really worth connecting the dots like this so you can see how the various things that have happened to you have resulted in the challenges and opportunities that you're currently facing. Because in a few years time, you might be surprised by how the decisions that you made and the experiences that you had in 2024 had ripple effects on your future self.
Sara Rathner:
So yeah, it's nice to be nostalgic and look back on things in previous years, but when you're doing that, think also about how those instances played out for you several years beyond that, and it can help you imagine how might something that's happening to me right now, whether it's good or bad, affect me in the future and how might I be able to turn things around and use those experiences to propel my goals financially, professionally, relationshipally, whatever, that's not a word.
Sean Pyles:
All of those things.
Sara Rathner:
All those things. Yeah. You get what I mean.
Sean Pyles:
Appreciate what got you here and then see if you can will that experience into giving you the future that you want.
Sara Rathner:
Yeah, I think the word manifesting is overused, but sure, let's do it. Manifest your future.
Sean Pyles:
Manifest away.
Sara Rathner:
Yeah.
Sean Pyles:
Before we move on, listener, I wanted to let you know about an upcoming webinar from our tax Nerds on Wednesday, January 17th at 9:00 AM Pacific Time, noon Eastern Time. You will get the rundown on all things taxes, like tax credits, deductions, tax advantaged accounts, and how to prepare for a filing season. Space is limited, so click the link in the episode description to register. Okay. Now let's get onto this episode's money question segment.
This episode's money question comes from a listener who left us a voicemail. Here it is.
Listener:
Hey, so I have a question about rent/mortgage sharing with a partner that I'm not married to. So I own a townhouse, and some time ago my girlfriend moved in with me. At the time she was going through school and she wasn't making any money, so we agreed that she didn't have to pay rent or utilities at the time. But now she has a job and we think it's fair that she shares in the cost of the utilities and pay some, I guess you can call it rent. However, my issue is figuring out what is an appropriate amount for her to pay. However, I own my place and she's not getting equity from paying rent to me. I don't think it's fair that she pays half the monthly mortgage.
So what I've done is a cursory search on Craigslist to see what rent would be for a one bedroom in someone else's home. And I just took the average of that. I live in Orange County, California. I kind of ballparked it around $900. So she agreed to this number and with her current salary, it's a little tight for her, but she says it's okay. I'm still unsure this was a fair amount. Furthermore, if we continue to live together and she earns more money and rent in the area increases as expected, should her rent increase? To me, that seems a little extortive, but I'm not sure what's fair to me. I'm having a hard time basically balancing the compassion for a loved one with the financial responsibility of owning a home. I'm just really lost in this matter and some advice would go a long way for me. Thank you.
Sara Rathner:
To help us answer our listener’s question on this episode of the podcast, we're joined by NerdWallet writer Kate Wood. Welcome back to Smart Money, Kate.
Kate Wood:
Hey, thanks for having me.
Sean Pyles:
Hey, Kate. So let's start by talking about a few ways people in our listeners' situation can have arrangements with a partner that they're sharing housing with. There's a spectrum from the most lax arrangements to the most formal. So let's start with the most lax, an informal agreement between our listener and their girlfriend. How would that work and what might be some pros and cons?
Kate Wood:
So I mean an informal agreement is what it sounds like. Just kind saying, "Oh, I'm going to need you to pay rent now. Here's how much you could pay." So the pro is obviously it doesn't really get much easier than that. It's kind of just like, well, here's what's going to happen. All right, the big con to that is this is just a conversation that you're having and if questions come up later, at that point it's he said, she said, it's each person's memory. Also, it could be harder to change if your situation changes since you both just kind of agreed to it.
Sean Pyles:
Yeah, I feel like this is a situation where it seems really easy in the beginning because you're just making it so you can go with the flow and figure out your housing payment. But it can lead to a lot of problems later on when you do have some sort of discrepancy or maybe one partner can't pay as much of the housing cost as they thought they could a month before, and then suddenly because nothing is written down, it becomes a really complicated argument.
Kate Wood:
Absolutely. I mean, that's kind of the thing, whether it's with someone who's a romantic partner or whether it's someone who's a friend, you've got a different relationship than if this were simply someone who was your roommate or a tenant or something like that. There are different kinds of expectations that can come in, and having a more formal arrangement is probably going to lead to some awkward and very not romantic conversations. But if you get a bit more formal and you have an actual rental contract where it's something that you can consult and you can agree, "Okay, this is how much you're going to pay. If the amount is going to change, this is how often it could change or how much it could change by." So then you've kind of got everything out in the open and it's something that you can go back and consult. It's something that you can still amend if needed if your situation changes. Definitely awkward to set up, but then once you have it, that's like a living document that you can keep turning back to.
Sean Pyles:
And having a formal rental agreement like this would also help the person whose name is on the house or on the lease because if you have an informal agreement and the person who is informally paying rent to the person on the lease or the mortgage suddenly just dips out or doesn't want to pay, then the person who's on that document, the legal document to have to pay for this piece of property is the one who's going to be on the hook if something happens.
Kate Wood:
One other thing, and I hadn't thought about this before because I'm not a tax pro, but technically you are supposed to report rental, even if it's just you renting a room within your house. That's still rental income, you are still supposed to report it to the IRS.
Sean Pyles:
Yeah. So that can get complicated. You want to consult with a tax pro and maybe a real estate attorney if you're going to be structuring a formal rental agreement like this. But speaking of getting even more formal, on the totally opposite end of the spectrum from an informal agreement is something called tenancy in common. And it doesn't seem like our listener is going to actively pursue this, but it's still worthwhile to touch on so folks are aware of all their available options. And this is basically a formal agreement where you share property ownership between a non spouse. You can divvy up ownership proportionally. So if one partner can only pay 40% of the mortgage costs and the other can pay 60%, you could split up ownership accordingly.
Kate Wood:
And working at the details of that kind of agreement can definitely be complicated. So this is another one where a professional like a real estate attorney can come in very helpful. Something that's important to note with tenancy in common is that there are major differences between sharing ownership in the sense that you've got a second person on the title and sharing ownership in the sense that this person has been added to your mortgage. For a lot of folks, especially in this current interest rates environment, they are not interested in adding someone to the mortgage because in order to do that, you have to refinance. So you're getting a new interest rate along with that. But you can add someone to the title at any point. You're just working with the title company to do that.
Now, if someone else is on your title, that means that they have some kind of legal right to the property. The biggest thing to note here is that it does not mean that they are in any way on the hook to repay the mortgage. So if something were to come up and you as the mortgage holder were having trouble paying, as far as the lender's concerned, someone who's just on the title but not on the mortgage, doesn't even count. So that's an important distinction to make.
Sara Rathner:
Sounds like that can get dicey potentially. So there are a few ways to structure these kinds of agreements, but let's turn to the financial aspect of our listener's question. They're really concerned with charging fair rent, which I appreciate. But let's talk about fair ways to share housing costs with a partner.
Kate Wood:
The easy one, similar to just having an informal agreement is just going with the vibe, like, oh, here's what feels right. And so again, that's fewer awkward conversations, but it might not make financial sense, and it also could be harder to adjust if either of you have a change to your situation since there's not any real basis for why either of you is paying the amount that you're paying. So that one can get a little bit trickier.
Sean Pyles:
Yeah, it seems like just like you were saying, Kate, where it's similar to having an informal rental agreement, if you just have a situation where you're paying what feels right, you're going off the vibes of your finances or what you think someone can pay, then you're probably going to have some awkward conversations down the road. In my opinion, it's usually better to have these conversations upfront so you're really clear on the expectations going into something as important as figuring out who's paying for what amount of housing. Now, I also want to turn to splitting housing costs 50/50 because this is something that people might think is really fair because you're two people most likely, and so you could split the rent or the mortgage right down the middle, and that seems like a really clean and easy way to structure how you're going to cover this. But there can be some real challenges to this too, and it actually might not be as fair as it seems at first. So what do you guys think about that?
Kate Wood:
Right. So in theory, it's fair in that you're two people, you're using the same amount of house, you're both contributing, but this really is only going to work if you actually make very comparable amounts of money, because as soon as there's any mismatch, one person's overpaying relative to their income and one person's underpaying. So say that one person is making $100,000 a year and one person's making $60,000 a year, if you were splitting 50/50, each person's proportions are going to be off by something like 13%. So the $100,000 person is going to be underpaying, they're getting a deal, whereas the $60,000 person is going to be stretching to come up with their half of that amount.
Sara Rathner:
You don't want to pull the wool over the eyes of somebody you're romantically involved with.
Kate Wood:
Ideally, no.
Sara Rathner:
Don't do that. That's just bad karma.
Sean Pyles:
Yeah, not a great way to structure a relationship financially or romantically over the long run.
Sara Rathner:
I mean, even if you're just living with a friend, this is somebody you like, don't do that. And have those conversations and be open about your income. It's not fair if one of you is living bare bones and the other person is rolling in savings because you're trying to be equitable, so to speak, about splitting your rent or your mortgage.
Sean Pyles:
And that's why we tend at NerdWallet to favor proportionally splitting housing costs like this based on your income. And to do this, you can add up your two incomes to come up with your total household income and then figure out how you would split the housing costs proportionally so it's fair.
Kate Wood:
Yeah. So using that same example of we've got one person who makes $60,000 and one person who makes $100,000, nice round numbers, they might not always be that way in practice, but it works for an example. So their household income would be $160,000. If you take each one of those and you divide the person's income by the household income, the person making $60,000 should be paying about 37% of the housing cost, and the person making $100,000 should be paying about 63% of the housing cost.
Sara Rathner:
I am a fan of this method. It's something that I still do in my life because it's honoring the fact that, again, somebody is going to benefit way more than the other one. If you're splitting rent 50/50 and somebody else is earning so much more, you want to be mindful of the fact that in a couple, you don't always earn the same amount of money, and sometimes you have one half of a couple vastly out-earning the other one. And it is really unfair and hurtful if it feels like you are benefiting from the suffering of the person that you are romantically involved in. So you never want to be in that situation if you can help it.
Sean Pyles:
I'll also add that there are a number of ways where you can split housing costs proportionally. There might be an instance where you actually split what your housing cost is for the mortgage or the rent 50/50, but then the person who earns more is covering utilities. So it ends up balancing out proportionally. It doesn't always have to be based on what the rent or the mortgage payment is specifically. You can kind of refigure it for whatever works for your situation.
Sara Rathner:
Yeah, I mean, you can also think about it in terms of the time spent doing labor around the house. Time is money. And so maybe you have somebody that one half the couple is earning less, and so they're able to cover less of the cost of the home, but maybe they earn less because they work fewer hours and they have more time to cook or clean or grocery shop or other tasks that are part of the upkeep of the home.
Sean Pyles:
So our listener mentioned that they were looking at rental prices in the area to see what fair rent would be, and that's another approach. What do you guys think about that?
Sara Rathner:
So when it comes to deciding or determining what fair rent would be for your area, you also want to make sure that you're not comparing apples to oranges. You want to consider what it would cost to rent the kind of home that you own. So the listener mentioned that they live in a townhouse. That's going to cost a different amount every month than, say, renting a one or two bedroom apartment or renting in a detached house. So don't compare a townhouse to a two bedroom apartment. Compare townhouses to townhouses, and then think about this is what fair rent is for similar homes because the person that moves in with you is going to enjoy that type of property with you. So that's one thing to think about.
And also you don't want to over or under charge, but it's tough because you might live in a home that would be so much more expensive than if your significant other were single and renting a place by themselves, they'd go for a much smaller kind of home because of their budget. So that's another thing to think about. Would your significant other rent a townhouse with a roommate or would they rent a two bedroom with a roommate?
Kate Wood:
Absolutely. Would they go for a studio, would they go for having a roommate? That kind of thing. If renting one bedroom in someone else's home isn't something they would actually do, it's not maybe the best comparison. Something that would also be potentially worthwhile is just using a rent calculator. We have one on NerdWallet to figure out what would be affordable rent for her current income.
Sean Pyles:
And I do like the impulse to get some data points from the market to bring something close to objectivity to this decision. But again, with how expensive housing is right now, this could make a housing payment unaffordable for the partner. And if our listener's goal is to be fair, this could end up being less fair than splitting housing costs proportionally, like we discussed earlier.
Sara Rathner:
Yeah. Months ago, Sean, you and I interviewed a listener who I believe she and her significant other were living in a high cost of living area, and they were living separately in rentals with roommates, and they wanted to move in together. They were ready to move to that phase of their relationship, but in doing so, they would be dramatically increasing their housing costs. And I really felt for them, because it's one of those situations where you don't save money by moving in together, and all of a sudden you're in a situation that's untenable, but you also don't want to be living with roommates forever. So what do you do? And that's just another thing to think about. By moving in with you and the home that you own, are they just lowering their quality of life dramatically? And then what can you do to prevent that from happening?
Sean Pyles:
Yeah, you have to think about location, the roommate factor is real too, and other financial goals. I mean for that couple, living together was a financial goal of theirs. And so even though it might not be the most cost-efficient thing to do, it's what they wanted out of life. So in that sense, it would still potentially be worth pursuing. I would probably have pursued that if I were them, just to get to that next step with my partner and not have so many roommates.
Sara Rathner:
Yes, and you reach a point in life where you just don't want roommates anymore.
Kate Wood:
That's fair.
Sean Pyles:
Yeah. Okay. Well, Kate, Sara, have you guys ever been in our listener's situation, I guess either the situation of the listener or the girlfriend? And if so, how did you handle this?
Sara Rathner:
Not exactly in the same way. I wasn't a homeowner until I had been married for a few years. So when we bought our home, it was a joint purchase and we were both on the title of our home. But when my husband and I rented before we got engaged and married, and then obviously into marriage, we started by splitting it 50/50 and then ended up switching to paying proportionally to our incomes because hashtag girl boss, I was earning a lot more and it just wasn't fair that I had so much more money at the end of the month to play with. So that was a discussion that we had. And then as our salaries adjusted over time, whether it was due to raises or switching jobs, we recalculated what percentage of each of our incomes made up the household income and then readjusted the proportionality of our payments toward rent and now mortgage. And we still pay our mortgage proportionally to our income.
Sean Pyles:
So you are not going just on vibes, you are doing some math and making sure it's as fair as can be for both of you.
Sara Rathner:
Yeah. Some of the other stuff we do on vibes, like groceries. But then other bills, we usually split those 50/50 and then there's one or two bills I take on extra just to sort of make up for things.
Sean Pyles:
Yeah, there's always some squishiness to it.
Sara Rathner:
There's a little squishiness. Yeah.
Sean Pyles:
Kate, what about you?
Kate Wood:
Well, I've definitely been in this situation before of being like, "Yeah, we can just do what feels right and go just on vibes" more or less because at the time, I didn't want to seem greedy. I didn't want to seem greedy, I didn't want to seem like, oh, I was trying to take more than I deserve. But actually I really regret not standing up for myself and being like, "Okay, wait, can we actually talk about how much money we're making and how this would work?"
I for a couple of years was splitting rent 50/50 with a partner who I did not know how much that person made. And what I found out later was that not only was that person earning more than twice what I was in terms of income, but he was also getting financial help from his parents. So the whole time that we were together, I was living paycheck to paycheck, draining it down to the very last dollar every month, not contributing to my retirement because I felt like I couldn't even put that money aside. And he was not doing that, very not doing that. And if we had been more open about money, if I'd known what he was earning, I would not have even remotely agreed to that.
Sean Pyles:
Right. That sucks, Kate, I'm really sorry that you went through that.
Kate Wood:
It was not great.
Sean Pyles:
No, I'm glad you're out of that now.
Kate Wood:
Yes.
Sean Pyles:
I'll say I've had a vibes situation that went fairly well. My partner bought a house five years ago, and I was not on the mortgage. We didn't have a tenancy in common. Our informal formal arrangement was that I would pay slightly less than half of the mortgage because I wasn't on it, I wasn't getting any equity from ownership of this house. And the idea was that I would be able to set aside a lot of money, hopefully, and be able to buy my own property. So we talked through our finances and who was paying what percentage of the mortgage, but we did it with other financial goals in mind. And I also picked up some utilities because I was earning more than my partner then. So it wasn't the most precise way to do it. It's not exactly what you're doing, Sara, but it worked out well for us. And we also have a lot of really open and honest communication about our finances, and that, I think, is what made all of this viable.
Sara Rathner:
Yeah, I mean, I will say what makes things a little bit easier in my situation is, it's one of the benefits of being married and both sharing the title of the home and sharing the responsibility for the mortgage is for better or for worse, we both have rights and we're both building equity. This is our asset. It is a lot more difficult when it's one person's asset and the other person has no claim to it whatsoever. And so it is what are you paying for? And it's for the enjoyment of the property. The same way that you would rent a home from a landlord. They're profiting potentially, or not, necessarily off of you owning the home, but you are paying into somebody else's mortgage and maintenance of the property, but you are getting a roof over your head. You're getting something for that money. You're getting a maintained property that you can live in that's kept up to a certain standard.
Sean Pyles:
Yeah, I did not have to pay for any repairs in the house, so that was nice.
Sara Rathner:
Yeah, I mean, I've definitely heard stories of people moving into a significant other's house and paying some form of rent, and also buying furniture and decorating and doing all this stuff out of their own pocket for a property that they don't own. And then when they break up, it's like, well, I spent all this money on furniture and now I don't get to take any.
Sean Pyles:
Oh, I would be taking that furniture. That's not even a question.
Sara Rathner:
But then you have nowhere to go, so you're just like, well, what do I do with this albatross of a couch? And it is hard. So I would caution anybody who's in the girlfriend situation, not only have conversations about the roof over your head, but also conversations about the upkeep of that property and what's your responsibility and what isn't.
Sean Pyles:
Well, something we've touched on a couple of times in this conversation is how awkward it can be to talk with your partner about money and housing. So it's probably a good idea if we discuss some tips for this. One thing we like to recommend at NerdWallet is setting aside time, having a money date, which may not be the most romantic date you ever have, but it's probably going to be one of the most productive because you're dedicating 30 minutes or an hour and you're saying, "We're going to hash all of this stuff out. Let's look at our income. Let's look at what our housing costs are, see how we can make this fair for all of us given our cash flow and our financial goals that we have individually and together." And then also maybe at the end of that time slot, put 30 minutes or an hour on a timer, when you're done with that, go on a walk or go have an actual date, something enjoyable so that you have something to look forward to when you've finished this task. Anything else you guys wanted to add onto that?
Sara Rathner:
Yeah, I would say don't move in with anybody if you don't know their income. Sorry, Kate.
Kate Wood:
No, I mean, that's ...
Sara Rathner:
You should learn your significant other's income, maybe not on the third date. That's not like a third date thing, but it could be like a 10th date thing. You know what I mean?
Kate Wood:
Yeah, no, definitely. That's a real fool me twice, shame on me.
Sara Rathner:
It happens. It's not your fault. And if you are in a relationship and you're inclined to lie about those things, I mean, I don't know.
Sean Pyles:
Go to therapy.
Sara Rathner:
Go to therapy. Apparently you have so much family money to play around with, you have money for therapy.
Kate Wood:
I feel like it's also often hard because in general, talking about money is still somehow somewhat taboo. And I think particularly if you're a woman in a heterosexual relationship and you're asking a man about how much he makes, there's definitely a perception there and that you don't want to come off as like, oh, I'm trying to get your money, I'm a gold digger, I'm doing all this stuff. And so it can be really hard to bring stuff up where you're just trying to find out what the baseline is, what's happening in the relationship and what's going on, because you don't want this stigma or this perception, or you're like, oh, I don't want to make demands or be like that. And it's like, you're not being like anything. This is a pretty basic thing.
Sean Pyles:
That can speak to the power imbalance in a lot of relationships like this, especially when one person is on the mortgage and the other is not. And for the girlfriend in this situation, it's probably going to be a good idea to beef up that emergency fund a little more than you might anticipate originally, because you want an exit plan if you need one. And that would hopefully be able to cover a security deposit, maybe first and last month's rent on an apartment. If you do realize you need to get out of there, you don't want to be financially dependent on a partner or dependent on them for housing too. That can be a really tough situation.
Sara Rathner:
You always need the FU Fund.
Sean Pyles:
Yes.
Sara Rathner:
Whatever that stands for, freedom, other words, whatever. I mean, I would also say, I mean, we talked about maybe if somebody's coming into a relationship also with family money, a lot of times there's this impetus to hide that because sometimes there's a feeling of shame. You have this money that you didn't earn and you benefit from it, but it's not through work, it's through privilege. And sometimes people have very complicated feelings about that, so they tend to keep it pretty quiet. Or you're concerned that somebody might only be with you because you have that family money. And so hopefully you're in a relationship where you feel like you can be honest about all the sources of your income and you're with somebody that you trust, and their motivations for being with you are not your money, but they're with you and you have money. And maybe there might come a time when you're together long enough that they also might benefit from your family money, but when it's appropriate.
Sean Pyles:
Okay. Well, Kate, thank you so much for talking with us today.
Kate Wood:
Absolutely. Thank you for having me.
Sean Pyles:
And that is all we have for this episode. If you have a money question of your own, turn to the Nerds and call or text us your questions at 901-730-6373. That's 901-730-N-E-R-D. You can also email us at [email protected]. Visit nerdwallet.com/podcast for more info on this episode. And remember to follow, rate and review us wherever you're getting this podcast. This episode was produced by Sara Rathner and me. We had editing help from Tess Vigeland. Kevin Tidmarsh mixed our audio, and a big thank you to NerdWallet's editors for all their help.
Sara Rathner:
And here's our brief disclaimer. We're not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.
Sean Pyles:
And with that said, until next time, turn to the Nerds.
