Financial tips for young unmarried couples

By Scott Reeves

updated 4:43 p.m. ET Aug. 16, 2005

NEW YORK - For young adults, living together involves more than cross-eyed passion and deciding who takes out the garbage.

There are financial considerations, even for a couple kept in cheese and crackers by graduate fellowships or just beginning a career.

"I encourage newer couples to draft a domestic-partner agreement that spells things out," says Sheryl Garrett, a certified financial planner and co-author of Money Without Matrimony: The Unmarried Couple's Guide To Financial Security. "Both parties should keep a copy. If the relationship ends, the agreement can be enforced by going to small-claims court or a higher court if large amounts of money are involved."

The U.S. Census Bureau reports that the number of unmarried couples living together increased 72 percent between 1990 and 2000, underscoring the need for an unknotted pair to get the financial basics right. Unmarried couples now make up about 5.5 million U.S. households. That's 11 million people or about 5 percent of the nation's population.

If your partner doesn't see the need for financial planning, try this: Estimate what you spend weekly on groceries, utilities and other household expenses. Multiply by 52 and toss in the rent. That's real money, even when divided by two. A little planning now can avoid arguments later.

Keep the domestic-partner agreement simple, because too many clauses and footnotes will kill the spark in the relationship. The pact should state that personal property brought into the relationship remains that person's property if the relationship ends.

You can update or completely rewrite the domestic-partner agreement any time you see fit. Just tear up the old copy and start fresh. Both your and your partner should sign and date the new agreement.

If one partner has begun a career while the other remains in school, it's still best to split household expenses 50-50. But if that's not possible, state in the agreement that the person with the job will contribute a greater amount to rent and household expenses with the expectation of being reimbursed in the future through catch-up payments or a lump sum payment. Keep a record of all contributions to the household account and make sure the other partner agrees.

Prepare for the worst. While you are committed to each other at an early stage in your life, things change and you may not be together forever. In the domestic-partner agreement, state that you will be civil if the relationship ends and split expenses equitably. You might consider including a paragraph that states that you'll go to a mediator and split the cost 50-50 if you can't reach an agreement on your own.

If you live in a dream apartment, make it clear in the agreement who has the right of first refusal if the relationship ends. You might consider a paragraph spelling out how you'll handle relocation for the former partner who will leave the apartment. It could include first and last month's rent on a new apartment and a portion of moving expenses. It's up to you, but put it in writing to avoid the possibility of future acrimony.

If you have children together or accumulate significant assets or debts jointly, it's time to get an attorney involved after you've penciled out what you want. At this point, the relationship is no longer simple and it's important for both partners to understand their rights and responsibilities under the law.

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