Money Mic: Why Cohabitation Will Ruin Your Finances

Carrie Sloan
Posted

Money Mic

The views expressed here are those of the essayist and not the LearnVest staff, but we look forward to opening the floor to debate and discussion, so tell us what you think. This Money Mic is part of a conversation about living with your partner—click here for the opposing view.

A Seductive Idea

First off, let me say that I have no moral qualms about cohabiting: No “Why would he buy the cow …?” arguments here.

In fact, I lived with my ex-boyfriend through most of my twenties before we finally broke up—which is why I would never move in with someone again, unless I was certain I was going to spend the rest of my life with him.

Why? We’ve all done the back-of-the-napkin math, and, when you do, living together can look seductive. Half the rent! Half the utilities! With the added fun of playing house.

I get it—that’s why I did it. And in the short-term, I agree: Living together can look like a good deal. But in the end, it can turn out to be ugly, financially and emotionally. In the long-term, shacking up can cost you far more than any savings you rack up. And don’t just take it from me.

Despite the fact that the commitment-shy tend to use living together as a litmus test before saying “I do,” it’s actually a better predictor of divorce.

The Financial Perils of Playing House

“I moved in with my boyfriend mainly because I was tired of commuting to Brooklyn,” says Sarah*, 24. “But I did only pay $700 a month. So that was a perk.” In six months, she’d saved $4,900, as compared to living in her old apartment.

Then, just six months in, the relationship ended. All of a sudden, Sarah needed somewhere to live—and fast. She paid for movers ($300), for storage ($100) and for a real estate broker to find her a new place ($1,800). And now that she’s got one, she’s faced with refurnishing: “I have to buy all new furniture because I got rid of it all when I moved in with him,” she says. “I don’t even want to think about how much that will cost.”

Financially, at least, she’s pretty much right back where she started—and that’s to say nothing of the emotional toll. “It was super-stressful,” she says. “Now I tell my friends, ‘I’m getting a studio and not moving out until I get back from my honeymoon.’”

Unhappy Endings?

My experience—and Sarah’s—are actually typical of cohabiting relationships. A 2002 study found that only half of first-time cohabiting couples will stay together for five years, and despite the fact that the commitment-shy tend to use living together as a litmus test before saying “I do,” it’s actually a better predictor of divorce.

That same study, published by the National Center for Health Statistics, found that when couples cohabited first, the likelihood their marriage would last ten years or more decreased by 6%. (And Bankrate cites the cost of the average divorce at a cool $20,000.)

But the relationship doesn’t need to end in divorce for things to get messy. For couples who never make it to the altar, the law doesn’t automatically provide the same protections it does for those who are hitched—which can be a costly lesson to learn.

Getting Cohabiting Right

The thing is, there are two types of living together: “Prenuptial cohabitation” is the type where you already have a ring and a wedding date in the not-so-distant future. So far, no study has shown that moving in before the Big Day will hurt your finances—or your prospects. (To prenup or not? Figure it out with this article.)

The iffier kind, of course, is long-term living together when you a) move in on a whim, b) don’t know (or want to look) where the relationship is headed, or c) do it out of convenience.

Ready for the Next Step?

Learn how to prepare yourself before moving in with your partner
CLICK HERE

If you’re going that route, at least consider cohabiting in a way that could spare you a lot of inconvenience later: Namely, get your rights in writing.

The Alternatives to Marriage Project at Unmarried.org suggests that anyone intent on sharing a roof consult a lawyer to draw up the following:

1. A Living Together Agreement: A legal contract that covers how you’ll handle property and assets when you’re together—or when you break up.

2. A will: If either of you were to die without one, the survivor inherits nothing—and inheritance law often penalizes the unmarried.

When you crunch the numbers, it all comes down to the fact that living together is a bigger decision than just how much you’ll save: If you’re savvy enough to factor your bottom line into your romantic picture, be wise enough to take a step back, look at the big picture—and protect yourself—before signing on the dotted line.

*Names have been changed. 

Carrie SloanCarrie Sloan is the Executive Editor of LearnVest. She is now happily married, and moved in with her husband-to-be shortly after getting engaged. 

 

 

The debate’s not over! Read the opposing view explaining why cohabitation is actually great for your finances here, and post your own opinion in the comments section.

  • fauwl

    This isn’t just true of moving in with a significant other- it’s true of any roommate situation.  After college, I moved in with a girlfriend in order to reduce costs and I also liked the idea of having a friend around.

    This turned out to be a huge mistake.  A year into our lease, I broke up with my boyfriend who was very close with my roommate’s boyfriend.  The living situation definitely became awkward, and I wasn’t entirely surprised when she sent me an email saying she was going to break the lease and move out.

    My plan to save money and have a supportive living environment backfired immensely.  Now I am stuck paying to break the lease, stuck with a new (much higher) rent, and stuck paying for movers and new furniture, etc.  To make matters worse, I had adapted to living a very comfortable lifestyle since my living expenses were so low.  It definitely created a false sense of security.  Anyone moving in with a roommate or a boyfriend should definitely be aware of the emotional and financial turmoil that can come out of the situation.

    • Jen

      agreed. finances aside, I’ve had much more heartbreak and stress come out of roommate living situations than out of significant other living situations!

    • Lauren

      agreed but it also depends on where you live.  I live in nyc and a roommate/cohabitation is pretty much a requirement on my salary. Yes I COULD live alone but the costs frighten me.    When i lived in Florida- I was able to live alone (and still paid less than what im paying now)  

      And yes-  I fear the emotiona toll that might come from the end of my situation.  Losing a boyfriend is hard.  Losing a friendship is harder.

    • Lauren

      agreed but it also depends on where you live.  I live in nyc and a roommate/cohabitation is pretty much a requirement on my salary. Yes I COULD live alone but the costs frighten me.    When i lived in Florida- I was able to live alone (and still paid less than what im paying now)  

      And yes-  I fear the emotiona toll that might come from the end of my situation.  Losing a boyfriend is hard.  Losing a friendship is harder.

  • http://neatfreakwannabe.blogspot.com Jenna

    I think the key is really thinking it through and not letting the romance or supposed convenience get in the way.  If you’re not comfortable with the downside of having to pay for move-out expenses if something goes wrong, then why not see if your significant other will move in with you, instead of you moving there?  If neither of you are comfortable with that, then maybe it’s not time to move in together.

    Also, make sure that you both discuss how you’ll split all household expenses and chores.  Not a very romantic discussion, but I have heard so many squabbles from roommates and romantic relationships alike about someone not doing their share of the work or paying their share of the costs.  Putting it all on the table up front helps make sure you’re really thinking everything through before you take the leap.

  • http://neatfreakwannabe.blogspot.com Jenna

    I think the key is really thinking it through and not letting the romance or supposed convenience get in the way.  If you’re not comfortable with the downside of having to pay for move-out expenses if something goes wrong, then why not see if your significant other will move in with you, instead of you moving there?  If neither of you are comfortable with that, then maybe it’s not time to move in together.

    Also, make sure that you both discuss how you’ll split all household expenses and chores.  Not a very romantic discussion, but I have heard so many squabbles from roommates and romantic relationships alike about someone not doing their share of the work or paying their share of the costs.  Putting it all on the table up front helps make sure you’re really thinking everything through before you take the leap.

  • http://neatfreakwannabe.blogspot.com Jenna

    I think the key is really thinking it through and not letting the romance or supposed convenience get in the way.  If you’re not comfortable with the downside of having to pay for move-out expenses if something goes wrong, then why not see if your significant other will move in with you, instead of you moving there?  If neither of you are comfortable with that, then maybe it’s not time to move in together.

    Also, make sure that you both discuss how you’ll split all household expenses and chores.  Not a very romantic discussion, but I have heard so many squabbles from roommates and romantic relationships alike about someone not doing their share of the work or paying their share of the costs.  Putting it all on the table up front helps make sure you’re really thinking everything through before you take the leap.

  • http://neatfreakwannabe.blogspot.com Jenna

    I think the key is really thinking it through and not letting the romance or supposed convenience get in the way.  If you’re not comfortable with the downside of having to pay for move-out expenses if something goes wrong, then why not see if your significant other will move in with you, instead of you moving there?  If neither of you are comfortable with that, then maybe it’s not time to move in together.

    Also, make sure that you both discuss how you’ll split all household expenses and chores.  Not a very romantic discussion, but I have heard so many squabbles from roommates and romantic relationships alike about someone not doing their share of the work or paying their share of the costs.  Putting it all on the table up front helps make sure you’re really thinking everything through before you take the leap.

  • http://neatfreakwannabe.blogspot.com Jenna

    I think the key is really thinking it through and not letting the romance or supposed convenience get in the way.  If you’re not comfortable with the downside of having to pay for move-out expenses if something goes wrong, then why not see if your significant other will move in with you, instead of you moving there?  If neither of you are comfortable with that, then maybe it’s not time to move in together.

    Also, make sure that you both discuss how you’ll split all household expenses and chores.  Not a very romantic discussion, but I have heard so many squabbles from roommates and romantic relationships alike about someone not doing their share of the work or paying their share of the costs.  Putting it all on the table up front helps make sure you’re really thinking everything through before you take the leap.

  • http://neatfreakwannabe.blogspot.com Jenna

    I think the key is really thinking it through and not letting the romance or supposed convenience get in the way.  If you’re not comfortable with the downside of having to pay for move-out expenses if something goes wrong, then why not see if your significant other will move in with you, instead of you moving there?  If neither of you are comfortable with that, then maybe it’s not time to move in together.

    Also, make sure that you both discuss how you’ll split all household expenses and chores.  Not a very romantic discussion, but I have heard so many squabbles from roommates and romantic relationships alike about someone not doing their share of the work or paying their share of the costs.  Putting it all on the table up front helps make sure you’re really thinking everything through before you take the leap.

  • http://neatfreakwannabe.blogspot.com Jenna

    I think the key is really thinking it through and not letting the romance or supposed convenience get in the way.  If you’re not comfortable with the downside of having to pay for move-out expenses if something goes wrong, then why not see if your significant other will move in with you, instead of you moving there?  If neither of you are comfortable with that, then maybe it’s not time to move in together.

    Also, make sure that you both discuss how you’ll split all household expenses and chores.  Not a very romantic discussion, but I have heard so many squabbles from roommates and romantic relationships alike about someone not doing their share of the work or paying their share of the costs.  Putting it all on the table up front helps make sure you’re really thinking everything through before you take the leap.

  • Tytylisa

    Its a bad idea to move in with your boyfriend/girlfriend if your only reason for doing so is to save a few bucks.

  • Sue

    It is a faulty conclusion that living together has a causal effect on the likelihood of divorce . 
    The two factors most likely are concomitant and are both caused by the same third factor, which may or may not be a low tolerance for long-term commitment.

  • jess

    “She paid for movers ($300), for storage ($100) and for a real estate
    broker to find her a new place ($1,800). And now that she’s got one,
    she’s faced with refurnishing…” so lets give her another 1000 for furniture (a little cheap, but hey she must have some furniture if she’s getting movers, and since this is about saving money… So, all in all  $3200.  “In six months, she’d saved $4,900, as compared to living in her old apartment.”  So, she still saved around $1700 in six months.  And if she was smart she probably sold her old furniture before moving, giving her more even more profit.

    So the emotional value might be worth not having that money, but the point of the article is still null.  (Also, if you’re going to talk about saving money you probably wouldn’t be spending for a real estate broker or for movers.)  Yes there are costs associated with moving, but not any more than moving in general.  There are other reasons you might need to break leases (bad landlords, etc.) other than breakups.

  • http://www.mangomoney.com Mango Money

    As un-romantic as it sounds, I really think the idea of getting something down in writing is a good one. A lot of my friends are starting to move in with their boyfriends or girlfriends these days, and they all fall under your “long term” category– no ring or wedding date in sight.

    A lot of my other friends are moving OUT from their boyfriend’s or girlfriend’s place, and you’re right, it is MESSY. Not only should you make an agreement beforehand (and don’t be afraid to say things like “IF we do break up”– be realistic here, it could happen!), but you should talk about these issues, including spending habits, beforehand. 

    I work for Mango Money’s blog and we’ve got a great post on just that. Check it out, it might be helpful for you couples out there! http://www.mangomoney.com/blog/money/you’re-in-love-with-a-spendthrift-how-to-reconcile-money-management-styles

    • Anonymous

      People move in together early and live long term in cities like NY and LA because it is so expensive, the quality of life low (very low disposable incomes) and this forces people to aim for a quick financial incentive vs thinking of building a foundation for the relationship.

  • Jen

    My biggest problem with these stats about the likelihood of divorce is that it doesn’t take into account the way the people involved feel about divorce- for instance, if you believe that living together before marriage is morally wrong, you are also more likely to believe that divorce is morally wrong. Therefore, I would suspect that these stats are skewed by there being a greater proportion of those who did not cohabitate before marriage also not divorcing though they might be unhappy, or waiting longer to decide to divorce. Not saying that’s good or bad, just saying I’m skeptical about the stats. 

    Also, I agree completely that deciding to live with someone, especially a romantic partner, should not be a decision taken lightly and without thorough communication. Unfortunately, some people don’t put any more thought into the decision to get married than some do into the decision to live together. I really think the discussion should be less about “how to protect yourself until you achieve marriage” and more about “how to ease into a joint life and finances with your partner” whether married or unmarried, until you have a history of good communication, good joint decision making, and commitment to working things out that will help the relationship stand the test of years, regardless of whether legalities are involved. 

    • Shawna

      Ooops!  I just posted the exact same argument above, and then saw yours.  Nice thinking. :)

  • Anonymous

    I recently had to make this decision myself. It is true that moving in together looks very seductive, I would be lying if I said I didn’t consider it. But ultimately, I decided against  it. I don’t think there’s anything wrong with doing it, I don’t subscribe to the philosophy that you are “living in sin,” but someone once told me that if you decide move in with someone, ask yourself  beforehand whether or not you are willing to settle for less than marriage, because there is a strong likelihood that you may have to. I truly want to get married someday and I am not willing to settle for less than marriage.

  • Natalie

    It’s interesting to think about.  I however am still in the traditional mindset.  To me, there is something special about saving cohabitation until marriage.  Life and dating is tough, so I guess I still hope that there are other men out there that will be on the same page as me.  I do get that it’s appealing, so I don’t mean to condemn anyone by my thoughts, but I’m curious to know if there are others that feel the same way.

    • Lauren

      I feel the same way!

    • Colleen

      I definitely feel the same way. I don’t see the need to give up my freedom/unshared space prematurely. Once we get married we’ll have all of the time to be together. After all, marriage isn’t supposed to be easy anyway.

  • Natalie

    It’s interesting to think about.  I however am still in the traditional mindset.  To me, there is something special about saving cohabitation until marriage.  Life and dating is tough, so I guess I still hope that there are other men out there that will be on the same page as me.  I do get that it’s appealing, so I don’t mean to condemn anyone by my thoughts, but I’m curious to know if there are others that feel the same way.

  • http://pulse.yahoo.com/_JN4QP4HSRAEJLS36DQ7GI5SC24 Evelyn

    I don’t think there is a lot of compelling information here about not moving in together.  This could have been so much more interesting and had so much more information.  Stuff like the loss of equity in an owned house, like the girl who spent 10 years paying half of my brothers mortgage.  Granted she left him and she would have been paying rent someplace anyway, but maybe she would have bought herself a house had she not been living in his.  Overall the casualness of their uncommitted relationship cost her a lot of sound future planning.  She had no 401K, she had no house and no furniture.  She just used all of his stuff.  When she left, she had a lot of nice clothes and they took a lot of nice vacations together on her dime but she kind of screwed herself.

    • John

      Sure, she paid 1/2 his mortgage; That was her share of the ‘rent’ to live there. I’m sure it was less expensive than renting her own apt. Basically, she saved a lot of money over those 10 yrs by paying 1/2 rent and not buying furniture, etc. If she didn’t save her money, that’s her fault. She financially gained more than she lost over that time; But if she spent all her money on clothes and vacations and nice cars and dinners, etc….Well, that’s her fault. She should have saved some of her money. 

    • Michi

      Buying a home and having a mortgage is not for everyone. I look at it from another perspective. She has no mortgage, no divorce proceedings to attend to and no furniture. She can pick up and easily move elsewhere if that is her choosing. Or she can live in a small home and spend her money elsewhere if that suits her. You see no stability, I see freedom. Had she bought the house with your brother or had gotten married to him, the situation would be messier. Even if they had gotten married that is no guarantee their relationship would’ve succeeded. No 401K? Of course she should’ve taken advantage of that benefit if her employer offered it but really her opting out of that has nothing to do with living with a boyfriend (unless you’re saying her job choice was different because she was taken care of somewhat).

  • Shawna

    I think that study about cohabitation leading to higher divorce rates is VERY misleading.  Goes to show you can prove anything with numbers.  What I’d like to know is what percentage of couples on each side were religious.  What I would wager makes that 6% difference is that many people who are morally opposed to living together before marriage are also morally opposed to divorce.  Therefore, I’d guess that it isn’t cohabitation before marriage that leads to divorce, but that being religious leads to NOT getting divorced, and also not living together.  I’d bet that non-church-going statistics are the same in both camps.

  • Leah Fulford

    Um, did we totally miss that this was called “cohabitation is bad for finances” and the writer delved into topics that pertained to *breaking up* from a cohabited relationship? And this is about money, not emotional stress (which has no monetary value anyhoo). Sure, breaking up has the *potential* to be expensive (I wouldn’t need an $1800 real estate agent), but living together, assuming most people are splitting half, is undeniably GOOD for the financial picture!

  • Getmorganizedkc

    Movers $300
    Storage $100
    Real Estate broker $ 1,800
    Total Cost = $2,200

    $4,900 (saved in 6 months on rent alone) -$2,200 (money lost) = $2,700 Profit 

    The math clearly doesnt fit the title of this aricle

  • Getmorganizedkc

    Movers $300
    Storage $100
    Real Estate broker $ 1,800
    Total Cost = $2,200

    $4,900 (saved in 6 months on rent alone) -$2,200 (money lost) = $2,700 Profit 

    The math clearly doesnt fit the title of this aricle

    • Mhorton1004

      Ummm, if you started with $4900 and end up with $2700 left after spending $2200, how does the $2700 become profit?  That’s just what you have left after shelling out $$ you wouldn’t have otherwise. I think you need to learn what a profit is vs. a loss!

  • http://twitter.com/xaotica kimberley

    “She paid for movers ($300), for storage ($100) and for a real estate broker to find her a new place ($1,800)…. “I have to buy all new furniture because I got rid of it all when I moved in with him,” she says. “I don’t even want to think about how much that will cost.””

    I realize that renting in New York is much more challenging, but those are still financial decisions that I would never have made. I’ve never paid for movers in my life. When I need to move, a group of my friends comes over. They help me and afterward I feed them dinner and cocktails. When they need to move, I go help them. I would never pay for a real estate broker to find an apartment. If I need a new place to live, I ask all my friends. If they don’t know of a place, I post on my blog / twitter / etc. and ask people to reshare it. If that fails, I post on the 30 local mailing lists I’m subscribed to and ask there. If that still fails, I go to the neighborhood I want to live in, walk around, and call phone numbers on signs. Sure, that process takes some amount of effort, but nowhere near the number of hours that even a very well paid person would have to labor to add up to $1,800. If you ask 5,000+ people in your city, chances are high that one of them knows of a good apartment. 
    If I had to move so quickly that I didn’t have time to do that, I would put my stuff in storage and sublet. Subletting for a month is way better than spending an unnecessary $2,100. 
    I’ve gotten rid of furniture pretty often when moving. Sometimes my furniture isn’t ideal for the new space. But by “getting rid of”, I mean “selling on craigslist or ebay”. Since I also buy most of my furniture on craigslist or ebay, the price I sell it for is frequently the same I paid, or very close, and it’s still a good deal for the next owner. It’s easy to find great deals on high quality designer furniture on craigslist… people know for months that they’re going to be moving, but still wait until the very last minute to list their furniture on craigslist, and if you wait until the end of the month, they’ll often drop the price to way cheaper than IKEA prices. 

    Okay, so I’ll suspend my disbelief and imagine for a moment that she had no choice and had to blow all that money. I pay people to teach me things all the time. Programming. Writing. Psychology. Design. etc. etc. When you live with someone, whether they are a romantic partner or a friend, you’re exchanging payment (time / money / effort) for a learning experience. If I pay for an algebra class, and it ends, I don’t say that it was a failure because I don’t know calculus. 

  • http://twitter.com/xaotica kimberley

    As far as the cohabitation study goes… it says:
    “A woman 30 years of age at the time of her marriage cannot be included in a measure of the probability of dissolution after 20 years of marriage, because she would have been 50 years of age after 20 years of marriage, and the maximum age of women in the
    NSFG sample was 44…. Estimates toward the later durations are therefore biased
    toward the experiences of younger women at marriage.”So women who move in with someone or marry them by the age of 24 are likely to have it not work out. Is that really surprising? That’s like saying that most 16-year-olds who are given a credit card are likely to overspend. 

  • http://profile.yahoo.com/IEHFQ7K6QVZRMCWBMPHRRXQKE4 Jamie

    I find it funny that what is recommended after reading this article is….http://www.learnvest.com/2011/08/money-mic-why-cohabitation-will-help-your-finances/

    What a colorful world we live in.