There’s an old adage that two can live as cheaply as one, however, this doesn’t always hold true. Two people will consume more food than one for example and will generally use more energy, but splitting housing costs and utility bills will certainly cost less overall. Items such as standing charges have to be factored into energy bills. Two meals can be cooked at the same time and many people buy utilities such as broadband, TV and phone lines as bundles that have a certain amount of usage built in. You are also likely to be cutting down on insurance costs and council tax bills.
Two might not be able to live as cheaply as one, but a cohabiting couple can certainly live for less than two on their own. A recent study has in fact shown that those who are married or living together are £102 better off each month than their single counterparts.
With extra income on their hands, here are some top tips on how cohabiting couples can make the most of their financial products.
The arrangement of your personal finances is, of course, a very personal choice. Some couples like to keep their own incomes strictly separate while others prefer to pool everything. Disposable income is one thing but even if you keep your spending money separate it can certainly be useful to have a joint account to cover essential household outgoings such as rent or mortgage and bills.
Setting up direct debits for all your regular outgoings helps ensure you never miss a payment (potentially triggering fines and late payment fees). If you have a central joint account fed from individual bank accounts however, you should ensure that there’s enough in there to cover your expenses.
If you have a savings account, it’s usually the case that the more you put in, the more you get out. Try to make regular deposits and go for the highest interest rates you can find.
Setting joint savings goals that you are both keen to work towards, such as a holiday abroad, could also provided the encouragement you both need to build up a savings pot.
However, it is important to note that as limits for cash ISAs and stocks and shares ISAs are set for individuals, a total of £11,520 for the 2013/14 tax year, it may be preferable to take out an ISA separately.
Joint credit cards can also be handy, especially if you have cash back or cards with a points-based reward scheme. Double the spend means double the reward but you do have to make sure you make at least the minimum payment each month. Setting a direct debit can again be handy for this but the best way to use any credit card is to pay the balance in full each month. This allows you to make use of the card’s interest free period and avoid credit card charges. Each person should be aware of any large purchases made on the card as spending can overlap and leave you with an unexpectedly large balance.
Taking out a joint mortgage will mean that you are able to borrow a larger sum, up to three times the value of your joint salary, as opposed to three times the value of a single salary.
As a couple you may also be able to put down a larger deposit for your first home, securing a mortgage at a low loan-to-value ratio (e.g. 60% mortgage, 40% deposit), which often come with lower interest rates.