This post originally appeared on Retire By 40
I have a confession to make. I almost stayed in a relationship because of money. Now, for as horrible as that may seem, I am a very independent woman, and you can be sure it was not so some sugar daddy could spend thousands on lavish gifts and spoil me silly. It was simply because life was much cheaper as a couple!
Rent? Split in two. Internet subscription, utilities, transportation… even the food bill wasn’t twice what I now spend on my own. Car repair? That would be $250 each, please. I cringe when I think about the few times we argued about money, say when I didn’t want to spend $100 on dinner. The guy was literally saving me hundreds every month! We did not break up over money, but the thought of being on my own again financially made me think about how much easier it is to have a partner when you are tackling a big goal such as financial independence and increasing your net worth.
How you save thousands by being a couple
When you are in a relationship, most expenses get split in two. We shared a car, a house, a hotel room when we went on holidays, and so on. Expenses such as water and electric consumption only marginally increase, since you still use one fridge, watch one TV, and turn on one light at the dinner table. Cooking for two requires just a little more food, but again the oven just gets to work once. Unless life paired you with a big spender, this is a fantastic opportunity to increase your saving rate.
You will need to get your partner on board, obviously. But if you are in a serious relationship, it shouldn’t be too hard to get them to agree. After all, you are saving more so you can work less, and spend more time together, who would say no to that?
If your partner is happy to follow you on the path to financial independence, it won’t be a problem to trade expensive date nights for a nice dinner at home, a potluck with friends or board games with your family. On the other hand, if it is just you, it may cause tensions in the early stages of dating, as you try to keep your savings goals, but have to fork out on nights out to meet people.
Using your better half to maximize your savings
Another great thing about being a couple, is that there are two brains looking at one equation. You both want to save as much as possible, invest it wisely, and spend on what is truly important to you. That can be traveling, spending more time with your kids, having a safety net so one of you can go back to college and increase his earnings down the road… It gets much easier because you both see the problematic, and look at it through your own eyes.
I for example, am very good at seeing the big picture. I see the long term goal, and the benefits related to early financial independence. With a detail oriented partner, who sees the day to day optimization of our goal, we form a power team that is unstoppable.
One partner could spend some time researching the best 401k providers, while the other one could make sure the household saves enough money on a monthly basis for both of you to max them out. One spouse could stay at home with the kids and run the household like a small business, making sure everything runs smoothly for the second one to focus on their career and become a top earner. Trying to do so on your own would require much more effort and energy, or hiring out day care for example, which is costly and emotionally hard when you don’t get to see your kids that much.
The math of living on one income
If you make $100,000 per year, and are able to live on $50,000, assuming a 5% annual return on investments and a 4% withdrawal rate in retirement, financial independence is only 17 years away. Meaning a couple in their early 30s can retire before age 50.
Living on one income can be done in two ways. First, you can keep working two $50,000 jobs (or whatever you earn, times two), and live on one person’s income. If you can make it work on the lowest income, even better. Many families manage to live well with only one average income earner, so why shouldn’t you? The advantage of that system is, should you guys break up, each person has a career and it is easy to bounce back.
The other option would be for one person to stop working so she can help the other one make $100,000. Or help the family live on $25,000 instead of $50,000. While the stay at home parent would have a harder time getting back to the workforce if needed, that solution is pretty powerful. You won’t need day care anymore, you can make it work on one car, your tax burden will be lower, and you can still max out two tax deferred retirement accounts. With extra free time, the stay at home parent can focus on making the household as efficient as possible. For example, doing some DIY projects to lower the utility bill. Cooking every night and making sure no food goes to waste. Because when both people work it is easy to justify take-out. Same thing for holiday planning, or running all the errands in one go. No more need for a sitter, the kids will be taken to the park more often and their little minds stimulated with plenty of activities.
In the end, I didn’t stay in that relationship for the sake of money, and managed to reach financial independence on my own like the independent woman I am. There is no right or wrong. But if financial independence is your goal, and there are two of you, you have no more excuses to make it work!