It is becoming increasingly more common for couples to move in together and start pooling resources (both capital and income) in order to improve standards of living. In fact, cohabiting couples are the fastest growing family type in the UK according the Office of National Statistics with 3.3 million couples in the UK choosing to live together although they are not married. The figure has almost doubled since 1996!
A lot has changed since 1996 which is probably reflected in the increasing number of couples choosing to cohabit. Not only have social attitudes changes towards couples choosing to live together before marriage – or choosing not to marry at all – but property prices have risen and private rental costs have increased as well.
It is therefore no great surprise that couples are choosing to pool their resources so that they can rent a larger property together or to buy a house. The added bonus of pooling resources is there is more available disposable cash in order to meet the costs of living.
But what happens when the relationship breaks down? Suddenly, your world is turned upside down and not only do you have to deal with the emotional fall out of a relationship ending, there are financial practicalities too, sorting out the property you might own jointly together, and adapting to and managing a one income household. In this article, I aim to give you some of my top tips on managing the transition from two incomes to a single income.
Adapting to a one income household is easier if you plan ahead and get yourself organised because. Taking control of the situation is often quite helpful and empowering in what can be a very uncertain time in your life.
Next on the list is to have a think about your current monthly outgoings. This could include mortgage or rent, utility bills, council tax, car expenses, credit card repayments, shopping, children’s activities… the list is endless! I think it is useful to prepare a spreadsheet setting out the average monthly spend and checking this against your bank statements (you might surprise yourself).
If you are separating, you are likely to be looking at setting up home on your own. You might want to have a think about what you can borrow by way of a mortgage with the capital you have and your income. As the household income is reducing, your borrowing capacity is likely to reduce with it which means you need to have a think about what you can afford to buy and also what mortgage repayments are going to be affordable for you going forwards. You should look into taking independent advice from a qualified mortgage broker to find out what you can and cannot afford.
With the above in mind, you should then look at what you are bringing in each month. Does your monthly income exceed your outgoings? If so, where can you “tighten the belt”? You need to think about all forms of income including: • Income from employment
• Any child maintenance you might be in receipt of from your ex-partner
• Interest or income from savings and investmentsI’ve spent so much money on our home, but I don’t own it!
• Any benefits you receive.
Now that you are in a single income household, it is worth checking whether there are any benefits you might be entitled to which you were not before such as child benefit, free child care or universal credit.
These are just some of the practical considerations to take into account when your relationship breaks down but there are also some very important legal considerations too.