It's often true that two can be better than one — especially when you're starting your financial life as a couple.
If you're single, you have to cover your bills, from rent to utilities to food, all on your own. Joining economic forces with your significant other not only helps cut costs, but can often be a huge boon, especially if you don't have children, according to a recent analysis from Surety First Insurance Services.
The analysis used Census Bureau data to calculate the median income in each of the 50 largest U.S. cities. It then subtracted the typical cost of living, as calculated by the Economic Policy Institute, which mostly uses data from government agencies like the Census Bureau and the Department of Agriculture to estimate the costs of common bills like rent, food, and child care in more than 600 metro areas and across all 3,142 U.S. counties (or equivalents).
The results found that in some of the most expensive cities in the country, households consisting of just two adults, that is, couples without minor children, often had a significant excess of income. In three cities — Washington, D.C., Austin, and Seattle — that monthly income surplus was actually larger than the typical monthly expenses for a two-person household.
In Washington, D.C., for example, the median combined income for a two-income household is about $11,750 a month. But the typical monthly expenses for a couple without kids are only $5,230. That leaves a surplus of more than $6,500.
Even in cities like New Orleans, which ranked lowest on the list, couples still earned enough income to end the month with an almost $1,000 surplus, according to the analysis. Single people and families in the Big Easy, by contrast, both ended their months in the red, $466 and almost $1,300, respectively.
Jeremy Schaedler, Surety First's founder and the author of the analysis, says he got the idea for the ranking after watching people leave the Bay Area during the pandemic. "We were pretty intrigued by it," he explains. "When [workers] take that income from a high-cost-of-living area like the Bay Area, and it goes somewhere else, it goes a lot further."
The median rent for a one-bedroom apartment in the D.C. metro area, for example, was about $1,450 in March 2021, according to Apartment List. If you're single and you want to live alone, that cost is all on you, but a couple can tackle that together. The median rent for a two-bedroom apartment in March was only about $200 more than a one-bedroom, so even if a couple wanted slightly more space (say, to work from home), their combined income more than makes up for the difference.
Video by Helen Zhao
"I was really surprised that Washington, D.C., is affordable," Schaedler says, noting that it topped the lists for affordability with single people and two-income families, too. "It's a very high-cost-of-living area, and you would think that a lot of the jobs there are government jobs." The analysis found that even if many government jobs aren't highly paid, the median income in D.C. is pretty high.
Schaedler's calculations may not offer a full picture. They rely on data collected before the Covid pandemic, and there's evidence that both income and expenses, especially rent, have changed over the past year. The study also uses median figures to express broader trends.
There are still many people in expensive cities, especially on the lower end of the income spectrum, who struggle to make ends meet.
However, the analysis does complicate the idea that big cities are unaffordable, and that living in one will prevent you from saving money or building wealth. Even after expenses, the top 50% of earners in ultra-high-cost cities will still be left with a fair amount of money to pay down debt and save for the future, Schaedler's calculations show.
Couples who are planning to start a family in the future should use the time before they have children to get themselves as financially settled as possible, says Janet Stanzak, a certified financial planner and founder of Financial Empowerment in Minnesota. "When you start to have children, all of a sudden your overhead goes up exponentially."
Stanzak gives the example of two of her clients: They're a younger couple, and both are physicians. The wife doesn't have any debt from medical school, while the husband has a lot. "He has [about] $200,000 in school debt. Now granted, doctors make good money, but that's a lot of debt to pay off," Stanzak says. So, "before they have children, they're going to do everything they can to get his school debt in check."
At the same time, Stanzak says, she's encouraged them not to solely focus on paying down debt. Investing for the future, including in retirement savings and a home, are also key.
"He's slamming everything — everything — extra that he has, so he's saving and investing and has a good cash reserve. He's doing all those things," Stanzak says. "They bought a condo, and the extra is paying school debt."
Video by Stephen Parkhurst
Whether you plan to have kids or not, combining incomes while you still have a long future ahead of you is a great way to tackle big financial goals. Especially in high-cost-of-living areas, it's smart for couples to prioritize having a robust cash reserve that can cover six months' worth of basic living expenses, including rent, groceries, and utilities, in the event of a job loss or serious illness.
It's also a good idea to get life insurance in case something happens to one partner, Stanzak says, although it's less crucial for couples without children than for parents facing high child-care and education costs.
Ultimately, couples who plan to have children should use their first years of cohabitation "to do the best for them and invest in themselves," Stanzak says. So, if you're asking yourself about "paying down debt versus investing, you need to do both."
That way, you'll be on the surest footing for whatever comes next.
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