Moving in together is an exciting prospect and can even send excited parents picturing marriage and kids in your near future. But let’s back up the truck a bit before the sound of future wedding bells drowns out the sound of your financial conscience. Before you get that far, it’s time to talk about the other Big ‘M’ – money. Keep in mind this financial advice for couples living together, so you can avoid financial feuds when you start sharing a roof. And, importantly, if you are to become First Home Buyers together in the future, you can treat this as a warm-up before you get into another Big M – mortgages.
How to handle money when you move in together
Talk about your finances from the get-go
Sit down with your partner and map out your respective incomes, bills, and expenses. This will give you a good idea of what kind of spending power you’ll have living together, as well as a good idea of where you could afford to live. It will also help in deciding how to split bills, because if you’re not earning the same amount as your partner, it’s unlikely that you’ll each pay 50% of the bills. Part of knowing how to handle finances when living together as a couple, is to understand each other’s financial situation and expectation. This is definitely something you want to be clear about before the bills start rolling in.
Consider whether you want to keep finances separate
Even though you’re moving in with them, you aren’t under any obligation to join finances with your partner. It may not be a wise move to set up joint bank accounts/credit cards with someone who is essentially your roommate; a nasty breakup could see you locked in an expensive legal battle over your own assets. You can always join your finances later if you and your partner decide to get married.
Of course, the right way to split finances will depend on your own situation. One way to do it might be to have a shared account for your rent and other expenses, such as power and food, and to keep your other money separate. This way you can both track how your expenses money is being spent without having to combine all of your assets. It’s also important to agree on a system for paying the bills; is one person going to take responsibility for managing them all, or will it be divided up between the couple?
Draw up a ‘roommate prenup’
While you and your partner might not be married, it’s still an extremely good move to draw up a series of agreed rules and regulations that essentially spell out the conditions of you and your partners living arrangement. While you might prefer trust over a written contract, it really boils down to better safe than sorry. It also further legitimises your position as a couple living together, as it solidifies your financial obligations to each other. It’s never nice picturing the worst-case scenario when you are loved-up and excited to pick out matching furniture but, unfortunately, you can’t always predict what will happen in relationships down the line. Having something formalised should things go wrong will help you deal with a tricky situation around money.
Understand each other’s attitude to money
Another aspect of financial advice for couples living together is to understand each other’s attitude to money – which may or may not be the same. For example, your financial background helps shape your opinions around money. The important bit is learning how to manage any differences in opinion around money between you and your partner. Some people might not have any issues regularly using credit cards, or maxing out an overdraft. But once you’re living as a couple, these sorts of financial decisions can impact on your partner. There are plenty of guides and tests to work out what your “money personality” is and it could be a good idea to go through this as a couple to help you with managing your finances when you live together.
Sort out your respective insurance and legal policies
It’s worth checking if any of your insurance policies extend to domestic partners, or offer benefits to your partner. Also, naming your partner as a beneficiary on any life insurance policy you may hold is something you may want to do, as is giving your partner power of attorney. However, these are big choices to make, so definitely discuss these with your partner and with a professional financial adviser before making any decisions.
Just remember: as long as you and your partner consider some advice around how to handle finances when you live together, it doesn’t have to turn into a money minefield.
While agreeing on money matters is a huge part of living happily as a couple, we can’t guarantee it will help you avoid other squabbles. At least you can laugh retrospectively though, right?