You’re in love, and you’ve both made the choice: It’s time to move in together. Congratulations!
Before you move in with your significant other, however, there are some very important financial questions you have to ask each other. Tackling money issues head-on and before you combine your household and your finances will reap huge benefits in your relationship later.
1. What is your financial picture?
This is the big one. If you are ready to combine households, you absolutely cannot make good financial decisions together unless you understand each other’s money situation.
It’s also one of those sneaky questions that contain a lot of other smaller questions. These are the basics to cover:
• How much money do you make annually?
• What are your current expenses?
• Do you have debt, and if so, how much?
• Do you budget, and if so, how?
• How is your health insurance covered?
• What are you comfortable budgeting every month for rent or a mortgage?
• What do you think will be the best ways to manage our joint finances?
It all sounds un-romantic but it will be much easier to discuss these issues before money has been allocated and choices made. It’s not necessary to sit down with spreadsheets and calculators; make these planning experiences pleasurable. After discussing round numbers about income and expenses, go out for a nice dinner to celebrate getting your financial ducks in a row. Follow that procedure (answer some questions, then have a treat) until your questions are answered.
2. What is important to you in a home?
“Home” means so much more than the four walls you live within. It also means having a neighborhood, a commute, nearby amenities (or lack thereof), and belongings you regularly use and love.
Before deciding where to live, it is best to have a conversation about each person’s “home” preferences, including the items mentioned above. Don’t just assume your partner will be happy moving into your place, or that they’ll just want you moving into theirs. Don’t just assume anything. Where you live is one of the biggest lifestyle decisions you can make. You’ll want to be certain you both understand each other’s needs and wants in terms of types of housing, cost, and location.
Where you live directly affects your financial resources. Long commutes require more gas money and time; the neighborhood and surroundings can determine a home’s resale value; property taxes or condo fees will add costs. There are just a few of the issues that need to be considered when moving in together.
3. How will we pay for things?
Paying the bills and splitting expenses can become very contentious issues if they are not planned for in advance. In asking this question, you are really asking how you will keep everything within the household paid for.
There are no right or wrong answers here. Each couple will deal with their joint finances in the ways that make the most sense to them. What is important is that everyone shares the same understanding. Know who will be responsible for what bills. Discuss and then get (in writing) some sort of contract for how rent or a mortgage will be paid so that everyone can protect their housing investment in the case of a break-up or other problem.
It is not absolutely necessary to share joint accounts or split everything equally. What is necessary is that both of you talk about your financial habits and goals, and have a plan for dealing with saving and spending money that works for both of you.
4. How are we going to talk about money in the future?
Everything’s great when you’re just dating and everyone goes home to their own salaries and bank accounts. It’s very easy to discuss money when it’s all theoretical.
When you move in together, it stops being theoretical, and it starts being real.
In addition to talking about finances now, make a plan for how you will talk about finances once you are living together. Make a plan to discuss income and expenditures however often is logical and workable for both of you. If you’re both independent and plan to keep separate accounts, perhaps looking at some numbers and re-assessing investments could be done every few months. If you want your finances to be more merged, perhaps a weekly or monthly date to discuss what money is coming in and how it is going out is more warranted.
The main point here is not to plan for having no plan to talk about money matters. You also don’t want to be discussing financial issues solely when there is a crisis or even a windfall. Money often takes care of itself best when you have some sort of a long-term plan for its use; making a long-term plan for your communications about money can be similarly helpful.
Making the choice to live with someone you love is an exciting, happy time. Make sure it stays that way by being brave enough to have frequent and honest conversations about money and your combined finances before you take that big commitment step.