You’ve been dating for a while and lately you’ve are spending more nights together than apart. In fact, you’ve spent so few nights at your place that your pet cactus is dying. After talking it over with your partner you both agree: it’s time to move in together.
Deciding to move in together is exciting but it’s also a major life event that can have a long-term impact on your finances. Merging your households and sharing the costs of living together means you both have more cash to put towards your other financial goals. But there are definitely some important money conversations you should have before you take this important step. Make sure you #RealMoneyTalk about these six things before you move in together.
What are Your Financial and Life Goals?
Deciding that you are ready to share the same living space is a good start, but you’ll also want to start having conversations about your financial and life goals. Most likely, you each already have individual short and long-term goals that you have been working towards. Talking about your pre-existing goals makes sure that you are both in a position to respect and account for your individual needs as you move into this new phase of your relationship.
You will also want to think about creating goals that you both want to start working towards as a couple after you move in together. This could be everything from wanting to move to a new city in the next year to wanting to retire before age fifty. Setting goals up front makes it a lot easier to decide on these priorities so they have proper attention as you grow as a couple. Being open and honest here will save you both from surprises later and make it that much easier to hammer out a budget you can both agree on.
What Is Your Combined Income, Debt & Credit History?
Merging households means that your finances are now dependent on each other, even if you choose to maintain separate bank accounts and split expenses. If you’ve never had conversations about how much money you make, your credit history, and your debt, now is the time to start.
Your credit can affect your ability to qualify for a lease. It can also impact the amount of security deposit you need to put down on a rental. If you are considering buying a house together, your credit is even more important. It can stop you from even qualifying for a mortgage at all.
If you haven’t started having these conversations yet, it might feel a little uncomfortable at first to get financially vulnerable with each other — especially if one of you has some items on your credit that you aren’t particularly happy with. But once you start living together things won’t stay hidden for very long. Better to have the conversation beforehand and not when you are sitting down in the leasing office. This will be your opportunity for fresh financial start with all your cards on the table.
How Much Are You Going to Spend?
In theory, moving in together means that you should be able to spend less on your living expenses. One apartment should cost less than two right? But if one of you prefers luxury accommodations while the other is more frugal, this can quickly cause friction.
Combining households means that you are are both going to be responsible for the household expenses. It’s important to get on the same page about the kind of lifestyle you both prefer and exactly how much that lifestyle is going to cost. This will impact what size place you get, the length of your commute, and miscellaneous items you both might want in the budget, like Netflix or monthly facials
How Are You Going to Split Expenses?
There are several different ways to manage your household expenses once you’ve moved in together. It’s important to choose the one that works best for your relationship. Will you keep your finances separate or will you combine them? If you keep your money separate, you can each deposit money into a joint account for your portion of the monthly expenses.
In addition to figuring out how to manage joint expenses, you’ll also want to determine how to divide up those expenses. You can split them 50/50, divide them in proportion to your incomes, or come up with some other arrangement. There is no one right way to do this. But it’s important to figure out the option that makes the most sense for the two of you as a couple.
Who is Going to Manage the Money?
No matter how you choose to split your expenses, you’ll need to figure out a system for record keeping and bill paying. No one wants to have their electricity turned off in the middle of a hot summer day because they forgot to pay the bill. Not to mention that missed payments can quickly add up to hundreds of dollars in unnecessary extra fees and interest.
Just like doing the laundry or grocery shopping, managing household finances is work. There are the tedious tasks and paperwork of paying bills, managing your budget and keeping your bank account out of the red. Plus there is the heavy thinking and aspirational work of planning for your financial future and making sure you are staying on track with your goals. You’ll want to hammer out who is responsible for paying what and have monthly budget check-ins to make sure your finances are on track.
What Will You Do if You Break Up?
It might seem counterintuitive to talk about how you want to handle things if you break up when you are just getting ready to move in together, but now really is the perfect time to have this conversation. Moving in together can have long-term legal and financial repercussions because you may be merging your finances and executing some documents together (like an apartment lease). You can execute something formal like a Cohabitation Agreement or simply write down just a few things that are important to each of you, like making sure you leave with your favorite lamp or lucky mousepad.
Moving in together is a time for celebration for your relationship. Having these #RealMoneyTalks beforehand will help ensure your finances will be celebrating too!