Published in: Banks | July 21, 2019
4 Financial Conversations Couples Must Have Before Moving in Together
By: Lyle Daly
These important money talks will start your life together on the right foot.
Moving in together is a significant and exciting step in any relationship. It’s a sign of how serious your relationship is, and it’s also a big change for both of you. Although you can get to know someone well when you’re dating, nothing compares to living with another person.
There’s plenty to discuss for couples that are going to live together, and one of the most important things to talk about is money. Finances are often a sore subject in relationships, with 34% of people in relationships saying it causes the most stress.
By having a few key financial conversations before moving in together, you’ll avoid a lot of potential arguments down the road.
1. Open up about your current financial situations
While it can feel weird to disclose your financial situation to someone, even when it’s your partner, you’ll both need to do this. A good place to start is by sharing your monthly incomes, credit scores, and debts.
It’s important to know all this so that you can figure out how much you can afford to spend on a home and so that you’re aware of any potential problems with qualifying for a home in advance. For example, if neither of you has a good credit score, then it may take longer to find a place to rent or you may need to pay a larger deposit.
In addition to the information above, it’s also smart to learn about how responsible your partner is with money. Here are some questions you can ask each other to gauge how well you handle your finances:
- Do you have an emergency fund? If so, how many months’ worth of expenses do you have saved?
- Are you saving money every month?
- Do you have a retirement account?
2. Decide how you’ll split the bills
Living together means one set of bills, so you’ll need to decide how much each of you pays. Many couples either divide bills based on income or do a 50/50 split.
To divide bills based on income, you would:
- Add your respective incomes together.
- Divide each of your incomes by that combined income amount.
- Pay a percentage of the bills corresponding to how much of your combined income you make.
Let’s say you make $7,000 a month and your partner makes $3,000. Your combined monthly income is $10,000, and you make 70% of that, so you’d pay 70% of the bills. Although this method does result in one partner paying more, it’s a good way for both partners to contribute what they can.
Another option is to split everything 50/50. This is a fair solution that can work well when you and your partner both make similar amounts of money. However, it can be problematic with a large income discrepancy, because the lower-income partner may end up barely getting by while the higher-income partner has it easy.
After you’ve decided on how you’ll split the bills, you’ll also need to decide who’s going to be responsible for paying each bill.
3. Talk about financial goals
One of the benefits of being in a serious relationship is that you have two incomes, which means there’s more money to pursue financial goals. But this will only be helpful if you are both focused on those goals. If you’re saving to put a down payment on your house while your partner spends every penny they make, it could end up brewing resentment in your relationship.
To ensure you’re both on the same page, you should go over what financial goals you each have, such as saving for a home or paying off debt. If either of you doesn’t have any goals yet, then this would be a good time to set them together.
4. Figure out the exit plan if you break up
This is a conversation couples often avoid, and for obvious reasons. No one wants to discuss the possible demise of their relationship.
It may not be pleasant, but this is something you and your partner need to go over. The couples who skip this step often have messy breakups because they never decided who gets to keep what or who will move out.
What should you cover in an exit plan? Here are the main topics to figure out:
- Moving out -- Who stays and who goes? If neither of you can afford the apartment alone, will you both move out? If you need to break the lease, how will you divide any fees?
- The security deposit -- Assuming you both paid a share of this, you’ll need to decide if the partner who stays will compensate the one who moves right away, or if you’ll need to wait until the end of the lease and get a refund from the landlord.
- Furniture and other possessions -- You should go over all your possessions and decide who keeps what early on. That way, there are no disputes later about who gets the TV or the silverware.
If you do run into this worst-case scenario, you’ll be glad you talked about this in advance, because it’s much more stressful to do so in the middle of a breakup.
Getting ready to cohabitate
Since moving in with your partner is a big deal, it makes sense to do plenty of preparations beforehand. These money talks will ensure that you and your partner both have strong communication about yours finances.
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