More couples are shacking up than ever. As of 2016, 18 million adults were living with an unmarried partner ― up a whopping 29 percent since 2007. About half are under the age of 35.
If you’re getting ready to do the same, you’re probably feeling a mix of elation and fear. On one hand, you’ll get to spend more quality time with each other. On the other, you’ll be faced with their annoying and gross habits on a daily basis.
Though your partner’s snoring or questionable taste in home decor probably won’t be relationship dealbreakers, their money habits might. That’s why it’s important to get on the same page with each other about finances before co-signing a lease together. Here’s how.
1. Talk About Your Goals
One of the first things you should discuss is your goals as a couple, according to Farnoosh Torabi, financial education ambassador for Chase Slate. Do you want to move into a bigger place? Do you eventually want to buy a house together? Get married?
“You’re moving in, and that’s a great next step, but in order for this to really feel like a partnership, you should be working toward something,” said Torabi. “So identify that something.”
2. Know Each Other’s Credit Scores
Knowing each other’s exact salaries, credit scores, savings and debts would feel like TMI in the very early stages of a relationship. But now that your lives are about to become much more entwined, it’s crucial to “get transparent and unveil each of your financial profiles,” according to Torabi.
“As you take the first steps of applying for homes, whether that’s to rent or buy, your financial profiles will make a big impact. The last thing you want is to catch each other off guard,” she said.
Tiffany “The Budgetnista” Aliche, a financial educator, suggested starting off by sharing your credit scores with each other. If you find that your future roomie has less than desirable credit, don’t panic. “Is this someone who’s just not knowledgeable about finances? That’s fine ― you can both get educated,” she said. “If it was someone who was willfully making poor financial choices over and over, you’re going to want to be careful.”
You might find that it makes more sense to wait six to 12 months while you each get your credit in shape, pay off debt and save money rather than to jump into a living situation with a shaky foundation.
3. Devise A Plan For Splitting Expenses
Of course, everything would be easy if you and your partner earned the same amount of money and had equal breathing room in your budgets. But that’s rarely the case, and splitting expenses 50/50 may or may not work. The lower earner might be stretched beyond their means, which can create stress and resentment.
“There are ways the person paying less can make up for that,” said Torabi. “Maybe it’s cooking more of the dinners or doing more of the housework.”
There’s no right or wrong answer to how you go about splitting expenses and household responsibilities, said Aliche. And it doesn’t have to be perfect. For example, before she married her husband, Aliche paid all the household bills like as electricity, gas and cable while her partner covered the rent. They went half in on groceries together. It wasn’t an exact science, but it was an equitable arrangement that worked for them.
Remember, you’re a couple, not roommates. You don’t need to nickel and dime each other as long as you’re both putting in your agreed-upon fair share.
But one thing you probably shouldn’t do is combine finances or co-sign a loan, according to Aliche. It’s simply too risky, especially if you aren’t married.
However, if you want to give the idea of merging money a “test run,” Aliche recommends setting up a joint savings account for a shared goal, such as travel. “I would make it something for excess money and not necessarily your [primary] account,” she said.
4. Consider A Cohabitation Agreement
Torabi said she is a fan of cohabitation agreements, which are written plans for how you will manage responsibilities as a live-in couple. You should treat this plan as a living document rather than something set in stone. “It can be a really great way to have conversations around things like finances or household duties,” said Torabi, who suggested revisiting the agreement every six months or so.
So what should the agreement include? Torabi said you should start by outlining all your bills and other expenses, the due dates and who is responsible for paying. Also, note whether you’ll split up the responsibility of paying bills, or one of you cover it all and get reimbursed by the other. “If there are kids involved, you definitely want to have some sort of agreement in place as far as expectations around childcare,” Torabi added.
And as unpleasant as it might be, you can also include what happens in the event of a breakup. “You might have furniture that you bought together or a joint credit card… these are some of the things non-married couples sometimes put in writing,” said Torabi. In fact, you should document all of the big-ticket purchases you make during the relationship in the agreement and save the receipts ― just in case.
5. Schedule Money Dates
Talking spreadsheets and cash flow is probably not your idea of a hot date, but fighting about money isn’t exactly sexy, either. That’s why it’s important to schedule time to sit down with your partner and review your current financial situation.
In fact, Torabi suggested logging into your online banking and credit monitoring accounts together. “There’s no such thing as oversharing when it comes to money in your relationship,” said Torabi.
Life gets busy, and it’s easy to skip these important check-ins, so put them on your calendar. Torabi suggested aiming for once a quarter.
And in addition to getting in the habit of having these money meetings, it’s a good idea to work on incorporating money discussions into your everyday lives so that it feels more comfortable and natural.
6. Have An Exit Strategy
While you’re wrapped up in the excitement of playing house with your partner, the last thing you want to think about is the potential for that relationship to end. But it’s always a possibility; at least you can be prepared.
Aliche recommended keeping important bills and accounts in your name only so it’s easier to cut ties and move on if necessary. For instance, if the electricity bill is in your name, you can simply transfer the service to a new address without much disruption. “Create your life in a way that you can untangle yourself financially should it not work out,” she said. “Have a separate financial identity.”
Torabi also said it’s important to have a stash of savings for any financial emergency. “A breakup is in the same category as your car breaking down or job loss,” she said.
At the end of the day, said Torabi, no one cares about your money more than you. “Your partner cares about you and wishes the best for you, but because it’s your money, you’re going to be more invested and mindful of it.”