More couples are leaping and moving together than ever before. According to data from 2016, a whopping 29 percent increase since 2007 has brought the number of adults living with unmarried partners to 18 million. This trend isn't exclusive to any age group, with roughly half cohabiting couples under 35.
If you're about to embark on this exciting journey, you're likely feeling mixed emotions. On one hand, there's the joy of spending more quality time with your partner. Conversely, you'll be exposed to their peculiar quirks and perhaps even their not-so-great financial habits.
While a partner's snoring or questionable taste in home decor might not be dealbreakers, their money habits certainly could be. That's why aligning your financial expectations is crucial before taking the plunge into shared living. Here's how you can do it:
Talk About Your Goals
To kickstart this financial journey together, it's essential to sit down and discuss your shared goals as a couple. Farnoosh Torabi, a financial education ambassador for Chase Slate, emphasizes the importance of identifying what you're both working towards. Are you planning to upgrade to a larger living space, buy a house, or get married? Clarifying your shared objectives sets the tone for your financial partnership.
Know Each Other's Credit Scores
While sharing intimate financial details like salaries, credit scores, savings, and debts might have felt taboo in the early stages of your relationship, it's now crucial to become transparent about your financial profiles.
As you venture into applying for a new home, your financial background will significantly impact your options. Tiffany "The Budgetnista" Aliche suggests starting with sharing your credit scores. If one of you has less-than-ideal credit, don't panic. Education can often remedy this situation. However, if poor financial choices persist, caution is advised.
Devise a Fair Expense Splitting Plan
Rarely do couples earn the same amount of money or have identical budgets. Splitting expenses 50/50 might not be the ideal solution, as it could stretch the lower earner beyond their means and lead to stress and resentment.
There's no one-size-fits-all answer to this; it doesn't have to be perfect. Find an equitable arrangement that works for you both. You're a couple, not roommates, so it's not necessary to nickel and dime each other. However, combining finances or co-signing a loan is generally too risky, especially if you aren't married. Instead, consider setting up a joint savings account for shared goals as a "test run."
Consider a Cohabitation Agreement
Cohabitation agreements are fantastic tools for managing responsibilities in a live-in relationship. Think of them as living documents that can evolve as your relationship does. Farnoosh Torabi recommends outlining all bills, expenses, due dates, and responsibilities in the agreement.
Decide whether expenses will be split or covered by one partner who gets reimbursed. For couples with children, it's essential to address childcare expectations. Document significant purchases made during the relationship and save receipts for added security.
Schedule Money Dates
Discussing finances may not be the most romantic activity, but scheduling regular money dates with your partner to review your financial situation is vital. Farnoosh Torabi even suggests logging into your online banking and credit monitoring accounts together, as there's no such thing as oversharing when it comes to money in a relationship.
Aim for these meetings at least once a quarter and work on integrating money discussions into your daily lives for a more comfortable and natural experience.
Have an Exit Strategy
While it might be the last thing on your mind when starting a life together, it's essential to be prepared for the possibility of a breakup. Keep important bills and accounts in your name only to simplify disentangling your finances if necessary.
Having a separate financial identity allows for a smoother transition. Additionally, maintain a savings cushion for financial emergencies, including a potential breakup. Remember, nobody cares about your money more than you do, so stay invested and mindful of your financial well-being.