Moving in together is exciting! You finally get the chance to spend more time with your partner. Do more exciting things and generally playhouse. While most couples go into this moving in together business as a way to save on expenses, not many take the time to have a “money talk” conversation.
True, money matters in relationships differ. However, there are basic financial rules every couple must consider when moving it together. Nothing kills the romance in a relationship faster than a lovers spite over money issues.
If you have finally decided to take your relationship a step further and move in together, for whatever reason, here are the main financial rules to keep in mind.
Since you are moving in together, are you planning on moving to a bigger house? Is the next marriage? And if so, is a mortgage in the picture? Or are you planning to buy land, build a home or buy in cash?
Identifying your goals will help in making the next discussions easier.
The Money Talk
It is among the most important talks to have as a couple when moving in together. How are you and your partner with money? Is one of you a spendthrift? What attitude do you and your partner have about money, savings, spending, and investments? Do not forget to factor in both the short and long term goals.
While on the money issue, discuss what each of you is bringing or will bring to the table. Is the cost-sharing for house expenses like rent and grocery shopping 50%-50%? Or the ratio different, depending on who earns more? It is not equal, but it is a fair method.
With the latter method, you can settle on a flat cost-sharing rate like 70% – 30% or have a weighted average rate. For example, if one is earning $80,000 and the other $45,000, here is how to go about it;
$80,000 + $45,000 = $125,000
$80,000 / $125,000 = 0.64 (0.64 * 100) = 64% – Higher earning partner contribution
100% – 64% = 36% – Lower earning partner contribution
Fair as this seems the higher-earning partner could be at a disadvantage if they have high debts like personal and credit card loans.
Whichever method it is, your money talk conversation should cover all possible scenarios. Once you start living together, you can always revise these figures if your income and debt statuses change.
We have designed a Ready-To-Use template. All you need to do is input your income and it will automatically calculate how much each of you will contribute towards house expenses, personal savings and personal use.
Read more about saving money to move
Bank Account Issues
Next, how to handle the money. Should there be a joint account? You can have the money for the household expenses here or where both of your incomes come through? Or do you keep separate bank accounts and always bring money when needed?
The best move is usually opening a joint account for the house expenses like rent or mortgage payments, utility bills and grocery shopping, among others. Both of you should be signatories to this account. Also, set a date when both of you should be sending money to the account, deadline dates for the bills, and who is responsible for each duty.
You can each retain your personal banking accounts where you keep the money for your personal expenses like car expenses, personal debt repayment, grooming expenses, or savings. Treat this as your backup in case the relationship goes down the drain. Even if your relationship survives, each will have loaded personal accounts that will not be affected in case either of you makes a poor financial decision.
When it comes to banking issues, the rule of thumb is to have an emergency fund that will cover at least 6-months of expenses.
And Credit Scores
While one’s financial position is a grey area when people are dating and mostly living independently, it becomes an important topic when you are moving it together.
You both need to be transparent about earnings, debts, and credit scores. Decisions like mortgages or renting will depend on your credit scores. You do not want to be caught off-guard. A partner with a low credit score rating can affect the other partner’s rating once you have financial commitments together.
Knowing each other credit scores can also help with the planning like not getting into any financial commitments together when both your credit scores are not okay.
A Living In Together Agreement
So Sheldon Cooper, I know, but highly recommended. It can document everything about the relationship – from the monetary contributions to the expense payments, responsibilities and handling of personal money and expenses.
You can revisit this agreement now and then; monitor your situation and see if anything needs to be changed or added as you both get used to the whole living together situation.
Yes, moving in together is fun but money matters can spoil the whole arrangement just when it is starting to get good. With the above financial rules, you can both start a life together with a financial plan that covers both the relationship and personal lives.